Dow recovered 313 with profit taking into the close, advancers over decliners 3-2 & NAZ climbed 178. The MLP index was flattish in the 188s & the REIT index declined 3+ to 446. Junk bond funds edge higher & Treasuries continued to be sold. Oil finished up 1+ to 79 & gold fell 4 to 1762 (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)
The current spate of inflation won’t last & ultimately will fall below the Federal Reserve's target, Chicago Fed running at a 30-year high, Evans said that the supply chain bottlenecks & other issues will subside & price pressures will fade. “I’m comfortable in thinking that these are elevated prices, that they will be coming down as supply bottlenecks are addressed,” he added. “I think it could be longer than we were expecting, absolutely, there’s no doubt about it. But I think the continuing increase in these prices is unlikely.” Inflation has been at 3.6% year-over-year in the past couple of months, the highest since the early 1990s, according to the Fed's preferred gauge. Other measures, such as the consumer price index, have inflation running even hotter. Evans acknowledged that the trend is putting pressure on the economy. “That definitely is a challenge for households and businesses. I mean, it cuts into income, wages. So that’s a problem. We’re definitely monitoring that,” he noted. “It’s really not a monetary policy issue, it’s an infrastructure supply issue at the moment. So I think inflation will be coming down, and I think once it’s come down, we’re still going to be in a low interest rate … world.” Nevertheless, the Fed broadly has indicated that it has met the inflation part of its mandate, with the level running well above the 2% goal. Consequently, the central bank is expected to begin slowly pulling back on the unprecedented support it has provided during the pandemic, starting with a tapering of monthly asset purchases. However, interest rate increases are not expected to being until at least the end of 2022, according to current FOMC projections. Market pricing sees the first hike coming either in Nov or Dec of next year, according to the CME's FedWatch tool. While Evans said he is on board with the tapering, he said the Fed soon will be facing the familiar change of keeping inflation elevated to healthy levels & likely will have to keep rates low. “It’s just putting challenges on getting monetary policy to produce sustainable inflation at and above 2% so that we can average 2% over time,” he added.
Fed’s Evans sees inflation falling below 2% target after current rise subsides
Pepsico (PEP), a Dividend Aristocrat, raised its full-year forecast after its latest quarterly earnings &
revenue topped expectations, despite higher costs & snarls
in the supply chain. Chain disruptions & inflationary pressures for labor, commodities &
transportation weighed on its fiscal Q3 results. CFO Hugh Johnston said the company has been raising prices on its beverages & snacks, & he
expects another price hike in the fiscal Q1 of 2022. EPS for the qtr ended Sep 4 came in at
$1.60, down from $1.65 a
year earlier. Excluding items, EPS was
$1.79, topping the $1.73 expected. Net sales rose 11.6% to
$20.2B, beating expectations of $19.4B. Organic revenue, which strips out the impact of acquisitions &
divestitures, climbed 9% in the qtr. North American beverage business reported organic revenue growth of 7%
for the qtr. While its organic sales have risen 10% on a 2-year basis, growth has moderated since bouncing back 21% in the
prior qtr. The company said that it saw double-digit net revenue
growth for its food service business, which includes sales to
restaurants, stadiums & college campuses. Worldwide,
away-from-home drink business is down just 10% from 2019 levels. For the full year, PEP expects its organic revenue to
increase by 8%, up from its prior forecast of 6% growth. The company
reiterated its forecast for core constant currency EPS of
11% growth. Analysts were forecasting full-year earnings growth of 13% & a revenue increase of 9.5%. Looking ahead to 2022, execs
said they expect organic revenue growth & core constant currency EPS growth to be in line with the company's long-term
objectives. The stock rose 89¢.
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
Pepsi earnings top estimates despite higher supply chain costs
Gold futures fell, with a climb in yields on gov debt & a stronger $ leading prices for the precious metal to suffer their first loss in 4 sessions. Dec gold fell by $6 (0.4%) to settle at $1760 an ounce, after rising 0.5% yesterday. Upward momentum for precious metals faded today as the 10-year Treasury note yields 1.522%, up from 1.481% yesterday while the $ was up 0.1%. Richer yields can undercut appetite for non-yielding precious metals & a stronger $ makes the $-priced commodities more expensive to overseas buyers. Today's gains for gold were at least partly attributed to tensions between China & Taiwan, which boosted safe-haven demand for the precious metal. Over the weekend, the US said it was concerned by “provocative” actions by China after Taiwan claimed that 93 Chinese military plans flew into its air defense zone over the last 3 days, according to a report. In addition, investors also were on edge as US Trade Representative, Katherine Tai, yesterday, outlined trade policy with China that is viewed largely as building on that initiated by former Pres Trump, who launched the biggest trade war since the 1930s in an attempt to get China to buy more US goods & to stop it from pressuring American companies to hand over their trade secrets. However, gold also likely drew some safe-haven bids as US stocks saw sharp declines yesterday, raising worries that a slide in risky asset prices may be deepening as the Federal Reserve is seen preparing to soon end monthly bond purchases that have supported a lower-yield regime & emboldened risk taking.
Gold futures post first loss in 4 sessions as dollar and Treasury yields climb
US oil futures stretched their gains into a 4th straight session to their highest settlement since Oct 2014, a day after OPEC & its allies decided not to accelerate its plan for gradually relaxing production cuts. Natural-gas futures also rallied, with prices up by more than 9% to post the highest finish in nearly 13 years, with global supplies tight ahead of the winter heating season. West Texas Intermediate crude for Nov rose $1.31 (1.7%) to settle at $78.93 a barrel. That was the highest front-month contract finish since 2014. Dec Brent, the global benchmark, added $1.30 (1.6%) at $82.56 a barrel. Brent also registered its highest close since 2018. Crude futures jumped yesterday after OPEC+ affirmed its plan to raise output by 400K barrels a day in Nov, in keeping with a plan agreed in Jul to increase production by that amount in monthly increments until existing output curbs imposed during the pandemic are fully reversed. Momentum could continue to take crude prices higher in the near term.
U.S. oil futures build on a nearly 7-year high; natural-gas prices post highest finish since 2008
Dow Jones Industrials
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