Stocks opened lower this morning (Dow -150 pts; SPX -.9%). As yesterday was risk-on, so today is risk-off. There’s really no good reason for this flip-flop, but that’s the market we’re in. Telecom, tech, materials and financials are leading the market lower, all down more than 1% in early trading. Gold is higher on the day (now up 16% year-to-date). Most other commodities are lower (today and year-to-date). WTI crude oil is down 2% to about $37/barrel. Brent (European) crude oil is down 2% to $39/barrel. Bonds are higher on the day as yields fall. The 5-year Treasury yield dipped to 1.15%. There is a support level, by the way, at 1.13% and that’s likely where this move stops. The 10-year Treasury yield is back down to 1.70%. Why? Again, it’s trouble overseas. European markets are poised to close down 1% today and have sunk 11-12% year-to-date. Japan’s Nikkei is down 17% on the year as well. So investors are wondering if all of the central bank stimulus will actually spur economic growth.
US mortgage rates are headed lower again. The average 30-year fixed rate touched 3.59% last week, according to Freddie Mac. That’s the lowest in 14 months. Lower rates are spurring home-buying activity, but with relatively few homes for sale buyers are increasingly competing with one another. And that’s driving home prices up.
Initial filings for unemployment insurance headed lower again last week. Weekly claims have been consistently below 300,000 for over a year now and that’s the longest stretch since 1973. According to Bloomberg, firings & layoffs are also at their lowest level since 1973. The US job market remains very healthy and very near full employment.
General Electric CEO Jeff Immelt responded to some irresponsible comments made by presidential candidate Bernard Sanders. Sanders—in the New York Daily News—apparently accused GE of “destroying the moral fabric” of America. Mr. Immelt wrote an op-ed in the Washington Post saying, in part, “It’s easy to make hollow campaign promises and take cheap shots in speeches and during editorial board sessions, but US companies have to deliver for their employees, customers and shareholders every day.” In addition, Immelt characterized Sanders’ charge that GE pays no taxes as a “lie.”
JP Morgan CEO Jamie Dimon published his annual shareholder letter. Here are some key points:
1) He said rather than worry about negative interest rates, we should be more concerned about rapidly rising rates because consumer spending and job growth are strong. Mr. Dimon actually wonders if the Federal Reserve will end up raising rates too fast.
2) Lower liquidity and higher market volatility are here to stay, so get used to it.
3) Changes in banking regulations have made the US financial system safer. “Nearly every year since the Great Recession, we have improved virtually every measure of financial strength…”