Dow fell 46, decliners modestly ahead of advancers & NAZ dropped 55. The MLP index was off 1+ to 190 & the REIT index crawled higher in the 481s. Junk bond funds edged higher & Treasuries were heavily sold, taking the yield on the 10 year Treasury up a very big 9 basis points to 1.52%. Oil fell 1+ to the 82s & gold surged 34 to 1855.
AMJ (Alerian MLP index tracking fund)
|
|
US consumer prices accelerated at the fastest annual pace in more than 30 years as supply chain bottlenecks & materials shortages persisted & gasoline prices surged. The consumer price index climbed 6.2% year over year in Oct, the Labor Dept reported. The increase marked the largest annual gain since 1990. Prices rose 0.9% month over month. The forecast expected prices to rise 0.6% in Oct & 5.8% annually. Energy prices jumped 4.8% last month & were up 30% over the past year. The Oct increase was largely the result of a 6.1% rise in the cost of gasoline. Food prices, meanwhile, edged up 0.9% last month as the food at home category saw a 1% increase. All food prices are up 5.3% year over year. Core prices, which exclude food & energy, increased 0.6% month over month & 4.6% over the past 12 months. The forecast called for respective increases of 0.4% & 4.3%. Also contributing to the rise were new & used vehicle prices, which in Oct rose 1.4% & 2.5%, respectively. Prices for new vehicles were 9.8% above year-ago levels while used vehicle prices were up 26.4% from Oct 2020. The cost of shelter ticked up 0.5% last month & was 3.5% above year-ago levels. The hotter-than-expected report surely caught the attention of the Federal Reserve, which earlier this month announced plans to taper its $120B per month in asset purchases while taking notice of "elevated" inflation. The central bank still expects inflation to be "transitory."
Consumer prices surge at stunning rate as supply chain crisis hits Americans
Treasury Secretary Janet Yellen downplayed concerns that inflation could spike to levels seen during an economic downturn in the 1970s, asserting that the Federal Reserve would act before a surge of that magnitude could occur. Yellen has repeatedly said that she expects inflation to return to acceptable levels of roughly 2% by in 2022. She reiterated that stance, arguing economic conditions will improve as the economy recovers from the COVID-19 pandemic. When asked about the possibility that her forecast was incorrect, Yellen sought to assure that the inflation situation will be "watched carefully." She said the Federal Reserve "wouldn’t permit" a return to the double-digit inflation levels seen in the 1970s, when Americans experienced nationwide gas shortages & other economic hardships in the aftermath of the Vietnam War. "Monetary policy would have a role to play if this turns out to be something that’s endemic," Yellen said. "In the 1970s, we saw supply shocks turn themselves into endemic inflation, wages increased, prices increased as a consequence. We’re not seeing that now. I don’t believe we will. But if that were the case, the Federal Reserve would have a role to play to keep it under control." "Expect to see more labor supply, a more normal pattern of demand," Yellen added. "As people feel safer, the demand for these goods, whose prices are rising, will diminish, and they’re going to go back to services in a more normal pattern. And at that point, I’d expect the price increases to level off, and we’ll go back to inflation that’s closer to the 2% we consider normal."
Yellen: Federal Reserve won't allow inflation to reach 1970s levels
Traders in the futures markets moved up their expectations for the first Federal Reserve interest rate hike to Jul from Sep, following a hotter than expected inflation report. Oct's consumer price index came in at a scorching 6.2% year-over-year, higher than the 5.9% expected. Traders are now fully pricing in a first rate hike for Sep, but they are pricing in much higher odds that the Fed starts to raise rates sooner. The Fed has said it would complete tapering its bond buying program by the middle of the year & then begin raising interest rates. Strategists are watching the move in the Treasury curve which is showing a narrowing between long end yields, like the 30-year & the shorter end, like the 5-year. A flattening yield curve can indicate that investors are worried about a weakening economy.
The first Fed rate hike is now expected as early as July following hot CPI data
Gold is in heavy demand & yields on Treasuries rally. However, stocks are seeing only limited selling. That's a whopper mismatch which can not be expected to last. Maybe Janet's words provided some comfort. Yesterday's PPI gives a glimpse of future consumer prices & the CPI data today shows what consumers are seeing currently. That is a scary picture for stocks.
Dow Jones Industrials
No comments:
Post a Comment