SOURCE:
Credit Bubble Bulletin : Weekly Commentary: Blinked
For the Week Ending October 28, 2022:
S&P500 jumped 4.0% (down 18.2% y-t-d)
Dow Industrial rose 5.7% (down 9.6%)
Utilities surged 6.6% (down 7.1%)
Banks rallied 5.9% (down 20.9%)
Broker/Dealers surged 7.2% (down 4.6%)
Transports jumped 7.0% (down 17.6%)
S&P 400 Midcaps rose 5.3% (down 14.3%)
Small cap Russell 2000 jumped 6.0% (down 17.7%)
Nasdaq100 gained 2.1% (down 29.3%)
Semiconductors rose 4.1% (down 38.3%)
Biotechs jumped 5.5% (down 10.5%)
the HUI gold equities index increased 1.4% (down 23.2%).\
Japan's Nikkei increased 0.8% (down 5.9% y-t-d).
Three-month Treasury bill rates ended the week at 3.9525%.
Two-year government yields declined six bps to 4.42% (up 369bps y-t-d).
Five-year T-note yields dropped 16 bps to 4.19% (up 292bps).
Ten-year Treasury yields sank 20 bps to 4.02% (up 250bps).
Long bond yields fell 19 bps to 4.15% (up 224bps).
Benchmark Fannie Mae MBS yields sank 27 bps to 5.74% (up 368bps).
Federal Reserve Credit dropped $19.4bn last week to $8.701 TN. Fed Credit was down $199bn from the June 22nd peak. Over the past 163 weeks, Fed Credit expanded $4.975 TN, or 133%.
Freddie Mac 30-year fixed mortgage rates jumped 14 bps to 7.08% (up 394bps y-o-y) - the high since April 2002.
Fifteen-year rates rose 13 bps to 6.36% (up 399bps) - the high since July 2007.
Five-year hybrid ARM rates surged 25 bps to 5.96% (up 340bps) - the high since November 2008.
Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down 11 bps to 7.07% (up 394bps).
For the week, the U.S. Dollar Index fell 1.1% to 110.75 (up 15.8% y-t-d).
The Chinese (onshore) renminbi declined 0.30% versus the dollar (down 12.36% y-t-d).
Commodities Watch:
Bloomberg Commodities Index increased 0.4% (up 12.7% y-t-d).
Spot Gold declined 0.8% to $1,645 (down 10.1%).
Silver dipped 0.8% to $19.23 (down 17.4%).
Gasoline surged 9.2% (up 30%)
Natural Gas gained 3.9% to $5.68 (up 52%).
Copper declined 1.3% (down 23%).
Wheat fell 2.5% (up 8%)
Corn slipped 0.5% (up 15%).
or $1,450, to $20,620 (down 55.5%).
U.S. ECONOMIC NEWS:
October 24 – Bloomberg (Giulia Morpurgo, Neil Callanan, and Olivia Raimonde): “Junk bond sales are falling at an unprecedented rate globally…, a double blow to riskier companies in need of financing in the next few years. Issuance for high yield corporates plummeted 73% through Oct. 24 compared with the same period last year… The decline highlights how money managers have been avoiding the high-yield space even as yields soar, fearing that borrowers could be vulnerable to inflation and the looming economic downturn. Worries about potential default risk have left junk-rated borrowers struggling to access capital via public markets.”
October 25 – Reuters (Sheila Dang and Eva Mathews): “Google parent Alphabet Inc's disappointing ad sales sparked worries across the digital media sector… as advertisers cut back on their spending in the face of an economic slowdown. Alphabet called out slowing spending by advertisers on YouTube, said financial services spending was cooling on Google, and plans to cut hiring by more than half. The negative results shattered many expectations that Google, which is the world's largest digital advertising platform by market share, would remain strong in a weakening economy and reinforced worries on Wall Street that inflation will continue to hurt advertising spending.”
October 28 – Reuters (Tiyashi Datta, Jane Lanhee Lee and Chavi Mehta): “In a further sign that large companies may be girding against an imminent recession, U.S. tech giants Amazon.com, Microsoft and Intel said this week that customers were taking an axe to cloud and datacenter spending. Cloud services for years has been one of the largest and most dependable sources of growth for some of the biggest tech companies, including during the pandemic as people worked and studied from home… ‘The AWS slowdown is a clear sign that businesses are beginning to trim costs, so this will likely put more of a squeeze on Amazon's bottom line in the coming quarters,’ said Andrew Lipsman, principal analyst at Insider Intelligence.”
October 27 – Bloomberg (David Welch and Craig Trudell): “The autonomous-driving sector just endured a day that tech and automotive giants may well look back on the way Wall Street recalls March 16, 2008. Whereas the day Bear Stearns collapsed was an epochal event in the global financial crisis, when flawed assumptions about the value of mortgages pushed banks to the brink — and some over the precipice — Oct. 26, 2022, will go down as the date that seismic consequences emerged from years of faulty presumptions about driverless-vehicle technology. First came the shock that Argo AI, the startup Ford and Volkswagen had each seeded with multibillion-dollar investments, was shutting down. Within hours, Reuters reported that Tesla’s self-driving claims are under criminal investigation.”
October 28 – Bloomberg (John Gittelsohn): “The cost of debt on commercial property has risen so fast that it’s now more expensive to finance many real estate deals than owners currently earn from rents. About $5.5 billion, or 28%, of new commercial mortgage-backed securities had negative leverage — where the cost of debt exceeded projected returns on investments — in the third quarter, according to… Moody’s Analytics. Only 8% of similar loans had negative leverage in the second quarter and barely 2% were negative in the third quarter of 2021.”
October 28 – Bloomberg (Paula Seligson): “Elon Musk is the new owner of Twitter Inc., ending months of uncertainty for Silicon Valley and shareholders. Yet for debt bankers on Wall Street, the drama is far from over, as they’ll need to convince investors that the Chief Twit’s ambitions for the company can justify its heavy debt load. With the $44 billion deal now closed, a Morgan Stanley-led cohort that provided about $13 billion of debt financing to help fund the acquisition of Twitter is now saddled with risky loans that they never intended to keep on their books. The banks now face the unenviable task of selling it off without realizing big losses -- and that’s not going to be easy.”
October 25 – Financial Times (Steve Johnson): “One year after its record-breaking launch, the world’s first exchange traded fund tracking the price of bitcoin has lost more of investors’ dollars than any other ETF debut. Asset manager ProShares launched its Bitcoin Strategy fund in October 2021, and it immediately became the most successful new ETF in history, amassing more than $1bn in its first week… Bitcoin enthusiasts proclaimed the launch as the moment when crypto joined the world’s biggest equities market and became enmeshed in mainstream investment strategies for retail and institutional buyers alike. But one year into its existence, the fund has lost money on an unprecedented scale... Its 70% share price drop also makes this the sixth-worst performing debut ETF of its kind of all time…”
October 25 – Bloomberg (Jessica Menton): “Bank of America Corp.’s clients poured money into US equities for the sixth consecutive week led by hedge funds and private clients, with the intake by single stocks nearing historic extremes. In the past three weeks, inflows into single stocks as a percentage of the S&P 500 Index’s market capitalization were in the 99th percentile of history since 2008…”
October 25 – Yahoo Finance (Ines Ferré): “Consumers could be paying at least 20% more on their heating bills this winter. Tight oil refining capacity and low stockpiles are expected to keep prices elevated during the colder months. ‘Our heating, oil inventories are very low. I mean the lowest, I think, that they've ever been. Does it mean that we're going to have run out of inventories? No, it means that we're going to have the potential for spikes, particularly in a cold winter,’ CIBC Private Wealth Senior Energy Trader Rebecca Babin told Yahoo Finance…”
October 23 – Wall Street Journal (Thomas Gryta and Drew FitzGerald): “Procter & Gamble Co. is ramping up advertising on premium brands. Verizon Communications Inc. is raising prices on wireless plans, while Whirlpool Corp. has slashed production of appliances. High levels of inflation in the U.S. and shifts in underlying demand are putting the spotlight on the strategies executives are taking to navigate a global economy where costs are rising and consumer appetite for some products has waned. The first batch of earnings reports from companies for the September quarter show that corporate profit margins are feeling the squeeze… With a fifth of the S&P 500 index already reporting, …Refinitiv projects quarterly earnings will decline 3.5% from a year ago, excluding the energy sector.”
October 27 – CNBC (Jeff Cox): “The U.S. economy posted its first period of positive growth for 2022 in the third quarter, at least temporarily easing recession fears… GDP, a sum of all the goods and services produced from July through September, increased at a 2.6% annualized pace for the period, according to the advance estimate… That reading follows consecutive negative quarters to start the year…”
October 25 – Wall Street Journal (Nicole Friedman): “Home prices posted their biggest month-on-month decline in more than a decade in August… The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the nation, fell 1.1% in August from July, the second straight month-over-month decline. The August decline was also the biggest month-on-month decrease since December 2011. The index rose 13% in the year that ended in August, down from a 15.6% annual rate the prior month… ‘With inventory rising so quickly and demand slowing so quickly, we have returned to a buyer’s market,’ said Ali Wolf, chief economist at… Zonda. ‘If mortgage rates are 6%-plus, in my mind, there’s no doubt that we’re going to see a downward adjustment to home prices.’”
October 26 – CNBC (Diana Olick): “Mortgage demand fell last week to nearly half what it was a year ago, according to the Mortgage Bankers Association, as rates hit their highest level in 21 years. Overall, demand for mortgages is at the lowest level since 1997. Mortgage applications to purchase a home dropped 2% from the prior week and were 42% lower than the same week in 2021. The annual comparison continues to jump each week, as fewer buyers either want or can afford to get into this very pricey housing market…”
October 26 – Reuters (Lindsay Dunsmuir): “The average interest rate on the most popular U.S. home loan rose to its highest level since 2001 as tightening financial conditions weigh on the housing sector… The average contract rate on a 30-year fixed-rate mortgage rose by 22 bps to 7.16% for the week ended Oct. 21 while the MBA's Market Composite Index, a measure of mortgage loan application volume, fell 1.7% from a week earlier. Mortgage application activity is at its slowest pace since 1997.”
October 26 – Reuters (Lucia Mutikani): “Sales of new U.S. single-family homes dropped in September…, more evidence that higher mortgage rates are choking the housing market. New home sales decreased 10.9% to a seasonally adjusted annual rate of 603,000 units last month… August's sales pace was revised down to 677,000 units from the previously reported 685,000 units… Sales plummeted 17.6% on a year-on-year basis in September. They peaked at a rate of 993,000 units in January 2021, which was the highest level since the end of 2006… The median new house price in September was $470,600, a 13.9% increase from a year ago. There were 462,000 new homes on the market at the end of last month, up from 457,000 units in August.”
October 28 – Bloomberg (Vince Golle): “US pending home sales sank last month by the most since the immediate aftermath of the pandemic, illustrating a swift and steep downturn for a housing market beset by soaring borrowing costs. The National Association of Realtors’ index of contract signings to purchase previously owned homes decreased 10.2% in September, the sharpest fall since April 2020…”
October 26 – Bloomberg (Ana Monteiro): “The US merchandise-trade deficit widened in September for the first time in six months as imports grew and some exports plunged. The shortfall widened 5.7% to $92.2 billion last month… Exports declined 1.5% to $177.6 billion. Imports rose to $269.8 billion, also the first increase since March.”
October 24 – Bloomberg (Vince Golle): “US business activity contracted in October for a fourth-straight month as concerns about inflation and sluggish demand weighed on the outlook. The S&P Global flash composite purchasing managers output index decreased 2.2 points to 47.3… Manufacturers and services providers’ views on the outlook also deteriorated in October, leading the composite future index to fall to its lowest level since September 2020. A measure of business activity at service providers slid to 46.6 in the month, marking the second-worst reading since May 2020. Firms attributed the decline to weak client demand, rising interest rates and stubborn inflation…”
October 25 – Bloomberg (Jenny Surane): “Visa Inc. saw spending growth slow the most since the depths of the pandemic as inflation weighs on consumers… Volume on the network rose 10.5% to $2.93 trillion in the fiscal fourth quarter, Visa said... That was shy of the 11% increase analysts… were expecting and a decrease from the 12% growth the firm reported for the previous three months. It was the slowest growth since Visa posted less than 5% for the first fiscal quarter of 2021.”
October 25 – Wall Street Journal (Will Parker): “After a long stretch of record-high rents, Americans are renting fewer apartments as demand in the third quarter fell to its lowest level in 13 years. Some renters are choosing to take on roommates, while others are boarding with family or friends. More people are opting to stay longer in their parents’ homes or moving back in…, according to a recent UBS survey. Apartment demand in the quarter, measured by the one-year change in the occupancy of units, was the lowest since 2009… Measured quarterly, the drop in demand was the worst of any third quarter—normally prime leasing season—in the more than 30 years RealPage has compiled the data.”
October 25 – Reuters (Jessica Menton): “Hyundai Motor Co global chief operating officer Jose Munoz… said the automaker's new $5.54 billion Georgia electric vehicle and battery plant could begin production in 2024 and eventually produce 500,000 vehicles annually… Munoz told reporters the plant will produce five or six models and could begin building vehicles as early as the third quarter of 2024.”
October 28 – Bloomberg (Kevin Simauchi and Jeremy Hill): “A heap of distressed debt is expanding in the US corporate bond market and investors worry that a burst of defaults will follow. The amount of dollar-denominated bonds and loans trading at levels indicating distress is the largest since September 2020, reaching $271.3 billion last week after five straight weeks of growth… Companies that binged on low-cost borrowing in recent years are facing the prospect of refinancing at exorbitant yields -- if they can find any investors…”
October 26 – Bloomberg (Jill R Shah and Carmen Arroyo): “The current environment of ever-rising rates is pushing riskier US borrowers to buy themselves time by putting off looming debt maturities. Through a variety of tactics, sometimes labeled by market professionals as ‘amend and extend,’ companies are prolonging payment dates rather than try to sell junk-rated refinancing debt at exorbitant yields… ‘We expect to see a pick up in amend-to-extend activity as borrowers look to address near term maturities,’ said Scott Snell, portfolio manager at Tetragon Credit Partners… ‘It’s better for issuers to negotiate directly with existing lenders, who don’t want to push their companies into default.’”
October 28 – Bloomberg (Ronan Martin and Paul Cohen): “It was supposed to be the silver lining to a year of brutal losses. As bond-fund managers watched the market value of their portfolio decline rate hike after rate hike, one thing was certain: companies would soon have to return to the market offering juicier yields… Of the 1,555 investment-grade bonds worth over $1.3 trillion that have been sold in the US and Europe since Russia’s invasion of Ukraine, all but 137 are now trading below their offering price... It totals up to paper losses of nearly $106 billion for investors so far.
October 25 – Reuters (Rami Ayyub): “U.S. students have suffered historic learning setbacks with math and reading scores falling to their lowest levels since before the COVID-19 pandemic, national exam results… showed, the latest sign of the damage school closures wrought on children. Math scores saw their largest drop on record, a trend consistent across most U.S. states and almost all demographic groups, according to the National Assessment of Educational Progress (NAEP), also known as the ‘Nation's Report Card’… Reading scores declined for most jurisdictions, though not as dramatically as in math.”
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.