Dow advanced 323, advancers over decliners better about 4-1 & NAZ gained 210. The MLP index went up 2+ to the 219s & the REIT index jumped 7+ to the 361s. Junk bond funds had limited buying & Treasuries hardly budged in price, leaving yields flattish for the day. Oil slid back to go under 75 & gold was off 4 to 1969 (more on both below).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
Demand for mortgage applications climbed 2.9% from a week earlier,
according to the weekly survey from the Mortgage Bankers Association. Mortgage rates have been moving lower since the collapse of Silicon Valley Bank triggered fears of a broader banking meltdown. "Application
activity increased as mortgage rates declined for the third straight
week," said Joel Kan, MBA’s VP & deputy chief economist.
"The 30-year fixed rate declined to 6.45%, the lowest level in over a
month." The decline in rates sparked interest among the other homebuying metrics. The refinance index increased 5% percent from the previous week. "Refinance
activity also picked up last week, but remains 61 percent below last
year’s pace", added Kan. "Most homeowners still have rates significantly
lower than current levels, leaving only a small pool of borrowers with
an incentive to refinance." The purchase index increased 2% from one week earlier. "While the 30-year fixed rate remained 1.65 percentage points higher
than a year ago, homebuyers responded, leading to a fourth straight
increase in purchase applications," said Kan. "Homeprice growth has
slowed markedly in many parts of the country, which has helped to improve buyers' purchasing power." The average contract interest rate for 30-year fixed mortgages decreased to 6.45% from 6.48%. The survey covers over 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990.
House lawmakers tore into top US bank regulators,
questioning their competency & saying examiners were asleep at the
wheel, at a 2nd day of congressional hearings this week about how Silicon Valley Bank & Signature Bank collapsed practically overnight on Mar 10 & 12. “We
need competent financial supervisors, but Congress can’t legislate
competence,” House Financial Services chair Rep Patrick McHenry told top officials at the Federal Reserve, Treasury & FDIC at the beginning the hearing. The committee's ranking member, Rep Maxine Waters questioned whether the repeated warnings regulators delivered to SVB about its balance sheet & long-term interest risks were sufficient. “The
light touch cautions from the Fed to SVB management are clearly not
what Congress intended for bank supervision,” said Waters. Rep Juan Vargas put it more bluntly. “It seems like [SVB] blew you guys off, and you didn’t do anything.”
Federal Reserve Vice Chair Michael Barr
did not disagree with this assessment. “I expect that we’re going to
find that we need to have a more of an emphasis on supervisors using the
tools they have more promptly, and putting in mitigations in place more
promptly when they see problems at banks that they’re supervising,” he
said. McHenry slammed the panel for a lack of transparency over
that fateful weekend when the 3 regulators hastily arranged backup
financing to ensure depositors at the 2 banks wouldn't lose any money
in their collapse. There
are no notes publicly available from regulators' emergency meetings the
weekend the banks collapsed, McHenry said. “That lack of transparency
has a negative effect on the public view of the safety of the financial
arena,” he added. The question of what records would be given to Congress came up repeatedly in the contentious hearing. Rep Brad Sherman requested a broad survey of banks that are undercapitalized the same way SVB was. “Are
there any banks out there, and roughly how many, that have capital of
under 5% if you subtract from their stated capital their unhedged,
unrealized losses on long term debt?” Sherman asked. “Let
us get back to you on that,” said Martin Gruenberg, chair of the
FDIC. “We’ll get the numbers and share
them with you very quickly.” Rep Bill Huizenga
demanded raw, confidential supervisory information about the banks,
available to regulators ahead of the collapses. Gruenberg did not
agree explicitly to provide confidential information, instead suggesting
the committee would need to issue a subpoena for this information. “I
think you have the authority to compel that information,” he said, “and
[FDIC] will be responsive to you.” Members of the Rep
majority House challenged many of the decisions made by regulators in
the hours & days after SVB collapsed & Signature Bank followed 48
hours later. Chief among these was what regulators did, or didn't do, in
the 3 days from the time they each learned of SVB's looming
collapse, on Thurs-Sun, when they decided that the failures of
SVB & Signature Bank posed a systemic risk to the financial system. “Despite
U.S. regulators having clear knowledge of insufficient risk management,
it seems the examiners and your supervisors were asleep at the wheel
while signs that Silicon Valley Bank was heading towards a collapse were
staring them right in the face for many, many months,” Rep Ann Wagner said to Barr.
House lawmakers tear into top bank regulators at hearing on SVB collapse
The fallout from a spate of bank failures is rippling throughout the economy, threatening to ignite a credit crunch that could hit small business the hardest. The
Federal Reserve & financial economists are warning that lending
standards may become drastically more restrictive in coming months amid
ongoing turmoil within the financial system sparked by the stunning
implosion of Silicon Valley Bank & Signature Bank. During
a credit crunch, banks significantly raise their lending standards,
making it difficult for businesses or households to get loans. Borrowers
may have to agree to more stringent terms like high interest rates as
banks try to reduce the financial risk on their end. Small businesses are particularly vulnerable to tighter credit
conditions, particularly with regional banks at the epicenter of the
crisis. Businesses with fewer than 99 employees tend to make up the bulk of business customers at regional banks, community banks & credit unions. Banks were already tightening lending standards before the crisis within the industry began. A quarterly survey
of loan officers published by the Fed showed that a growing number of
banks tightened lending standards & saw reduced demand in the final 3 months of 2022. That's because Fed officials are in the
midst of the most aggressive tightening campaign since the 1980s as they
try to crush inflation still running about 3 times higher than the
pre-pandemic average. But fears over a broader financial crisis complicated the Fed's efforts
because the rapid rise in interest rates played a direct role in the
failure of Silicon Valley Bank. Increasing interest rates threaten to
exacerbate instability within the financial system. Chair
Jerome Powell acknowledged during the Fed's meeting last week
that upheaval within the financial sector could tighten credit for
American households. He suggested that stricter lending standards could
have a similar effect on inflation that a rate increase can. "Such
a tightening in financial conditions would work in the same direction
as rate tightening," Powell said. "You can think of it as being the
equivalent of a rate hike or perhaps more than that."
Gold futures ended with a loss, their 3rd in 4 sessions. Traders looked to book profits as gold futures failed to trade over the
$1990 resistance level. However, sentiment is very bullish for gold. Traders are worried over the prospects of more banks getting a
rescue & focused on the chances for a recession & a pause period
in Federal Reserve interest-rate hikes.
Gold for Jun fell $5 to settle at $1984 an
ounce.
Gold Futures Mark a Third Loss in 4 Session
Oil futures briefly traded higher after the Energy Information
Administration reported the biggest weekly decline in US crude
supplies so far this year, but prices finished slightly lower for the
session. The big jump in refinery runs reported by the EIA caused some traders to
adjust the crack spread & the adjustments likely led some traders to lighten
up their positions in oil. Meanwhile, the market is still apprehensive because the banking crisis & liquidity is still a bit sketchy. May West Texas Intermediate
crude fell 23¢ to settle at $72.97 a barrel.
Oil Futures Give Up Gains to Finish with a Modest Loss
Since its recent low on Mar 10, Dow has recovered 900 with modest daily gains. Considering the background of the banking mess, that is a fairly good response. However it is still below its yearly high & the record set at the start of last year. The effects of substantially higher interest rates & a looming recession are limiting any stock market advance.
Dow Jones Industrials
