Financial Data and Economic News Summary of the Week ending October 7, 2022

 SOURCE:

Credit Bubble Bulletin : Weekly Commentary: McAlvany Wealth Management Client Conference

For the Week Ending October 7, 2022:

FINANCIAL  DATA:

Stocks:

S&P500 rallied 1.5% (down 23.6% y-t-d)

Dow Industrial gained 2.0% (down 19.4%)

Utilities fell 3.2% (down 12.2%)

Banks recovered 1.8% (down 26.2%)

Broker/Dealers surged 6.1% (down 10.6%)

Transports rallied 3.5% (down 24.3%)

S&P 400 Midcaps rose 2.9% (down 20.2%)

Small cap Russell 2000 recovered 2.2% (down 24.2%)

Nasdaq100 increased 0.6% (down 32.4%)

Semiconductors rose 2.2% (down 40.3%)

Biotechs gained 1.9% (down 16.8%). 

With gold bullion up $34, 

the HUI gold equities index rose 1.8% (down 23.6%).

U.K.'s FTSE rallied 1.4% (down 5.3% y-t-d).  

Japan's Nikkei surged 4.5% (down 5.8% y-t-d). 

France's CAC40 gained 1.8% (down 18.0%)

German DAX recovered 1.3% (down 22.7%). 

Spain's IBEX 35 increased 1.0% (down 14.7%). 

Italy's FTSE MIB rallied 1.2% (down 23.6%)

Brazil's Bovespa surged 5.8% (up 11.0%)

Mexico's Bolsa jumped 2.5% (down 14.2%). 

South Korea's Kospi rallied 3.6% (down 25.0%). 

India's Sensex increased 1.3% (unchanged). 

China's Shanghai was closed for holidays (down 16.9%).

Turkey's Istanbul National 100 surged 12.2% (up 92%). 

Russia's MICEX slipped 0.6% (down 48.7%).

Bonds:

Three-month Treasury bill rates ended the week at 3.26%. 

Two-year government yields added three bps to 4.31% 

   (up 358bps y-t-d). 

Five-year T-note yields rose five bps to 4.14% 

   (up 288bps). 

Ten-year Treasury yields gained five bps to 3.88%

    (up 237bps). 

Long bond yields added six bps to 3.84%

   (up 194bps). 

Benchmark Fannie Mae MBS yields increased five bps to 5.72% 

   (up 366bps).

Federal Reserve Credit $bn last week dropped $44.7bn to $8.728 TN. Fed Credit is down $173bn from the June 22nd peak. Over the past 160 weeks, Fed Credit expanded $5.002 TN, or 134%.  

Mortgage Rates:
Freddie Mac 30-year fixed mortgage rates slipped four bps to 6.66% 

     (up 367bps y-o-y). 

Fifteen-year rates declined six bps to 5.90% 

    (up 367bps). 

Five-year hybrid ARM rates rose six bps to 5.36% 

    (up 284bps) - the high since January 2009. 

Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates up 23 bps to 7.05% (up 390bps) - the high since March 2009.

Currency Watch:
For the week, the U.S. Dollar Index added 0.6% to 112.80

    (up 17.9% y-t-d).

The Chinese (offshore) renminbi increased 0.10.% versus the dollar     (down 10.89% y-t-d).

Commodities:
Bloomberg Commodities Index jumped 5.1% (up 18.1% y-t-d). 

Spot Gold rallied 2.1% to $1,695 (down 7.3%). 

Silver recovered 5.8% to $20.13 (down 13.6%). 

WTI crude surged $13.15 to $92.64 (up 23%). 

Gasoline spiked 10.6% (up 23%)

Natural Gas slipped 0.3% to $6.75 (up 81%). 

Copper declined 0.8% (down 24%). 

Wheat dropped 4.5% (up 14%)

Corn added 0.8% (up 15%). 

Bitcoin increased $200, or 1.0%, 

this week to $19,570 (down 58%).

ECONOMIC  NEWS:

October 4 – Financial Times (Eric Platt and Kate Duguid): “Investors and Wall Street analysts are sounding the alarm about a possible ‘market accident’, as successive bouts of tumult in US stocks and bonds and a surging dollar cause rising levels of stress in the financial system. A gauge of strain in US markets… has soared to its highest level since the coronavirus pandemic ructions of May 2020. Even as equities on Wall Street start the new quarter with gains, the OFR’s Financial Stress index is near a two-year high at 3.1, where zero denotes normal market functioning. That has added to a growing list of benchmarks which suggest trading conditions in US government debt, corporate bonds and money markets are increasingly stretched.”


October 6 – Bloomberg (Ye Xie and Mary Biekert): “Global foreign-currency reserves are falling at the fastest pace on record, as central banks from India to the Czech Republic intervene to support their currencies. Reserves have declined by about $1 trillion, or 7.8%, this year to $12 trillion, the biggest drop since Bloomberg started to compile the data in 2003.”


October 6 – Financial Times (Tommy Stubbington): “The Bank of England has defended last week’s intervention in the UK government debt market, saying it stepped in to prevent a £50bn fire sale of gilts that would have taken Britain to the brink of a financial crisis. The central bank said… that had it not launched its emergency bond-buying scheme in the wake of chancellor Kwasi Kwarteng’s ‘mini’ Budget, pension funds would have been forced to sell £50bn worth of long-term UK government debt ‘in a short space of time’… The BoE’s defence of the scheme… is the clearest sign yet of how close the UK came to a market meltdown following Kwarteng’s plan for £45bn in unfunded tax cuts. Had the central bank not intervened, it feared there would have been a ‘self-reinforcing spiral’ that threatened ‘severe disruption of core funding markets and consequent widespread financial instability’, said Sir Jon Cunliffe, the BoE’s deputy governor for financial stability…”

October 4 – Bloomberg (David Goodman): “Kwasi Kwarteng signed off on £100 billion ($113bn) of bond buying by the Bank of England as the market fell into turmoil last week, higher than the size of the plan announced by the central bank and an indication of the level of concern among officials about volatility in the gilt markets… The chancellor of the exchequer agreed to a request to approve purchases of as much as £100 billion when the plan kicked off…”


October 4 – Bloomberg (Loukia Gyftopoulou): “Asset managers including Blackrock Inc. and Schroders Plc are limiting institutional investors’ withdrawals from some UK property funds after a wave of requests to move money. Schroders’ UK Real Estate fund has deferred redemptions due at the start of October to as late as July 2023, which will give the £2.8 billion ($3.2bn) fund more time to ensure it has enough cash to cover the payments…”

October 7 – Bloomberg (Andrew Atkinson): “UK corporate insolvencies in the second quarter reached their highest since 2009, with the soaring cost of energy cited as a primary concern for more than a fifth of companies. The figures released by the Insolvency Service and the Office for National Statistics show that more than 1-in-10 firms questioned in August reported a moderate-to-severe risk of failure.”


October 6 – Bloomberg (Preston Brewer): “The US IPO market has almost entirely frozen over, with very few companies even trying to navigate the treacherous environment of market volatility, rising interest rates, and low investor appetite for new issues. The poor performance of companies that have recently completed their initial public offering has only tightened this winter’s grip. How Cold Is Cold? How much have US IPOs fallen? Quite a lot. In the recently completed quarter, US IPOs were down 87.5%, and raised nearly 98% less capital compared to the first quarter of 2021, when new issues peaked. Only 52 companies went public in the US in Q3, raising $2.8 billion.”

October 6 – Bloomberg (Alexandre Tanzi): “Almost half of US families surveyed by the Census Bureau found the recent rise in consumer prices ‘very stressful’ -- and the vast majority of the others were also worried about inflation. The Census Bureau included a new question about the impact from soaring prices in its regular household poll. The result shows that nearly everyone was at least a little stressed by inflation…The survey also highlights disparities among ethnic groups. More than half of Hispanic and Black respondents found inflation ‘very stressful,’ compared with about 43% for Whites and about 38% for Asian Americans.”

October 3 – Bloomberg (Will Wade): “US coal prices surged past $200 for the first time as a global energy crunch drives up demand for the dirtiest fossil fuel. Spot prices for coal from Central Appalachia rose to $204.95 a ton for the week ending Sept. 30, the highest in records dating to 2005…”


October 5 – Reuters (Ahmad Ghaddar, Alex Lawler and Rowena Edwards): “OPEC+ agreed steep oil production cuts…, curbing supply in an already tight market, causing one of its biggest clashes with the West as the U.S. administration called the surprise decision shortsighted. OPEC's de-facto leader Saudi Arabia said the cut of 2 million barrels per day (bpd) of output - equal to 2% of global supply - was necessary to respond to rising interest rates in the West and a weaker global economy.”

October 4 – New York Times (Alan Rappeport and Jim Tankersley): “America’s gross national debt exceeded $31 trillion for the first time…, a grim financial milestone that arrived just as the nation’s long-term fiscal picture has darkened amid rising interest rates. The breach of the threshold… comes at an inopportune moment, as historically low interest rates are being replaced with higher borrowing costs as the Federal Reserve tries to combat rapid inflation… ‘So many of the concerns we’ve had about our growing debt path are starting to show themselves as we both grow our debt and grow our rates of interest,’ said Michael A. Peterson, the chief executive officer of the Peter G. Peterson Foundation… ‘Too many people were complacent about our debt path in part because rates were so low.’”


October 4 – Reuters (Lucia Mutikani): “U.S. job openings fell by the most in nearly 2-1/2 years in August, suggesting that the labor market was starting to cool as the economy grapples with higher interest rates aimed at dampening demand and taming inflation. Despite the fifth month of decreases in job openings this year reported by the Labor Department in its Job Openings and Labor Turnover Survey, or JOLTS report…, vacancies remained above 10 million for the 14th straight month. While there were 1.7 job openings for every unemployed person in August, down from two in July, this closely watched measure of supply-demand balance in the labor market remained above its historical average. Layoffs also stayed low, signs of a still-tight labor market, which likely keep the Federal Reserve on its aggressive monetary policy tightening path.”

October 5 – Bloomberg (Vince Golle): “US mortgage rates jumped to a 16-year high of 6.75%, marking the seventh-straight weekly increase and spurring the worst slump in home loan applications since the depths of the pandemic. Over the past seven weeks, mortgage rates have soared 1.30 percentage points, the largest surge over a comparable period since 2003…”

October 5 – Yahoo Finance (Dani Romero): “Mortgage applications… became the latest sign showing how hard rates are hitting housing. And it could get worse. The volume of mortgage applications for purchases dropped 13% last week compared with the previous week…, while refinance activity… plunged 18%. Purchase apps were down 37% year over year and refis were 86% lower.”

October 3 – Bloomberg (Prashant Gopal): “Home prices in the US have taken a turn and are now posting the biggest monthly declines since 2009. Median home prices fell 0.98% in August from a month earlier, following a 1.05% drop in July… Black Knight Inc. said… The two periods mark the largest monthly declines since January 2009. ‘Together they represent two straight months of significant pullbacks after more than two years of record-breaking growth,’ said Ben Graboske, Black Knight Data and Analytics president. The housing market is losing steam fast with skyrocketing mortgage rates driving affordability to the lowest level since the 1980s.”

October 3 – Bloomberg (Vince Golle): “A gauge of US manufacturing stumbled in September to a more than two-year low, moving closer to outright stagnation as orders contracted for the third time in four months. The Institute for Supply Management’s gauge of factory activity dropped nearly 2 points to 50.9, the lowest since May 2020… The… measure of new orders declined more than 4 points to 47.1, also the lowest level since the early months of the pandemic… Meantime, a measure of prices paid for materials used in the production process retreated for a sixth-straight month. At 51.7, the price index is the lowest since June 2020…”

October 3 – Bloomberg (Alexandre Tanzi): “Global manufacturing contracted in September for the first time in more than two years as orders and production continued to weaken, underscoring growing risks of a worldwide recession. The JPMorgan global manufacturing purchasing managers gauge fell for a fourth consecutive month, to 49.8 last month… An index of new orders shrank for a third-straight month to a more than two-year low and a measure of international trade fell…”

October 3 – Reuters (Yoshifumi Takemoto and Leika Kihara): 

“Core consumer prices in Japan's capital, a leading indicator of nationwide inflation, rose 2.8% in September from a year earlier, exceeding the central bank's 2% target for a fourth straight month and marking the biggest gain since 2014. The data reinforced market expectations that nationwide core consumer inflation will approach 3% in coming months and may cast doubt on the Bank of Japan's view that recent cost-push price increases will prove temporary.”

October 3 – Reuters (Noor Zainab Hussain): “Insurers are bracing for a hit of up to $57 billion as they try to assess the damage from Hurricane Ian in Florida and South Carolina, risk modeling firm Verisk said… The industry projection includes estimated wind, storm surge, and inland flood losses resulting from Ian's landfalls in the two states, Verisk said. However, the estimate range… does not include elements such as losses to the National Flood Insurance Program and any potential impacts of litigation or social inflation that could lead to a total insured industry loss of $60 billion.”


October 4 – Wall Street Journal (Anne Tergesen): “Florida residents who suffered financial losses from Hurricane Ian might be able to tap their retirement accounts to cover emergency expenses, a last resort more victims of natural disasters are using. Though 401(k) plans are set up to keep Americans’ nest eggs out of reach until retirement age, the Internal Revenue Service allows savers to pull money out for certain economic hardships, including buying a first home, preventing foreclosure and covering high medical bills. Since the IRS added natural disasters to the list of sanctioned reasons for hardship withdrawals in 2020, thousands of workers have tapped their retirement savings for that purpose.”

October 1 – Wall Street Journal (Leslie Scism and Cameron McWhirter): “Florida homeowners had reduced their flood insurance coverage in the years before Hurricane Ian dumped up to 15 inches of rain on the state, inundating coastal and inland areas. Only a small number of residences in two of Florida’s hardest-hit inland counties are covered by flood insurance. The percentage of protected homes is higher in coastal areas that sustained the most damage, but still, is over 50% in just one of the affected counties… In all locations pummeled by Ian, the percentage of homes covered by flood policies is down from five years ago.”

October 5 – Bloomberg (Michael Hirtzer, Elizabeth Elkin, and Joe Deaux): “A logjam of more than 100 ships, tugboats and their convoys of barges in the shrinking Mississippi River is threatening to grind trade of grains, fertilizer, metals and petroleum to a halt. The largest US barge operator warned customers it won’t be able to make good on deliveries. Ingram Barge Co. declared force majeure… due to ‘near-historic’ low water conditions on the Mississippi, the top route to get US grains and soybeans to the world market.”

DOUG  NOLAND  COMMENTARY: