Dow recovered 444 advancers over decliners a relatively modest 2-1 & NAZ went up 46. The MLP index added 2+ to 211 & the REIT index crawled up 1+ to the 422s. Junk bond funds rose along with stocks & Treasuries were sold, raising yields (more below). Oil was off 1 to the 109s & gold gained 10 to 1852.
AMJ (Alerian MLP index tracking fund)
Small businesses are growing concerned about the fate of the US economy as the nation deals with high inflation, supply-chain & labor shortages, & rising interest rates. According to a poll conducted this month by business-coaching & peer-advisory firm Vistage Worldwide, 57% of small business owners predict that the US economy will only become worse in the next year, matching the Apr 2020 mark for lowest level of confidence. Last month, 42% of small business owners had the same grim outlook on the economy. The poll is part of a broader confidence index that, in May, revealed its largest year-over-year drop since the COVID-19 lockdown from spring 2020. While prices continue to rise, the number of small businesses that expect a revenue increase in the coming year dipped to 61%, a significant decline from the May 2020 level of 79%. Data showing that small business owners have a pessimistic view of the economy relies on responses from a variety of sectors, including manufacturing & consumer products & services. Even large corporations are feeling the impact of supply-chain holdups, rising prices & worker shortages. Supply chains are also seeing indicators that consumers are starting to cut down on spending, particularly for discretionary purchases, amid higher prices for gas & other necessities.
The IMF has warned against “geoeconomic fragmentation” as policymakers & business leaders gather at the World Economic Forum in Davos, Switzerland. In a blog postt, IMF Managing Director Kristalina Georgieva said the global economy faces its “biggest test since the Second World War,” with Russia's invasion of Ukraine compounding the residual economic effects of Covid-19 crisis, dragging down growth & driving inflation to multi-decade highs. Spiraling food & energy prices are squeezing households around the world, while central banks are tightening monetary policy to rein in inflation, exerting further pressure on indebted nations, companies & families. When combined with the spike in volatility in financial markets and persistent threat from climate change, the IMF said the world faces a “potential confluence of calamities.” “Yet our ability to respond is hampered by another consequence of the war in Ukraine—the sharply increased risk of geoeconomic fragmentation,” Georgieva added. “Tensions over trade, technology standards, and security have been growing for many years, undermining growth—and trust in the current global economic system.” She said that uncertainty around trade policies alone cut global GDP by almost 1% in 2019, according to IMF research, & the DC based institution's monitoring also indicates that around 30 countries have restricted trade in food, energy & other key commodities. Georgieva warned that further disintegration would have enormous global costs, harming people across the socio-economic spectrum & said technological fragmentation alone could lead to losses of 5% of GDP for many countries.
Treasury yields rose as concerns about inflation & economic growth remained in focus for investors. The yield on the benchmark 10-year Treasury note climbed 3 basis points to 2.823% & the yield on the 30-year Treasury bond moved 2 basis points higher to 3.021%. Yields move inversely to prices & 1 basis point is equal to 0.01%. Treasury yields moved lower throughout last week, as investors looked to find a safe haven in gov bonds, amid heavy selling in stock markets. The S&P 500 briefly dipped into bear territory on Fri, with the benchmark index falling 20%. However, US equities were on the rise today, with investors appearing to rotate slightly out of bonds, ahead of first-qtr GDP data, due out on on Thurs.Today's advance is less than inspiring. The advance decline ratio is weak & demand for tech shares is limited in NAZ. The GDP data on Thurs will be telling. There is a chance GDP growth will be negative, signalling a recession, However there are not indications a decline would be substantial. But any headline mentioning recession could shake investor confidence which is already very nervous.
Dow Jones Industrials