Dow climbed 126, decliners over advancers 3-2 & NAZ sank 170. The MLP index was off 1 to 171 & the REIT index fell 5 to the 397s. Junk bond funds declined & Treasury prices sank, taking the yield on the 10 year Treasury up almost 10 basis points to 1.73% (more below). Oil tumbled 2+ to the 61s & gold was even at 1727.
AMJ (Alerian MLP index tracking fund)
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The number of Americans filing for first-time unemployment benefits rose last week, despite some signs the US economy is strengthening as more Americans are vaccinated & pandemic-induced business restrictions are rolled back. Figuresby the Labor Dept show that 770K Americans filed first-time jobless claims last week, higher than the 700K forecast. Weekly jobless claims have remained stubbornly high for months, hovering around 4 times the typical pre-crisis level, although it's well below the peak of almost 7M that was reached when stay-at-home orders were first issued a year ago in Mar. There are roughly 9.5M fewer jobs than there were last year in Feb before the crisis began. Continuing claims (the number of Americans who are consecutively receiving unemployment aid) fell to 4.12M, a decline of 18K from the previous week. The report shows that roughly 18.2M Americans were collecting jobless benefits for the latest week, a decrease of 1.9M from the prior week. Many more Americans are receiving jobless aid from 2 federal programs that Congress established with the passage of the CARES Act in Mar: One extends aid to self-employed individuals, gig workers & others who typically aren't eligible to receive benefits & the other provides aid to those who have exhausted their state benefits.
Another 770K Americans filed for unemployment benefits last week
The 10-year Treasury yield jumped above 1.7% despite reassurance from the Federal Reserve that it had no plans to hike interest rates anytime soon, nor taper its bond-buying program. The yield on the benchmark 30-year Treasury bond climbed 4 basis points to 2.483%. Yields move inversely to prices. (1 basis point equals 0.01%). The 10-year broke above 1.75% earlier in the session, marking its highest level since Jan. 24, 2020, when it topped out at 1.762%. This is also the first time the 30-year has traded above 2.5% since Aug 2019. After the Fed's 2-day policy meeting concluded yesterday, the central bank said it sees stronger economic growth than previously estimated, forecasting GDP to rise to 6.5% in 2021, up from the 4.2% GDP increase forecast in Dec. The Fed also expects core inflation to hit 2.2% this year, but has a long-run expectation of it sticking around 2%. The central bank also indicated that it didn't plan to hike interest rates thru 2023 & that it would continue its program of buying at least $120B of bonds a month. These projections reinforced the idea that the Fed is willing to let the economy run hot for a period of time to allow the US to recover from the Covid pandemic. Bond investors fear this means the central bank will let inflation increase more than normal, eroding the value in bonds. Fed Chair Jerome Powell reiterated that the central bank wants to see inflation consistently above its 2% target, & material improvement in the labor market, before considering changes to rates or its monthly bond purchases.
10-year Treasury yield at 14-month high of 1.74%, 30-year rate tops 2.5%
The US economy grew again in Feb despite a bout of severe
winter weather & it's likely to gain speed in the months ahead as more
Americans get vaccinated & nearly $2T in fresh gov
stimulus is spent, a new survey showed. The leading economic index rose 0.2% in Feb, the Conference Board said. “The U.S. LEI continued rising in February, suggesting
economic growth should continue well into this year,” said Ataman
Ozyildirim, senior director of economic research at the board. The US economy grew again in Feb despite a bout of severe
winter weather & it's likely to gain speed in the months ahead as more
Americans get vaccinated & nearly $2T in fresh gov
stimulus is spent. The leading economic index rose 0.2% in Feb. “The U.S. LEI continued rising in February, suggesting
economic growth should continue well into this year,” he added.
U.S. economy expands again in February, leading indicators show
The economic data from the Conference Board was encouraging, but investors are paying more attention to rising interest rates. The yield on the 10 year Treasury was under 1% at the start of the year & is now heading for 2%. Loan costs (beginning with mortgage interest rates which are tied to the rate on the 10 year Treasury) are heading north. That will be a major damper for the bulls.
Dow Jones Industrials
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