Dow jumped 548, advancers over decliners 3-1 & NAZ rose 92. The MLP index went up 2+ to the 196s & the REIT index gained 4+ to 452. Junk bond funds climbed higher & Treasuries was steady after yesterday's high volatility. Oil was off 1+ to the 91s & gold retreated 35 to 1890.
AMJ (Alerian MLP index tracking fund)
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Americans are already coping with the hottest inflation in 4 decades & Russia's full-scale attack on Ukraine could push it even higher. The
conflict roiled the global market yesterday, pushing oil prices above
$105 for the first time since 2014 & raising concerns of a prolonged
inflation surge after Russia launched a broad offensive, hitting
Ukrainian cities & bases with airstrikes & shelling. The consumer price index rose 7.5% in Jan, the fastest since
1982, in large part because of a spike in energy prices. Energy prices
have climbed 27% over the past year, in part due to lopsided supply &
demand. Consumers are traveling more, but the supply side has not kept
up with the demand. Inflation & energy prices could get even worse as the crisis in Ukraine escalates. The
war in Europe, which has shattered nearly 3 decades of peace on the
continent, could ultimately cause oil prices to surge as much as 20% to
$120 a barrel & inflation could surge as much as 10% on a
year-over-year basis in the US if that happened. US
consumers are already facing sticker shock at the pump. A gallon of gas,
on average, cost $3.51 nationwide yesterday, up
from $2.63 a year ago. In California, gas prices are well over $4 per
gallon. Russia is the world's 2nd-largest producer of both oil & natural
gas; a conflict or sanctions could disrupt the oil market even further
at a time when high demand is outpacing tight supplies. OPEC+ has already resisted calls to
boost supply.
Americans could pay a price for Russia's attack on Ukraine
Ukraine's military has stopped Russian invasion troops "in most directions" despite renewed missile strikes today, Ukrainian Pres Volodymyr Zelenskyy said. "The enemy has been stopped in most directions. The fights continue," Zelenskyy added. "Russia expects us to get tired, but we're not tired."The situation on the ground in Ukraine is extremely fluid & accounts of the military situation are difficult or impossible to confirm. Russia is believed to have 190K troops in the vicinity of Ukraine, but it’s not known how many of them have invaded Ukrainian territory. Ukraine's army has about 145-150K troops. Many of Ukraine's rank-&-file infantry have gained combat experience against pro-Russian separatists in the eastern part of the country, where low-level fighting has been ongoing since 2014. Separately, the country is believed to be in the process of mobilizing thousands of reservists. UK Defense Secretary Ben Wallace said that Russia had lost more than 450 personnel & Russian special forces had failed in an attempt to take a key airport from Ukrainian defenders. “Our assessment, as of this morning, is that Russia has not taken any of its major objectives,” Wallace said. “In fact, it is behind its hoped-for timetable.” The State Emergency Service of Ukraine provided footage of firefighters at the scene of a heavily damaged building that was struck by what it said was a downed Russian aircraft. “There were several explosions this morning,” Zelenskyy said. “This is the same situation as happened to Ukraine in 1941. This morning we protect our state on our own, as the world’s countries look to us.”
Ukraine President Zelenskyy says Russian advance ‘has been stopped in most directions’
A key inflation measure showed that prices rose at their fastest
level in nearly 39 years, but it didn't deter consumers from spending
aggressively, the Commerce Dept reported. The core
personal consumption expenditures price index, the Federal Reserve’s
primary inflation gauge, rose 5.2% from a year ago, slightly more than
the 5.1% estimate. It was the highest level since 1983. Including food & energy prices, headline PCE was up 6.1%, the strongest gain since 1982. On a monthly basis, core PCE rose 0.5%, in line with estimates, while the headline gain was up 0.6%. The
same report showed that consumer spending accelerated faster than
expected, rising 2.1% on the month against the 1.6% estimate. The
spending increase reversed a 0.8% decline in Dec. That came
even though personal income was flat for the month, which was better
than the expectation for a drop of 0.3%. After-tax, or real disposable,
income fell 0.5% as the expiration of a child tax credit offset wage
gains & a large adjustment to Social Security checks. Personal savings totaled $1.17T, which translated into a 6.4% rate, the lowest 2013. A
separate report also brought more better-than-expected news: Orders for
long-lasting goods jumped 1.6% in Jan, compared with the outlook
for a 0.8% gain. For markets, inflation has been front & center
as price gains have persisted at the strongest levels since the runaway
increases in the 1970s & early 1980s. Back then, the Fed had to
institute a string of stifling interest rate rises that dragged the
economy into a recession. In the current case, policymakers also have indicated that hikes are
coming, though they are hoping to tighten in a more deliberate way. Virtually all central bank officials have said they expect to start the
increases in Mar & markets expect hikes to come at most if not all
the ensuing six meetings this year.
Fed’s favorite inflation gauge up 5.2% for biggest annual gain since 1983
Dow Jones Industrials
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