SOURCE:
Credit Bubble Bulletin : Weekly Commentary: New Cycle Realities
S&P500 dropped 1.6% (down 24.8% y-t-d)
Dow recovered 1.2% (down 18.4%)
Utilities fell 2.5% (up 14.4%)
Banks increased 0.6% (down 25.7%)
Broker/Dealers sank 4.3% (down 14.5%)
Transports increased 0.2% (down 24.1%)
S&P 400 Midcaps declined 1.0% (down 21.0%)
Small cap Russell 2000 lost 1.2% (down 25.1%).
Nasdaq100 dropped 3.1% (down 34.5%).
Semiconductors sank 8.2% (down 45.2%).
Biotechs gained 0.5% (down 16.4%).
the HUI gold equities index fell 7.2% (down 29.1%).
U.K.'s FTSE fell 1.9% (down 7.1% y-t-d).
Japan's Nikkei was little changed (down 5.9% y-t-d).
France's CAC40 rallied 1.1% (down 17.1%).
German DAX gained 1.3% (down 21.7%).
Spain's IBEX 35 increased 0.7% (down 15.3%).
Italy's FTSE MIB was little changed (down 23.5%).
Brazil's Bovespa sank 3.7% (up 6.9%)
Mexico's Bolsa slipped 0.6% (down 14.7%).
South Korea's Kospi declined 0.9% (down 25.7%).
India's Sensex dipped 0.5% (down 0.6%).
China's Shanghai Exchange rallied 1.6% (down 15.6%).
Turkey's Istanbul National 100 rose 1.7% (up 95.2%).
Russia's MICEX increased 0.3% (down 48.5%).
Bonds:
Three-month Treasury bill rates ended the week at 3.615%.
Two-year government yields surged 19 bps to 4.50% (up 376bps y-t-d).
Five-year T-note yields rose 13 bps to 4.27% (up 301bps).
Ten-year Treasury yields gained 14 bps to 4.02% (up 251bps).
Long bond yields jumped 15 bps to 4.00% (up 209bps).
Benchmark Fannie Mae MBS yields surged 19 bps to 5.92% (up 385bps)
Federal Reserve Credit slipped $3.4bn last week to $8.725 TN. Fed Credit was down $176bn from the June 22nd peak. Over the past 161 weeks, Fed Credit expanded $4.998 TN, or 134%.
Mortgages:
Freddie Mac 30-year fixed mortgage rates surged 26 bps to 6.92% (up 387bps y-o-y) - the high since April 2002.
Fifteen-year rates jumped 19 bps to 6.09% (up 379bps) - the high since July 2008.
Five-year hybrid ARM rates spiked 45 bps to 5.81% (up 326bps) - the high since December 2008.
Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates up 12 bps to 7.17% (up 396bps) - the high since December 2008.
Currency Watch:
For the week, the U.S. Dollar Index added 0.5% to 113.31 (up 18.4% y-t-d).
The Chinese (onshore) renminbi declined 1.06% versus the dollar (down 11.63% y-t-d).
Commodities Watch:
The Bloomberg Commodities Index fell 3.0% (up 14.6% y-t-d).
Spot Gold dropped 3.0% to $1,644 (down 10.1%).
Silver sank 9.2% to $18.28 (down 21.6%).
WTI crude retreated $7.03 to $85.61 (up 14%).
Gasoline fell 3.8% (up 18%)
Natural Gas dropped 4.4% to $6.45 (up 73%).
Copper recovered 1.1% (down 23%).
Wheat declined 2.3% (up 12%)
Corn added 1.0% (up 16%).
Bitcoin lost $360, or 1.9%, this week to $19,200 (down 58.6%).
U.S. ECONOMIC NEWS:
October 14 – Reuters (Lucy Raitano): “Investors with classic "60/40" portfolios are facing the worst returns this year for a century, BofA Global Research said in a note on Friday, noting that bond markets continue to see huge outflows. ‘2022 (is) a simple tale of ‘inflation shock’ causing ‘rates shock’ which in turn threatening ‘recession shock’ & ‘credit event’; inflation shock ain't over,’ BofA said… BofA said annualised returns so far in 2022 on portfolios like these are the worst in the past 100 years, while those on ‘25/25/25/25’ portfolios that hold equal portions of cash, commodities, stocks and bonds have dropped 11.9%, the worst since 2008.”
October 13 – Wall Street Journal (Austen Hufford): “Inflation started in goods affected by supply-chain issues. It isn’t ending that way. While costs to transport goods have declined and supply-chain snarls are easing, prices are now rising briskly in services. Core service prices… jumped 0.8% in September from August…, driven by shelter, medical care and car insurance. Core goods prices, which exclude food and energy, were flat. For the 12 months ended September, core service prices were up 6.7%, the fastest since 1982. They are now rising faster than core goods prices, which rose 6.6% the same month, down from a peak of 12.3% in February.”
October 14 – Associated Press (Anne D’Innocenzio): “The pace of sales at U.S. retailers was unchanged in September from August as rising prices for rent and food chipped away at money available for other things. Retail sales were flat last month, down from a revised. 0.4% growth in August… Retail sales fell 0.4% in July. Excluding sales of automobiles and at gas stations, retail sales rose 0.3%. Excluding gas sales, spending was up 0.1% While the report showed the resilience of the American consumer, the figures are not adjusted for inflation… In fact, sales at grocery stores rose 0.4%, helped by rising prices in food.”
October 11 – Bloomberg (Augusta Saraiva): “Optimism among US small businesses edged up in September as firms grew less downbeat about the outlook for sales, while a smaller share said they raised prices. The National Federation of Independent Business overall optimism index rose 0.3 point to 92.1 last month… Five of the gauge’s 10 components increased. Despite rising for a third-straight month, the measure is historically low.”
October 12 – Reuters (Lindsay Dunsmuir): “The average interest rate on the most popular U.S. home loan rose to its highest level since 2006 as the housing sector continued to bear the brunt of tightening financial conditions… Mortgage rates have more than doubled since the beginning of the year… The average contract rate on a 30-year fixed-rate mortgage rose by 6 basis points to 6.81% for the week ended Oct. 7…”
October 12 – CNBC (Diana Olick): “Mortgage demand dropped again last week as rates climbed higher, but one type of loan is attracting borrowers. Adjustable-rate mortgages, or ARMs, which offer lower rates, are seeing renewed demand after getting very little interest over the last decade… Mortgage applications to purchase a home, which fell 2% for the week, were 39% lower than a year ago. Buyers have stepped way back this fall, as higher rates have made affordability even worse.”
October 11 – Bloomberg (Prashant Gopal): “After an abrupt end to the US housing boom, home flippers who were winning big just months ago are now racing to stem losses. The doubling of mortgage rates since January has crushed buyer demand and depressed values in investors’ most favored locations, from Phoenix and Las Vegas to Jacksonville, Florida. It’s a swift turnabout for flippers such as Tammi Merrell, who’s stuck with homes to sell and loans to pay. ‘It’s a high-risk, high-reward business — and now we’re facing the high risk,’ said Merrell, a full-time flipper in the Denver area. ‘I’m just praying for break even.’”
October 10 – Wall Street Journal (Theo Francis): “Many big U.S. businesses say they have been able to increase prices this year with limited pushback from customers. Not all the changes are leading to higher corporate profits. Cintas… and Vulcan Materials… have reported widening profit margins as they raised prices. Others, including furniture maker MillerKnoll Inc. and Olive Garden operator Darden Restaurants Inc., say inflation continues to eat into their profits, as their costs are rising faster than their price increases… ‘There’s never been a better time to have a conversation with a customer about price increase because they all understand it, because inflation is pretty much across the board,’ John Michael, an executive at MillerKnoll, told investors…”
October 14 – Wall Street Journal (Cameron McWhirter): “Sections of the Mississippi River are approaching low water levels not seen in more than three decades, disrupting a vital supply lane for agriculture, oil and building materials and threatening businesses including barge and towboat operators, farmers and factories. The low water… has halted commercial traffic and river boat cruises at numerous spots below Illinois. Prices to ship goods have more than doubled in a matter of weeks. Barges are grounding on sandbars in unprecedented numbers and many ports and docks no longer have water deep enough for commercial boats to safely reach them. ‘America is going to shut down if we shut down,’ said Mike Ellis, chief executive of Indiana-based American Commercial Barge Line LLC.”
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