Dow finished up all of 1 after heavy selling in the last hour of trading, advancers over decliners 4-3 & NAZ lost 82. The MLP index was about even at 206 & the REIT index was off 1 to the 462ss. Junk bond funds were off a tad & Treasuries saw limited buying which brought lower yields. Oil slid back about 1 to the 91s & gold jumped 15 to 1823 (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)
Too much of a good thing, in the form of rapidly rising wages, is expected to push Federal Reserve interest rate hikes at an even faster pace. Average hourly earnings jumped 0.7% in Jan & are now running at a 5.7% pace over the past 12 months, according to Labor Dept data released Fri. Excepting a 2-month period during the early days of the pandemic, that is by a wide margin the fastest-ever move in data going back to Mar 2007. While that has come as welcome news to workers, it's posed a further quandary for the Fed, which increasingly is being seen as falling behind in terms of policy & having to catch up to inflation that is running at its fastest pace in nearly 40 years. The Fed's new approach to monetary policy was approved in Sep 2020. Under what it deemed flexible average inflation targeting, the Fed said it would be willing to allow inflation to run hotter than its 2% target in the interest of achieving full employment. But with inflation running around 7% year-over-year & the labor market getting ever tighter, the Fed now is in the position of playing catch-up. Leisure & hospitality, the hardest-hit sector from the pandemic, has seen a 13% earnings gain over the past year. Wages in finance jobs are up 4.8%, while retail trade pay has risen 7.1%. Markets have been raising the stakes slowly for the Fed, pricing in five hikes this year but leaving open the possibility for more & at a faster rate. While traders see a qtr-point move coming in Mar, the possibility of a more aggressive 50 basis point hike has risen to nearly 30%. A basis point is one one-hundredth of a percentage point
Fast-rising wages could cause the Fed to raise interest rates even higher
Tyson Foods (TSN) shares climbed to an all-time high after the
company reported that first-qtr profits nearly doubled due to
soaring US meat prices. The
surge reflects strong demand & high prices for its beef, pork &
chicken, as US labor shortages have limited production. “Customer demand continues to outpace our ability to supply product,” CEO Donnie King said. Increased
prices & profits threaten to amplify federal scrutiny of the
US meatpacking industry, as the Biden administration has criticized a
lack of competition in the sector. TSN & 3 other industry behemoths slaughter about 85% of grain-fattened cattle carved into steaks for consumers. The
average price for its beef surged 31.7% in the qtr ended on
Jan 1, while the unit's operating margins jumped to 19.1% from 13.2% a
year ago. Average prices for all for TSN products climbed 19.6%. Overall
sales for beef soared about 25% to $5B, helping sales rise 24% to $129B. The forecast expected revenue of $12.2B. EPS rose to $2.87, beating estimates of
$1.95. TSN raised meat prices to offset
higher costs for labor, transportation & grains used for animal feed. Its cost of goods rose by 18% in the qtr & King expects grain prices will continue to rise. The stock jumped 10.79 (12%).
If you would like to learn more about TSN click on this link:
club.ino.com/trend/analysis/stock/TSN_aid=CD3289&a_bid=6ae5b6f
Tyson Foods’ higher meat prices nearly doubles profits
US gasoline prices are up 8¢ from last week as oil continues to surge on tensions between Russia & Ukraine. The nationwide average price for a gallon of gas increased to $3.42 today, according to GasBuddy's latest data. The national average is
already up 12.3¢ compared to a month ago & 97.5¢ per gallon
higher than a year ago. For more than a month, prices have increased each week at the pump,
hitting a 7-year high last week, putting more stress on motorists across
the country. Patrick De Haan, head of petroleum analysis for GasBuddy, said that the national average last week had the "largest weekly
jump" in a year, when prices jumped 10.4¢ per gallon in a
week. De Haan said that continued concerns over Russia invading Ukraine have driven up prices. "Tensions
overseas are in the driver's seat at present," De Haan added. "Until there's some change in the situation,
I'd look for additional upward pressure on oil to continue as the
situation escalates." De Haan said that talks with Iran could eventually lead to more oil
being added to the market, but 'there's a lot of work to do there." If
Iran & world powers can come to an agreement, though, it would
"certainly would help alleviate pressure on oil," he noted. The
price of West Texas Intermediate crude oil was trading at $91.63 a
barrel today after closing out last week hitting nearly $93 per
barrel. De Haan stressed that "motorists should expect even more price
increases, with the larger jumps coming later this spring as a
confluence of seasonal factors and the potential flare up in
geopolitical tensions." De Haan predicted that the national average could surge into "record territory by the start of the summer driving season."
Gasoline prices rise for sixth straight week
Gold futures logged their biggest one-day gain in almost 3 weeks, buoyed by inflation concerns, after posting their strongest one-week gain since mid-Nov. Apr gold rose $14 (0.8%) to settle at $1821 an ounce -- the biggest one-day point & percentage gain for a most-active contract since Jan 19 & highest settlement since Jan 26. Prices saw a gain of 1.2% last week, which was the sharpest such advance for a most-active contract since a 2.9% rise in the week ended Nov 12. Prices for the precious metal have climbed despite better-than-expected monthly data on US employment. Data on Fri showed the US added 467K jobs in Jan, topping the forecast for 150K new jobs & some predicting job losses on the month due to the impact of omicron, the variant of the coronavirus that causes COVID-19. The positive results may support a faster pace of interest-rate increases by the Fed, with the market pricing in as many as 4 rate increases this year to benchmark federal funds rates, which currently stand at 0-0.25%. Concerns about pricing pressures will add to interest in a report on consumer prices due Thurs, the consumer-price index.
Gold futures posts biggest session gain in nearly 3 weeks
Oil futures finished lower after a 7th straight week of
gains, with traders noting signs of progress on negotiations around Iran
nuclear sanctions. West Texas
Intermediate crude for Mar fell 99¢ (1.1%)
to settle at $91.32 a barrel after
the US benchmark on Fri logged its highest finish since Sep 2014. Apr Brent crude, the global benchmark, lost 58¢ (0.6%)
at $92.69 a barrel, after ending Fri at its
highest since early Oct 2014. The Biden administration waived sanctions on some of Iran's civilian
nuclear activities as it attempts to close a deal that would see Tehran
return to the 2015 nuclear pact. The US will allow foreign companies & officials to
work on some nonweapons Iranian nuclear facilities, reversing a decision
by the Trump administration in 2020 to sanction that work.
Oil prices end lower following another round of 7-year highs
Interesting that traders were optimistic about Biden removing same sanctions on Iran, because Iran said it wasn't "good enough." From the midday lows, the Dow rose 300 which was followed by selling in the last hour. At above 90, WTI is trading in its highest range over the last 15 years (i.e. around record highs). The consumer price index will be released on Thurs & the producer price index (with forward looking prices) will be released on Feb 15.
Dow Jones Industrials
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