Dow went up 203, advancers over decliners 4-3 & NAZ dropped 222. The MLP index edged up 2+ to the 291s & the REIT index added 3+ to the 407s. Junk bond funds continued to see limited buying & Treasuries saw a little buying which reduced yields. Oil remained off about 1 to the high 74s & gold gained 24 to 2450, nearing it record high (more on both below).
Dow Jones Industrials
Job opportunities are slowly disappearing in the US & hiring has screeched to its slowest pace in a decade (aside from the pandemic plunge). That's making more workers hold tight to the job they've already got. The Bureau of Labor Statistics' latest Job Openings & Labor Turnover JOLTS survey, which showed that the number of open positions edged back slightly in Jun, hiring activity sank, layoffs were muted & the number of people quitting their jobs hit a 3-year low. It's yet another sign that the once-scalding-hot labor market is not just settling into a steadier state but potentially drifting closer toward a downswing. In Jun, employers posted an estimated 8.18M jobs. While that's more than expected, it's a slight step back from the upwardly revised tally of 8.23M openings in May. It's also the 2nd-lowest monthly total seen so far this year & it puts the ratio of job openings to job seekers at 1.24, or slightly above the average seen in 2019. The forecast expected job openings to shrink to 8M. Last month's hiring was some of the weakest in years when there were 5.34M estimated hires & the hires rate (number of hires as a percentage of employment) were the lowest since Apr 2020, when the job market collapsed at the start of the pandemic. Outside of the pandemic, the hires rate hasn’t been this low since Feb 2014. Beyond the headline job openings number, economists have been closely watching the quits rate, or number of people voluntarily leaving their jobs as a percentage of total employment. That metric serves as a signal for workers' willingness to test the labor market waters. In Jun, that rate held at 2.1%, the lowest since Jun 2020; however, the number of estimated quits dropped to 3.28M from 3.40M & landed at the lowest monthly total since Nov 2020.
The number of available jobs in the US is shrinking
US consumer confidence unexpectedly rose in Jul, but remained in the tight range of the past 2 years amid lingering worries about inflation & higher borrowing costs. The Conference Board said that its consumer confidence index increased to 100.3 this month from a downwardly revised 97.8 in Jun. The forecast called for the index falling to 99.7 from the previously reported 100.4. "Even though consumers remain relatively positive about the labor market, they still appear to be concerned about elevated prices and interest rates, and uncertainty about the future, things that may not improve until next year," said Dana Peterson, chief economist at the Conference Board. Consumers' 12-month inflation expectations were steady at 5.4% in Jul. They peaked at 7.9% in 2022.
US consumer confidence rises in July; inflation expectations steady
Prices increased 5.9% nationally in May when compared with the previous year, the S&P CoreLogic Case-Shiller index showed, down from the 6.4% pace recorded the previous month. On a monthly basis, prices climbed 0.3%, according to the index. "Home prices hit a new high in May," said Lisa Sturtevant, Bright MLS chief economist. "But with affordability a growing challenge for homebuyers and more new listings coming onto the market, we could be at the peak." The 10-city composite, which encompasses Los Angeles, Miami & New York, rose 7.7% annually, compared with an increase of 8.1% in Apr. The 20-city composite, which also tracks housing prices in Dallas & Seattle, posted an annual gain of 6.8%, a decrease from the 7.3% figure recorded the previous month. Prices rose in all the 20 major metro markets tracked by the index. "All 20 markets observed annual gains for the last six months," said Brian Luke, head of commodities, real & digital assets at S&P DJI. "The last time we saw that long a streak was when all markets rose for three years consecutively during the COVID housing boom." The largest price gain took place in New York, which recorded a year-over-year increase of 9.4%. The Case-Shiller index reports with a 2-month delay, meaning it may not capture the latest ongoings in the market. There are a number of driving forces behind the affordability crisis. Years of underbuilding fueled a shortage of homes in the country, a problem that was later exacerbated by the rapid rise in mortgage rates & expensive construction materials. Higher mortgage rates over the past 3 years have also created a "golden handcuff" effect in the housing market. Sellers who locked in a record-low mortgage rate of 3% or less during the pandemic began have been reluctant to sell, limiting supply further & leaving few options for eager would-be buyers. Economists predict that mortgage rates will remain elevated in 2024 & that they will only begin to fall once the Federal Reserve starts cutting rates. Even then, rates are unlikely to return to the lows seen during the pandemic.
Home prices just set another record high as affordability crisis worsens
Gold prices gained around 1% as investors remained optimistic that the Federal Reserve could drop clues about lowering interest rates in Sep at the end of the policy meeting this week. Spot gold was up 0.8% at $2403 per ounce & US gold futures settled 1% higher at $2451. At the conclusion of its 2-day meeting tomorrow the Fed is expected to maintain current interest but may signal potential policy easing as soon as Sep. The US rate futures market has fully priced in a rate cut in Sep. Lower interest rates reduce the opportunity cost of holding the non-yielding bullion. Traders are also awaiting a series of US employment data scheduled to be released this week, including the pivotal non-farm payrolls report due on Fri.
Gold climbs on rate cut hopes as Fed meeting looms
West Texas Intermediate (WTI) crude oil fell to a near 2-month low early today on weak China demand & flagging investor interest in the commodity. WTI crude oil closed down $1.08 to settle at $74.73 per barrel, the lowest since Jun 5, while Sep Brent crude was last seen down $1.02 to $78.76. The drop comes as demand from China, the #1 importer, remains weak as the country deals with a debt crisis for its key real-estate sector, flagging consumer demand & high youth unemployment while the ruling Communist Party has avoided expensive stimulus measures to revive demand. Weak investor interest is also stifling prices, with a report that hedge funds & money managers last week sold off contracts for 103M barrels, cutting their net positions to 380M barrels, down from 524M barrels on Jul 2. The drop also comes ahead of Thurs's OPEC meeting, which is expected to end with no changes to 2.2M barrels per day of voluntary production cuts in place as the cartel looks to continue supporting prices despite light demand.
WTI Oil Drops to the Lowest in More Than Seven Weeks on Weak China Demand and Investor Disinterest
As is common, the day before the Fed announces the results of its meeting, investors are anxious & nervous. Tomorrow's meeting has added importance after investors were disappointed that there were no rate cuts a few months ago. In addition, high profile tech companies will be reporting earnings & the early returns suggest they may be less than optimistic. Tomorrow's trading could see high volatility.
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