Dow went up 78, advancers over decliners 2-1 & NAZ slid back 56. The MLP index added 3+ to 190 on bullish sentiment for oil & the REIT index climbed 3+ to 429 (a new record). Junk bond funds rose & Treasuries were heavily sold (more below). Oil shot up 2+ to the 68s (more below) & gold was off 1- to 1895 after a strong month in May.
AMJ (Alerian MLP index tracking fund)
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The US economy is on track to grow at the fastest pace in nearly 4 decades this year thanks to unprecedented levels of gov stimulus & increased vaccination rates, the Organization of Economic Cooperation & Development (OECD) said. The new projections mark a more optimistic outlook from earlier this year: In Mar, the OECD predicted the US would grow by 6.5%, an increase from its Dec forecast of 3.5%. That uptick represents the faster-than-expected distribution of the vaccine – at least 50% of the population has received one dose so far – & the $1.9T relief plan passed by Dems in Mar. That measure, the American Rescue Plan, sent a $1400 stimulus check to most adults, expanded unemployment benefits by $300 a week & allocated $350B to state & local govs. "Substantial additional fiscal stimulus and a rapid vaccination campaign have given a boost to the economic recovery," the OECD said. The group, which represents 38 countries, also predicted the global economy would grow 5.8% in 2021. But it warned the recovery would be uneven; in many OECD nations, living standards are expected to remain well below pre-crisis levels, even by the end of 2022.
US economy poised to grow at fastest pace since 1984, OECD says
A group of some of the world's most powerful oil producers agreed to continue gradually easing production cuts amid a rebound in oil prices. OPEC & its oil-producing allies (OPEC+) will boost output in Jul, in accordance with the group's Apr decision to return 2.1M barrels per day to the market May-Jul. Production policy beyond Jul was not decided on & the group will meet again on Jul 1. Intl benchmark Brent crude futures traded at $71.15 a barrel today, up 2.7%, while West Texas Intermediate crude futures stood at $68.61, for a gain of more than 3% & the contract’s highest level in more than 2 years. Oil prices have climbed more than 30% this year. The Middle East-dominated group, which is responsible for over a 3rd of global oil production, is seeking to balance an expected upswing in demand with the potential for an increase in Iranian output. The alliance announced massive crude production cuts in 2020 in an effort to support prices when the coronavirus pandemic coincided with a historic demand shock.
OPEC+ is expected to increase output despite concerns over return of Iranian oil
Bonds yields rose, as investors digested last week's inflation data & look ahead to Fri's all-important jobs report. The yield on the benchmark 10-year Treasury note ticked up to 1.632% while the yield on the benchmark 30-year Treasury bond rose to 2.319%. Yields move inversely to prices. Inflation is even more in focus since the release of Apr's core personal consumption expenditures price index last week, a key measure of inflation, which rose 3.1% — hotter than expected. Gold, which often is used as an inflation hedge, is still holding above a key level of $1900. The ISM manufacturing report for May came in roughly in line with expectations, showing continued strong growth, rising commodity costs & higher prices. However, the increase in prices slowed slightly from the previous month. The report also said companies were reporting that labor market issues could limit growth potential going forward.
Treasury yields climb as investors digest higher inflation prints
Stocks are near record highs but below highs at the opening. And nervous investors are buying gold & Treasuries. Data for May will be reported in the next few days.
Dow Jones Industrials
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