👊 DOW hits new highs

and mortgage demand falls

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Good morning investors! About 50 S&P 500 stocks have posted third-quarter earnings thus far, with 79% of those beating expectations

Today we cover:

  • Mortgage demand falls

  • Stocks hit new highs

  • Renting vs. Buying

📊 Economy and News 

High Interest Rates Cause a Decline in Mortgage Demand

Mortgage interest rates climbed for the third consecutive week, which led to a sharp decline in demand from both current homeowners and prospective buyers. According to the Mortgage Bankers Association's seasonally adjusted index, total mortgage application volume dropped 17% compared to the previous week.

The average interest rate on 30-year fixed-rate mortgages with conforming loan balances (up to $766,550) increased to 6.52%, up from 6.36%, while points (including the origination fee) rose to 0.65 from 0.62 for loans with a 20% down payment.

Refinancing activity, which is particularly sensitive to weekly rate fluctuations, experienced the largest decline, dropping 26% from the previous week. However, it remained 111% higher than the same week last year, as rates a year ago were 118 basis points higher. This means many who purchased homes last year could still benefit from refinancing. The refinance share of applications fell below 50% for the first time in more than a month.

Mortgage applications for home purchases also decreased, falling by 7% over the week. Yet, they were 7% higher compared to the same period last year, as increased housing supply is providing new opportunities for some buyers.

Global hits:

Shocking: A growing number of Americans with auto loans owe more than their vehicles are worth. The average amount owed on upside-down loans climbed to an all-time high of $6,458 during the third quarter.

Must check: It’s now easier to cancel subscriptions – new rule to go into effect.

Money: This year, holiday spending between Nov. 1 and Dec. 31 is expected to increase to a record total of $979.5 billion to $989 billion, according to the National Retail Federation.

Even as credit card debt tops $1.14 trillion, holiday shoppers expect to spend, on average, $1,778, up 8% compared to last year, Deloitte’s holiday retail survey found.

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📈 Stocks

S&P 500 5,842.47 (+0.47%)
DJIA 43,077.70 (+0.79%)
NASDAQ 18,367.08 (+0.28%)
BRENT CRUDE 74.22 (-0.04%)
* Prices as of Oct 17th, 12:20 AM UTC

DOW Hits Another High

The Dow Jones Industrial Average rose to a record close on Wednesday, bouncing back from a sell-off in the previous session. Similarly, the small-cap Russell 2000 hit a new year-to-date high.

Morgan Stanley rose 6.5% after topping Wall Street estimates for both its third-quarter earnings and revenue. United Airlines also reported better-than-expected results and forecast strong numbers for the fourth quarter, sending shares 12.4% higher.

There were a lot of other major happenings too, including Novavax announcing the Food and Drug Administration has put a hold on its application for a combination shot targeting Covid and influenza and a stand-alone flu vaccine, sending shares of the company down sharply.

Also, Ulta Beauty shares ticked up slightly, as the company stuck by its current forecast and shared its longer-term financial targets.

The beauty retailer’s CEO Dave Kimbell said the company is facing stiffer competition and a more dynamic consumer backdrop. But more importantly, Bed Bath & Beyond is coming back to a physical store near you after going out of business last year. But this time, it’s taking up space at a rival.

Entertainment: Diamond Sports and FanDuel have reached a naming rights agreement for Diamond Sports’ regional sports networks. The agreement will start with the 2024 NHL and NBA seasons and will be long-term, pending Diamond’s emergence from bankruptcy.

Also, MLB viewership numbers on TNT Sports and Fox Sports jumped 18% YOY.

Lastly, private equity billionaire Tom Gores has agreed to pay $750 million to buy 27% of the National Football League’s Los Angeles Chargers.

Surprising: Airbus to cut up to 2,500 jobs in defense and space. Elsewhere, Apple announced a new iPad mini, offering the first update to its smallest tablet since 2021. The new iPad mini comes with a faster A17 Pro processor, the same chip that was in last year’s iPhone 15 Pro. It starts at $499, can be preordered now and launches in stores on Oct. 23. Lastly, companies are expanding with Amazon to invest more than $500 million to develop small modular reactors and GM to invest $625 million in joint venture to mine EV battery raw materials in U.S.

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💵 Personal Finance

Why buying is better than renting

Yesterday, we talked about the benefits of renting over owning. However, we’re not writing ownership out because it offers some exciting benefits and real estate should always be a part of your portfolio.

So, why should you own property? Here are some reasons:

  • It builds wealth. When you buy a home, you invest in an asset that may appreciate over time. Look at how home prices have exploded in the last few years. A house that cost $250,000 in 2018 now costs $350,000. This is a difference of $100,000, i.e., a growth of 40% in five years. Your profit will go only higher when you add rental income to it.

  • Owning a house offers stability. With a fixed-rate mortgage, your monthly payments remain consistent, allowing for better long-term financial planning. On the other hand, your rent can go up with a warning.

  • There are tax benefits. Plus, you might be eligible for lower rates if it’s your first home. Deductions on home loan interest and principal repayments under sections 24(b) and 80C of the Income Tax Act, respectively, can reduce the tax burden and increase overall savings.

  • Unlike rented properties, homeowners enjoy the freedom to customize and renovate as per their taste and needs. Thus, owning a house offers more exciting opportunities.

  • Homeownership offers the possibility of earning rental income. You can rent out everything from the entire crib to the garage to just the backyard.

At the end of the day, renting or buying is a personal choice. Experts seem divided. We think renting can help save money (in some situations) but no serious investor will have a portfolio without real estate.

Watch this video for more:

💰 Be a Better Investor

"If you don’t value your time, neither will others. Stop giving away your time and talents. Value what you know and start charging for it.”

Kim Garst

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Nothing in this newsletter is financial advice. Always do your own research and think for yourself.