Dow slid back 155, decliners over advancers 5-4 & NAZ fell 65. The MLP index retreated 1+ to the 189s & the REIT index crawled up to 481. Junk bond funds inched higher & Treasuries were heavily purchased. Oil climbed to the 82s & gold was off 1 to 1826.
AMJ (Alerian MLP index tracking fund)
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Producer prices rose at a faster clip in Oct & at a record annual pace as supply chain bottlenecks & materials shortages continued to put upward pressure on costs. The producer price index for final demand increased 0.6% last month, accelerating slightly from the 0.5% gain in Sep according to the Labor Dept. The reading was in line with expectations. Prices jumped 8.6% year over year, matching last month's reading for the largest annual increase on record. Annual price increases have printed at a record pace for 7 straight months. The index rose 0.4% in Oct when excluding food, energy & trade. The forecast was for a 0.5% increase after a 0.2% jump in Sep. Core prices rose 6.8% year over year, matching estimates. More than 60% of the Oct increase was due to the 1.2% jump in prices for goods, while services prices edged up 0.2%. 1/3 of the increase in goods prices occurred as energy costs surged 6.7%. Prices for beef & veal declined 10.3%. Meanwhile, over 80% of the increase in final demand services prices was due to autos & parts, whose prices soared 8.9%.
Producer inflation picks up in October
The Federal Reserve warned of potential spillover from China's real estate troubles to the US financial system. Since this summer, highly indebted developer China Evergrande has rattled global investors as the company has attempted to avoid official default. Other Chinese developers have also struggled to repay debt
adding to concerns of wider fallout in the world's 2nd-largest
economy — roughly a qtr of which is driven by real estate. “Stresses
in China’s real estate sector could strain the Chinese financial
system, with possible spillovers to the United States,” the Federal
Reserve said in its latest financial stability report, released twice a year. The report pointed to the size of China's economy & financial system, & global trade links. The
bulk of the document discussed domestic US financial conditions, from
historically high stock market prices to risks from rapid growth in
stablecoins — digital currency tied to a fixed value such as the $. Analysts downplayed the significance of the Fed's comments on
Chinese real estate.
Fed says China’s real estate troubles could spill over to the U.S.
Shoppers drawn in by early holiday deals are facing a deluge of out-of-stock
messages due to the ongoing supply chain disruptions, according to new
data. In Oct, consumers hit the ground running for holiday shopping,
spending more than $72.4B in online purchases, an 8% increase
from a year ago, according to the Adobe Digital Economy Index. However,
filling those carts has been harder than ever before, with out-of-stock
messages surging 250% in Oct 2021 compared to Jan 2020. In fact, out-of-stock messages surged 325% when
compared to holiday shopping in Oct 2019. Overall, there were over 2B out-of-stock messages online over the course of Oct alone. The electrics category had the "highest out-of-stock levels" according to Adobe, which tracked 18 categories. The
categories with the next highest out-of-stock levels were jewelry,
apparel, home & garden, & pet products. The data proves that "consumers are beginning to understand the real
impact of the supply chain challenges," according to Adobe Digital
Insights director Taylor Schreiner. As a result, "some have begun
to adjust their holiday strategy accordingly, with parents shopping for
toys earlier and some settling for gift cards this season," he added. Schreiner warned that consumers who haven't yet started shopping "will need to be prepared to be flexible."
Consumers see 250% surge in out-of-stock messages: Adobe
The Dow has gone almost straight up for almost a month. But all good things must come to an end. The dreary news on the producer price index was a good excuse to take profits. More selling this week is likely, especially if rising inflation is taken more seriously.
Dow Jones Industrials
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