Dow declined 144, decliners modestly ahead of advancers & NAZ was off another 230. The MLP index slid 1+ lower to the 164s & the REIT index fell 2+ to 380. Junk bond funds were little changed in price & Treasuries remained in demand. Oil fell almost 1 to the 59s & gold recovered 12 to 1735 (more on both below).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
The US economy has roared back to life in 2021, with Q1 growth set to defy even the rosiest expectations as another fresh influx of cash looms. Manufacturing data yesterday showed the sector at its highest growth level since Aug 2018. That report from the Institute for Supply Management in turn helped confirm the notion among economists that output to start the year is far better than the low single-digit growth many had been predicting back in late 2020. The Atlanta Federal Reserve, which tracks data in real time to estimate changes in GDP, now is indicating a 10% gain for the first 3 months of the year. The GDPNow tool generally is volatile early in the qtr then becomes more accurate as the data roll in thru the period. That comes on the heels of a report Fri showing that personal income surged 10% in Jan, thanks largely to $600 stimulus checks from the gov. Household wealth increased nearly $2T for the month while spending rose just 2.4%, or just $341B. Those numbers, along with a burst of nearly $4T in savings, pointed to an economy not only growing powerfully but also one that is poised to continue that path thru the year. Aa combination of systematic resilience combined with previously unimaginable doses of fiscal & monetary stimulus have helped speed the recovery along considerably. The final qtr of 2020, in which GDP increased 4.1%, left the total of goods & services produced just $270B shy of the same period a year previous, before Covid-19 struck. “With strong federal fiscal support and continued progress on vaccination, GDP growth this year could be the strongest we’ve seen in decades,” New York Federal Reserve Pres John Williams said in a speech last week.
10% GDP growth? The U.S. economy is on fire, and is about to get stoked even more
Federal Reserve Governor Lael Brainard became the first top official at the central bank to express unease about last week's sharp rise in longer-term Treasury yields. Asked about the bond market, Brainard said she was “paying close attention to market developments.” “Some of those moves last week and the speed of the moves caught my eye,” Brainard added. “I would be concerned if I saw disorderly conditions or persistent tightening in financial conditions that could slow progress” towards the central bank's twin goals of a strong labor market & stable 2% longer-run inflation. Last week, Fed Chair Jerome Powell & other central bank officials said they were happy to rising rising longer-run Treasury yields because they said it represented confidence in the economic outlook. Many market experts said the Fed's lack of concern risked having markets push longer-run yields higher to test the Fed's resolve. The US economy is likely to experience a “burst” of short-lived inflation rather than a durable shift in price levels, Brainard said. “Transitory inflation pressures are possible if there is a surge in demand that outstrips supply in certain sectors when the economy opens up fully,” Brainard continued. The size of the surge in demand will depends on the effects of further fiscal stimulus from Congress & whether Americans spend-down the savings they have accumulated as they have curbed spending during the coronavirus pandemic, she said. While more gov spending from Congress this year will stoke the economy, fiscal policy will begin to retard growth down the road, she noted. “A surge in demand and any inflation bottlenecks would likely be transitory, as fiscal tailwinds to growth early this year are likely to transition to headwinds sometime thereafter,” Brainard said. With some economists raising their forecasts for US growth this year to a 6% annual rate – the fastest pace since 1984 – some investors are betting inflation will pick up & the central bank will have to start to exit its easy policy stance sooner than expected. But Brainard said the Fed’s underperformance on hitting 2% inflation over the past decade highlights the need for “patience.” “We have pledged to hold the policy rate in its current range until not only has inflation risen to 2% but it is also on track to moderately exceed 2% for some time,” she said, Brainard said she “would not hesitate to act” if inflation “rises immoderately and persistently above target.” At the moment, “the economy remains far from our goals in terms of both employment and inflation, and it will take some time to achieve substantial further progress,” Brainard said.
Fed’s Brainard expresses unease about last week’s bond market turmoil
Gold futures ended higher, on the heels of a 5-session decline that pushed prices to their lowest level in over 8 months. Gold for Apr rose $10 (0.6%) to settle at $1733 an ounce, after trading as low as $1704. Yesterday, prices based on the most-active contract posted a 5th-straight session decline & marked the lowest finish since Jun 2020. Markets have been fixated on a move in bond yields, which have weighed on appetite for stocks & gold because it forces investors to assess the relative value of those assets against a regime of richer yields & rising corp borrowing costs. The Fed has suggested yield moves reflect upbeat expectations for an economic recovery fueled by the vaccine program & the likelihood of additional fiscal stimulus.
;'Gold scores first gain in 6 sessions
Target (TGT), a Dividend Aristocrat, reported quarterly profit & revenue that exceed expectations as COVID-19 fueled demand for same-day services. The retailer adjusted EPS of $2.67. Revenue was up 21% to $28.3B. The estiamte called for EPS of $2.54 on revenue of
$27.5B. Same-day services, which include order pick up, drive up Shipt,
increased by 212%, helping boost same-store sales by 21%. Comparable
traffic grew 6% & average ticket size increased by 13%. “Following
years of investment to build a durable, scalable and sustainable
business model, we saw record growth in 2020, as our guests turned
to Target to safely provide for their families throughout the pandemic,”
CEO Brian Cornell said. The company continued to gain
market share in all 5 of its merchandising categories, helping 2020
sales grow by more than $15B – greater than the 11 previous years
combined. The company gained about $9B in market share last
year. TGT cited continued uncertainty surrounding COVID-19 as reason for not providing guidance. The stock dropped a big 12.48 (7%)\.
If you would like to learn more about TGT, click on this link:
club.ino.com/trend/analysis/stock/TGTa_aid=CD3289&a_bid=6ae5b6f7
Target's same-day services fuel record growth
Oil futures fell, with US prices settling below the $60 mark for the first time in more than week, as traders bet that OPEC & its allies (OPEC+) will decide later this week to restore some output in Apr. West Texas Intermediate crude for Apr fell by 89¢ (1.5%) to settle at $59.75 a barrel, though climbed to as high as $61.21 during the session. Front-month contract prices ended at their lowest since Feb 19. May Brent crude, the global benchmark, declined by 99¢ (1.6%) at $62.70 a barrel after tapping an intraday high of $64.13. The settlement was the lowest since Feb 12. At an OPEC+ technical meeting held today, it was reported that OPEC Secretary General Mohammad Barkindo said producers must emphasize “cautious optimism.” The pandemic still poses downside risks to the economy, but “encouraging global economic developments & resilient demand in Asia are upside factors,” Barkindo said. OPEC+ will hold a committee meeting tomorrow to offer a recommendation on production levels & the group will hold its main decision-making gathering on Thurs. A survey estimated that OPEC produced 24.9M barrels a day in Feb, a drop of 870,K barrels a day from Jan for the first monthly decline since Jun. OPEC+ had decided to keep output steady in Feb, while Saudi Arabia said it would unilaterally reduce production by 1M barrels a day in Feb & Mar. A survey found Saudi Arabia cut output by 850K barrels a day in Feb.
U.S. oil prices settle below $60 mark as traders bet that OPEC+ will decide to boost output
A pause for stocks was needed after yesterday's enormous advance. While the oulook for the economy looks good, all concerned, there are dark clouds in the sky. Uncertainty about the stimulus bill in the Senate, a significant rise in Treasury yields this year, the effectiveness of the vaccines & 10M Americans looking for work are worries investors will mull over.
Dow Jones Industrials
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