Dow declined 107 (close to session lows), decliners over advancers about 3-1 & NAZ lost 55. The MLP index slid back 3+ to the 191s & the REIT index dropped 6+ to the 358s following recent strength. Junk bond funds rose in price & Treasuries were sold, bringing higher yields. Oil jumped 1+ to the 75s & gold finished up 3 to 1809 (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)
Treasury Secretary Janet Yellen said that she's prepared to inform Congress she will immediately deploy "extraordinary measures" to avoid violating
the gov debt limit as lawmakers hurtle toward the Jul debt
deadline. Yellen said the
Treasury is poised to end Jul with a cash balance of roughly $450B, well below the previous week's level of $718B. "If
Congress doesn't act, I will send a letter indicating my intention to
invoke (extraordinary measures)," Yellen added. "I'll provide more
details about how long I think emergency powers would last. There's a
lot of uncertainty around it and I think we have to be careful." The debt ceiling,
which is currently around $22T, is the legal limit on the total
amount of debt that the federal gov can accrue; according to the
Committee for a Responsible Federal Budget, it applies to both the $16.2T held by the public & the $5.9T owed by the gov. In 2019, former Pres Trump suspended the nation's borrowing limit for 2 years, but that
suspension is poised to expire on Jul 31 & Dems seemingly do
not have a plan yet to raise the limit or suspend it again. "We’re considering all options," House Speaker Nancy Pelosi recently said. If Congress is unable to increase the debt limit, the Treasury would
enter uncharted territory, incapable of paying bills – including
payments to Social Security beneficiaries, gov employees or
service members – since it would have no cash on hand. The Treasury
Dept would be unable to issue any more bills or bonds & would
instead have to rely on tax revenue & emergency accounts to pay the
bill. Other "extraordinary measures" the Treasury would take range
from halting issuance of special securities to state & local
govs to suspending the daily reinvestment of Treasury securities
held by a gov employee retirement fund & the Treasury's
Exchange Stabilization Fund.
Yellen: Treasury prepared to deploy extraordinary debt limit measures as deadline looms
San Francisco Federal Reserve Pres Mary Daly said that a strong economic recovery will allow the central bank to slow its asset purchases, possibly near the end of 2021. Markets have been looking for clearer guidance from the Fed on when it will begin to reduce, or taper, the minimum $120B it is buying in Treasuries & mortgage-backed securities. While Daly did not give an exact timeline, she said the time for tapering is drawing near. “It is appropriate to start talking about tapering asset purchases, taking some of the accommodation that we have been providing to the economy down,” she added. “We’ll still be in a very accommodative position with a low funds rate, but we don’t need all the tools we see the economy get its own footing.” This is “absolutely the time to start doing that, having those conversations,” she continued. “My own view is we’ll probably be in a good position to taper at the end of this year or early next.”
Fed’s Mary Daly says tapering of bond purchases may start this year
PepsiCo (PEP), a Dividend Aristocrat, reported that its quarterly revenue rose more than 20% from a year
earlier as restaurant demand for its drinks returned, fueling an
earnings beat. The company also raised its outlook for its full-year adjusted EPS growth. “A
lot of the things we did through the pandemic, continuing to invest in
the business, are now paying dividends now that mobility has increased
and consumers are getting out more,” CFO Hugh Johnston said. EPS rose to $1.70, up from $1.18 a year earlier. Excluding items, the company EPS was $1.72, beating the $1.53 estimate. Net sales surged 20.5% year over year to $19.2B, topping expectations of $17.9B. Organic revenue, which strips out the impact of foreign
currency, acquisitions & divestitures, rose 12.8%. The North American beverage business reported organic revenue
growth of 21%, the highest of all of divisions. Volume for its drinks soared 15%, & food service revenue,
which includes sales to restaurants, stadiums & college campuses,
doubled during the qtr. Last year, the division's organic revenue fell 7%. On the heels of such a strong qtr, the company said it now
expects 11% growth in constant currency EPS, up from its
prior forecast of high-single digit growth. The forecast implies core EPS of $6.20 for 2021. Analysts were expecting full-year EPS growth of 7.2%. The company also narrowed its forecast for 2021
organic revenue growth from mid-single digits to 6%. Johnston said that the company tends to provide more conservative
forecasts, which could set it up to beat expectations in H2. The stock rose 3.45.
If you would like to learn more about PEP, click on this link:
club.ino.com/trend/analysis/stock/PEP?a_aid=CD3289&a_bid=6ae5b6f7
PepsiCo raises forecast after earnings crush estimates
Gold futures finished higher, with prices finding support following data showing rising US inflation & dovish comments from a key Federal Reserve member, amid persistent concerns about the spread of the COVID-19 delta variant. The US cost of living in Jun saw the biggest climb since 2008, with the consumer price index up 0.9%, exceeding the 0.5% advance forecast. Aug gold rose $4 to settle at $1809 an ounce, after declining 0.3% yesterday. Yesterday, Federal Reserve Bank of New York Pres John Williams told reporters that conditions for scaling back its $120B a month bond-buying stimulus program have yet to be met. However, the pres of the St Louis Fed James Bullard said today the Federal Reserve should start reducing the stimulus it provides to the US economy, though he added the reduction didn't need to start immediately. “I think with the economy growing at 7% and the pandemic coming under better and better control, I think the time is right to pull back emergency measures,” he said.
Gold prices finish higher with US consumer prices up sharply in June
Oil futures settled higher, with US prices at their highest in more than 2 years. Prices found support on expectations for another decline in US crude inventories, despite worries that the spread of the delta variant of the coronavirus that causes COVID-19 may lead to economic restrictions & lower energy demand. West Texas Intermediate crude for Aug rose $1.15 (1.6%) to settle at $75.25 a barrel. That was the highest front-month contract finish since early 2018. Sep Brent crude, the global benchmark, gained $1.33 (1.8%) to $76.49 a barrel, the highest since Jul The Intl Energy Agency (IEA), in its monthly report, said rising coronavirus cases & its potential impact on the long-planned easing of pandemic restrictions in several wealthy countries made it harder to gauge future demand. The watchdog made only minor adjustments to its headline forecasts, leaving its outlook for global oil-demand in 2021 unchanged & trimming its growth estimates for next year by 100K barrels a day to 3M barrels a day. The IEA raised its forecast for non-OPEC supply growth this year by 60K barrels to 770K barrels a day & maintained its forecast growth of 1.6M barrels a day for next year. The IEA said that it expects around 1M barrels of that 2022 growth to come from the US, where producers have focused more on promises to return cash to investors than increasing production. The organization said that if OPEC+ cannot reach a supply agreement, the crude market faces “the prospect of a deepening supply deficit.” Talks aimed at boosting production fell apart earlier this month after the UAE insisted it should be able to pump more crude than allowed under OPEC+’s existing output agreement.
U.S. oil prices at highest since 2018 with supplies seen falling an 8th-straight week
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