Dow fell as enormous 681, decliners over advancers a huge 6-1 & NAZ tumbled 357. The MLP index was off 1+ to the 181s & the REIT index sank 10+ to the 413s. Junk bond funds were sold & Treasuries soared, with the yield on the 10 year Treasury up an astounding 7 basis points to above 1.69%. Oil rose to the high 65s & gold declined 18 to 1817 (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)
Pres Biden's $4T tax credit & spending proposals encountered a new political obstacle: The threat of surging inflation, after consumer prices in
Apr saw the biggest increase in decades. The
Labor Dept report that US consumer prices for goods &
services surged 0.8% in Apr, the largest monthly increase in more than
a decade & the fastest year-over-year jump since 2008. Excluding the
volatile food & energy data, core inflation rose 0.9% in Apr & 3%
over the past 12 months. "There’s so much money out there in the
economy that the demand is high, and it’s outpacing supply and it’s
starting to push prices up," Sen John Thune said. "We need to be a little more cautious and restrained." Rep lawmakers have seized onto the swiftly rising prices, as well
as lackluster job creation last month, to argue that more gov funding will only hurt the economy as it recovers from the coronavirus
pandemic. "With this morning’s Consumer Price Index (CPI) release, it is clear
that inflation is here," Sen Pat Toomey tweeted. "The Federal
Reserve can no longer pretend this is a distant problem. It is time for
the Fed to revisit its accommodative policy stance." Since the pandemic began a little more than one year ago, Congress has
approved nearly $6T in federal spending designed to keep the
nation's economy afloat, including the $1.9T American Rescue
Package passed by Dems in Mar. The exorbitant level of spending
pushed the nation's deficit to a record $3.1T for the 2020
fiscal year & a high of $1.7T for H1.
Biden's massive spending plans threatened as consumer prices spike
Consumer debt edged higher during Q1, due primarily to a jump in mortgages & auto loans, the Federal Reserve reported. Total household debt balances rose by $85B, a 0.6% increase that brought the total level to $14.6T. Fueled by low rates & a red-hot housing market, mortgage debt swelled in the period by $117B (about 1.2%, to $10.1T), according to the New York Fed's quarterly Report on Household Debt and Credit. Auto loans increased by $8B, to $1.4T, while student debt balances rose by $29B to $1.6T, even though many loans are in forbearance granted during the coronavirus pandemic. One surprise in the report came from a substantial decline in credit card balances. That level fell by $49B, the 2nd-largest drop since the New York Fed began tracking it in 1999. Credit card balances now total $770B, $157B lower than at the end of 2019, “consistent with both paydowns among borrowers and reduced consumption opportunities,” the report stated. New York Fed researchers said the latest round of declines also was helped substantially by another round of gov stimulus checks, this time for $1400. While retail sales have jumped higher, so has the savings rate as well as the share put toward reducing debt. The report also noted a general upswing in credit quality among borrowers. The median credit score for newly originated mortgages increased to 788 while the score for new auto loans rose to 720. Just 15% of the newly originated auto loans were to subprime borrowers with scores lower than 620. Delinquency rates also continued to drop, edging lower to 3.1% of all debt, a 1.5 percentage point decline from the same period in 2020.
Household debt climbs to $14.64 trillion, due to jump in mortgages and car loans
After weeks of declines, the pace of daily vaccinations in the US is improving. The country is reporting an average of 2.2M shots per day over the past week, up slightly from the most recent low reported Sat, when it dipped below 2M for the first time since early Mar. A key Centers for Disease Control & Prevention (CDC) advisory panel is set to vote today on whether to recommend expanding usage of Covid-19 vaccine to kids ages 12-15. An endorsement is the last step before officials give states the go-ahead to open vaccinations to Ms of adolescents as early as tomorrow. CDC data shows the US is averaging 2.2M reported daily vaccinations over the past week, down 35% from the peak level in mid-Apr but up over the past few days. While too early to say whether this recent uptick will turn into a steady trend, the data does show an increase in reported first doses, indicating that new people are entering a vaccination program. More than 46% of the US population has received one or more shots & 35% are fully vaccinated. If & when states roll out the vaccine to the 12-15 age group, the vaccination pace could get a further boost. Average daily US Covid cases fell further yesterday, with the 7-day average at about 38K. New case counts are below 40K per day this week for the first time since Sep. The latest 7-day average of daily US Covid deaths is 608.
U.S. vaccination pace improves, averaging 2.2 million shots per day with an increase in first doses
Gold prices logged their first back-to-back retreat so far this month, as a reading of US inflation revealed the biggest monthly increase in 13 years, leading to a rise in Treasury yields & the $. The US consumer price index soared 0.8% to match the biggest monthly increase since 2009. The rate of inflation over the past year jumped to 4.2% from 2.6% in the prior month, the highest level since 2008. The 10-year Treasury note was up at nearly 1.67%, while the ICE US Dollar Index a popular $ metric, climbed 0.6%. Bullion had been mostly on the rise in the past 6 weeks, settling Mon at the highest level since Febr as the $ had been hanging around its weakest level since Feb. Jun gold fell by $13 (0.7%) to settle at $1822 an ounce, after declining a smidgen yesterday.
Oil futures marked their highest settlement since Mar, boosted by an upbeat outlook for demand in H2 & data showing a fall in US crude inventories. Traders also kept an eye on gasoline shortages across the Southeast as the Colonial Pipeline moves to restore service on a key fuel artery. The Intl Energy Agency (IEA), in its monthly report, said the oil glut built up after the pandemic forced producing countries to slash output has almost returned to normal levels. The IEA cut its 2021 forecast for demand growth, reflecting weaker-than-expected demand in H1. However, it left its outlook for the H2 unchanged & said it expects global oil demand to have almost returned to its pre-pandemic normal level by the end of this year. The report followed OPEC's monthly report yesterday, which left OPEC's upbeat outlook for 2021 demand growth unchanged. The Energy Information Administration reported that over the past 4 weeks, motor gasoline product supplied, a proxy for demand, averaged 8.9M barrels per day, up over 41% from the same time a year ago. Against this backdrop, West Texas Intermediate crude for Jun rose 80¢ (1.2%) to settle at $66.08 a barrel, the highest front-month contract finish since Mar. Jul Brent crude, the global benchmark, added 77¢ (1.1%) at $69.32 a barrel, also the highest finish since Mar.
Oil logs highest settlement since March after upbeat demand outlook
The story today is easy to understand, growing inflation fears. That would bring higher interest rates which can drag the economy into a recession. In May, the Dow is already down 300 after falling 1200 this week. For what it's worth, it's still up 3K YTD.
Dow Jones Industrials
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