Dow slumped 127, decliners over advancers about 5-4 & NAZ was off 54. The MLP index was even at 185 & the REIT index rose 1+ to the 164s. Junk bond funds did little & Treasuries were sold following recent strength. Oil fell to 71 & gold dropped 16 to 1812.
AMJ (Alerian MLP index tracking fund)
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Consumer spending accelerated last month while the economy continued to gain momentum as COVID-19 restrictions were lifted & shoppers were met with higher prices. Retail sales, a measure of spending at restaurants, stores & online, in Jun rose 0.6% to $621B, according to the Commerce Dept. The forecast called for a decrease of 0.4% & the reading was 18% above year-ago levels. Last month's reading was revised down to -1.7% from the initial reading of -1.3%. Retail sales had been slowing since the 10.7% increase in Mar as the impact from stimulus checks had begun to dissipate. Retailers, restaurants & bars continued to see strong growth. Sales at clothing & clothing accessory stores soared 2.6% versus last month & 47.1% from a year ago. Food services & drinking places saw sales rise 2.3% in Jun & 40.2% year over year. Meanwhile, sales slumped at motor vehicle & parts dealers & furniture stores as the industries continued to grapple with supply-chain dislocations & higher prices. Sales in Jun dipped 2% at auto dealers as prices spiked 10.5% from the prior month. Sales were still up 19.5% from a year ago. Furniture sales slid 3.6% month over month, but were up 17.1% annually. Excluding autos, retail sales in Jun rose 1.3%, outpacing the 0.4% increase that was expected.
Retail sales jump as consumers met with higher prices
Treasury Secretary Janet Yellen cautioned that prices could continue to rise for several more months, though she expects the recent startling inflation run to ease over time. She added that she worries about the problems inflation could pose for lower-income families looking to buy homes at a time when real estate values are surging. “We will have several more months of rapid inflation,” Yellen said. “So I’m not saying that this is a one-month phenomenon. But I think over the medium term, we’ll see inflation decline back toward normal levels. But, of course, we have to keep a careful eye on it.” The consumer price index, which measures costs for a wide range of items, increased 5.4% in Jun, the fastest pace in nearly 13 years. Excluding food & energy, the gauge rose 4.5%, the fastest acceleration in nearly 30 years. Prices that goods & services producers receive for their products jumped 7.3%, a record for data going back to 2010. Also, housing prices in the nation’s largest cities climbed nearly 15% in the most recent measurements from S&P CoreLogic Case-Shiller. All of that has added up to concern that inflationary pressures could stall the aggressive US economic recovery, with the housing escalation raising fears of a bubble. “So I don’t think we’re seeing the same kinds of danger in this that we saw in the runup to the financial crisis in 2008,” Yellen added. “It’s a very different phenomenon. But I do worry about affordability and the pressures that higher housing prices will create for families that are first-time homebuyers or have less income.”
Yellen sees ‘several more months of rapid inflation’ before easing, worries about housing impact
Treasury yields were little changed after data showed retail sales rose unexpectedly in Jun as the economy continued to rebound from the pandemic. The yield on the benchmark 10-year Treasury note was flat at about 1.307% & the yield on the 30-year Treasury bond climbed 2 basis points to 1.937%. Yields move inversely to prices. Retail sales rebounded 0.6% last month, the Commerce Dept said. The forecast called for retail sales dropping 0.4%. Excluding automobiles, gasoline, building materials & food services, retail sales increased 1.1% last month after a downwardly revised 1.4% decrease in May. However, an early reading on consumer sentiment in Jul from the University of Michigan came in lower-than-expected 80.8, down from a final number of 85.5 in Jun. The survey also showed inflation expectations rising with consumers believing prices will increase nearly 5% in the next year. Yields were initially higher after the retail sales report but drifted toward the flatline in early trading after the consumer survey was released. Yesterday, Federal Reserve Chair Jerome Powell acknowledged in a Senate testimony that inflation was “well above target.” During his 2nd congressional testimony of the week on monetary policy, Powell reiterated the view that higher inflation looked to be transitory, & he also acknowledged that price pressures were well above the central bank's target. Inflation & employment growth are both determining factors as to when the Fed will tighten its easy monetary policy. “We’ve said that we would begin to reduce our asset purchases when we feel that the economy has achieved substantial further progress measured from last December,” he added. “We’re in active consideration of that now.”
10-year Treasury yield hovers near 1.3% after better-than-expected retail sales data
Buyers took the market higher when it opened, but negative thoughts about higher inflation lasting for some time dimmed early enthusiasm. Dow is still flirting with 35K as it has been doing for more than a week.
Dow Jones Industrials
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