The Buzz on Business for Tuesday, January 30^th, 2024

The Dow and S&P close at new all-time highs, and the Nasdaq closes at a new 2-year high while in the face of a, ya know, pretty good economy and pretty good markets, a US Senator lays into Federal Reserve Chairman Jerome Powell and demands he cut “astronomical interest rates.”

We may fly this thing into the mountainside yet.

Stock Market Report

Nothing but green numbers all up and down the giant quote machine on Monday.

• The Dow Jones Industrial Average was up a stout 224 points. That is six-tenths of a percent. It closed at 38,333.
• The S&P 500, likewise, was up. It closed at 4928. Up 37 points or eight-tenths of a percent.
• A very, very good day indeed for the techs. The NASDAQ Composite was up 173 points, that's 1.12%, and it closed at 15,628.
• The Russell 2000 was up 1.6%. That's 32 1/2 points, and it closed at 2,010.
• The RSP was up six-tenths of a percent. The SOXL was up over 3% on the session.

Bond Market Report

Rates were down; bonds were up across the board on Monday.

• The yield on the 2-year treasury was down four basis points and closed at 4.322%.
• The 20-year closed at 4.425% off eight ticks.

Oil, Gold, and Bitcoin

• Oil gave back some of its recent gains. It was off $1.19 and closed at $76.93.
• Gold picked up $8. And it closed at $2025.40.
• Bitcoin was up $1279.81 from Friday's close. It closed Monday at $41,512.06.

Warren Slams Powell on "Astronomical" Rates: Housing Pain or Political Game?

So, Massachusetts Senator Elizabeth Warren and a group of her Democratic colleagues put Federal Reserve Chairman Jerome Powell on the hot seat on Monday. They claimed interest rates were astronomically high and that those high rates were causing people pain—unnecessary pain—because they can’t buy houses. In no uncertain terms they demanded rates be cut. Immediately.

Let me be clear. I have no particular animus toward Elizabeth Warren. Certainly no more animus than I have toward every other single member of Congress. And listeners to this podcast know that I carry no brief for the Federal Reserve or for its chairman.

We have attached to the episode description a link to a chart of 30-year mortgage rates in the United States for the last 50 or 60 years. We encourage all of our listeners to click on the link and see for themselves. Mortgage interest rates are a bazillion light years from astronomical they are at the lower end of the range they have been in since Elizabeth Warren was a toddler.

Don't Fly it into the Mountainside: A Call for Rationality in the Face of Populist Pressure and Market Mania

Further, every borrower implies a saver. While it might be true, although it's dubious, that a cut in the Fed Funds rate might reduce mortgage interest rates sometime in the future, what is certain, beyond doubt, is that savers—people with money in the bank—in Massachusetts and everywhere else would see their incomes cut. Dramatically.

Every borrower implies a saver. People pay interest, but they also earn it. This policy proposed by this US Senator would hurt those people far more than it would help anyone buy a house. And the problem with home prices is mostly supply due to zoning, nimbys, and other regulations. Things the Federal Reserve has absolutely no control over.

One year ago. Exactly one year ago. Everybody and their mother was predicting that the economy would tip into a recession in 2023. Somehow we’ve managed to avoid that and did so while inflation went from over 9% to about 2 1/2%, still too high. But the economy remains reasonably strong. Unemployment is low. Housing starts are not gangbusters but strong enough. Manufacturing has finally ticked up for the first time in two years.

The Fed, with all of its faults, is walking a pretty good tightrope. If they can just be left alone to do their job, maybe, just maybe, we'll get through this.

Regular listeners know we predicted just this scenario, this kind of political pressure, a couple weeks ago, on this podcast.