Dow gained 113, advancers modestly ahead of decliners & NAZ went up 56. The MLP index fell 1+ to the 186s & the REIT index rose 2+ to 435. Junk bond funds inched higher & Treasuries were purchased, lowering the yield on the 10 year Treasury by 2 basis points to 1.59%. Oil crawled up to 67 & gold was steady at 1898.
AMJ (Alerian MLP index tracking fund)
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Personal income tumbled in Apr as the prior month's boost from stimulus checks waned & inflation ran hotter than expected. Personal
income declined 13.1% month over month, less than the 14.1% decline
that was expected. Incomes surged
by a downwardly revised record 20.9% in Mar as the gov sent out
$1400 checks to most Americans. Consumer spending, which
accounts for 2/3 of US economic activity, edged up 0.5%, in
line with estimates. Spending was revised up to 4.7% last month, from
the initial 4.2% print. Meanwhile, core personal consumption expenditures, which exclude food & energy, rose 0.7% month over month & 3.1% from the prior year,
both exceeding the respective 0.6% & 2.9% that was
expected. The 3.1% increase was the biggest in at least 28 years &
the 1.2 percentage point increase from Mar's upwardly revised 1.9%
year-over-year print was the largest since recordkeeping began in 1960.
Personal income plunges as stimulus check boost fades, inflation runs hot
A key inflation indicator rose a faster-than-expected 3.1% in Apr as price pressures built in the rapidly expanding US economy, the Commerce Dept reported. The core personal consumption expenditures index was forecast to increase 2.9% after rising 1.9% in Mar. Federal Reserve officials consider the measure to be the best gauge for inflation, though they watch a number of metrics. As part of its price stability mandate, the Fed considers 2% to be healthy, though it is committed to letting the level average higher than usual in the interest of promoting full employment. The index captures price movements across a variety of goods & services & is generally considered a wider-ranging measure for inflation as it captures changes in consumer behavior & has a broader scope than the Labor Dept's consumer price index. The CPI accelerated 4.2% in Apr. Over the past month, core PCE rose 0.7 %, also quicker than the expected 0.6%. Including volatile food & energy prices, the headline PCE index jumped 3.6% year over year & 0.6% from Mar. That increase in inflation came with a sharp deceleration in personal income, which declined 13.1%. But that actually was less than the 14% estimate. Personal income had surged 20.9% in Mar following the latest round of gov stimulus checks. Even with the $3.2T decline in personal income, the savings rate remained elevated at 14.9%. Consumer spending rose 0.5%, in line with estimates. Disposable personal income, after taxes & other withholdings, tumbled 14.6%.
A key U.S. inflation gauge rose 3.1% year over year, higher than expected
The coronavirus threat in the US is likely to be rather low this summer, but it's not guaranteed to stay that way later this year, Dr Scott Gottlieb said. “I don’t think we should declare mission accomplished. I think that we should declare a near-term victory,” he said. Coronavirus cases in the country have tumbled as more Americans get vaccinated against Covid. The 7-day average of daily new infections is around 23K according to Johns Hopkins University data. That's down more than 50% since the beginning of May alone. “I think we’ve done enough to give ourselves an opportunity to enjoy the summer and be at low risk this summer,” said Gottlieb. However, he added, “I do think that this is going to be a risk as we get into the fall and probably more likely the winter.” One reason for the cautious outlook for the colder months is because “we could see new variants,” said Gottlieb, who has previously noted that respiratory pathogens like the coronavirus generally spread more easily in the winter. “I think we need to get in place better surveillance, better sequencing of strains so that we can spot these variants more quickly,” he added. The US also cannot ease up on its efforts to get more people vaccinated yet, Gottlieb said. That's a critical factor in lowering risk across the country. Roughly 50% of the nation's population has received at least one dose, according to the Centers for Disease Control & Prevention. He suggested around 75% of the country could be vaccinated by the fall. “So, there’s still work to do. Right now, we’re on a pretty good track doing the right things,” he added.
Gottlieb: Covid risk should be low in U.S. this summer but will rise in fall
Stocks are climbing again although the advance/decline ratio is not strong. Reaction by investors to Biden's budget (with a staggering $6T in expenses) will be driving the market next week.
Dow Jones Industrials
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