Markets extends losses as Biden announces large oil reserve release

Dow was tumbled 550 (session low), decliners ahead of advancers 5-4 & NAZ fell 221.  The MLP index slid back 1 to 210 & the REIT index was off 2+ to the 483s.  Junk bond funds were bid higher & Treasuries continued in demand.  Oil dropped 7+ to 100 after Biden announced the release of oil from resources over 6 months & gold gained 7 to 1946 (more on both below).

AMJ (Alerian MLP Index tracking fund)

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The Biden administration will release 1M barrels of oil each day for the next 6 months from US reserves amid high gasoline prices.  The plan is an effort to relieve some inflation associated with rising gasoline prices & combat other supply shortages that partly stem from Russia's invasion of Ukraine.  "This record release will provide a historic amount of supply to serve as bridge until the end of the year when domestic production ramps up," the White House said.  And Biden will also call for Congress to force oil companies pay fees for unused leases, accusing energy producers of "hoarding without producing."  "Companies that are producing from their leased acres and existing wells will not face higher fees," the White House added.  "But companies that continue to sit on non-producing acres will have to choose whether to start producing or pay a fee for each idled well and unused acre."  The oil & gas industry insists that obtaining a lease is merely the first step in a process that includes permitting & investigating whether there is actually any fossil fuel below the ground to extract.  The White House pressure on oil companies over "unused" leases is being echoed from Dems in Congress, who are pushing CEOs to testify next week. 

Biden unveils plan to tackle high gas prices hitting Americans

The Treasury Dept announced sanctions on a global network of individuals & shell companies it says are helping the Russian military to evade the multilateral controls on exports of advanced technology to Moscow while the Kremlin wages war against Ukraine.  At the center of the network is Serniya Engineering, a Moscow-based company that the Biden administration said operates under the direction of Russian intelligence services.  From there, the sprawling group of companies extends outward to include defense procurement firms, middlemen & front companies located in the UK, Spain, Finland, Singapore, Malta & France.  The US put export controls in place at the start of Russia's unprovoked invasion of Ukraine in late Feb.  The restrictions work in concert with nearly identical export bans that are being enforced by the EU, Japan, Australia, Canada, New Zealand, Britain & South Korea.  Treasury also announced fresh sanctions on 4 technology companies that supply the Russian military with microelectronics, navigation equipment & satellite imaging software.  One of them, Mikron, is also Russia's largest chipmaker.  The company is responsible for the debit card chips in Russia's domestic payment system, Mir, which was developed in response to previous Western sanctions.  The US also identified 3 more sectors of the Russian economy — aerospace, marine & electronics — as potential targets for sanctions given their strategic importance to the country's defense industrial base.

U.S. sanctions global network of firms helping the Russian military evade export controls 

Automakers will likely report sharp sales declines for Mar & Q1, industry analysts say, as an ongoing shortage of new vehicles has left car-shoppers with few – & often expensive – choices.  US auto sales forecasts from Cox Automotive, Edmunds & JD Power/LMC Automotive say that Q1 sales of cars, pickup trucks & SUVs were likely below 3.3M, down more than 14% from Q1-2021.  For some automakers, the declines may be even worse.  Edmunds expects General Motors (GM), Honda, Nissan, & Volkswagen to report year-over-year sales declines of more than 20% for Q1, with Ford (F) faring only slightly better.  But while sales are falling, prices are rising.  TrueCar analysts said that the average selling price of a new vehicle in the US likely rose 15.4% in Mar from a year ago, to nearly $43,500.  Consumer concerns about inflation – including higher gas & vehicle prices – likely played a role in the qtr's projected sales decline, which includes an expected drop of at least 24% in Mar.  But the biggest factor is the thin supply of new vehicles amid a global shortage of semiconductor chips.

With few new cars on lots, U.S. auto sales likely fell sharply in the first quarter, analysts say

The average rate for a 30-year fixed-rate loan jumped to 4.67%, mortgage-finance giant Freddie Mac said, marking the weekly figure's highest reading since 2018.  The 30-year fixed rate rose from 4.42% a week ago, continuing a steady rise that has pushed home-loan rates within sight of 5% for the first time in 4 years.  This year's surge in mortgage rates was hardly unforeseen, given the record lows reached in the pandemic period & concerns about high US inflation readings, but it has unfolded faster than expected.  At the beginning of the year, the average rate on America’s most popular home loan was 3.22%.  Higher mortgage rates typically slow home buying activity, but the number of applications submitted by hopeful home buyers has risen for 3 of the past 4 weeks, according to the Mortgage Bankers Association, showing the US home boom is far from over.  "It’s going to take a pretty healthy increase in rates to moderate the demand," said Phil Shoemaker, pres of originations at Homepoint Financial, a Michigan-based mortgage lender.  Expectations that the Federal Reserve will raise interest rates several more times this year to control inflation are driving up mortgage rates.  Before the central bank raised rates for the first time since 2018, the Fed's decision to unwind its purchases of mortgage-backed securities had started forcing rates upward.  Home prices continue to push homeownership out of the question for many Americans.  The median sales price of an existing home rose 15% in Feb from a year earlier.  Rising rates are reducing refinances, which powered much of the mortgage market's boom in 2020 & 2021.  About 4M Americans could lower their monthly mortgage payments thru a refinancing in Feb, down from close to 16M a year ago, according to mortgage-data firm Black Knight.  Refinancings are expected to make up 33% of mortgage originations this year, down from 59% in 2021, according to the Mortgage Bankers Association.

Mortgage rates surge to highest since 2018

Gold futures finished higher, tallying gains for the month as well as the qtr as the Russia-Ukraine war continued to boost haven demand for the precious metal.  Gold for Jun rose $15 (0.8%) to settle at $1954 an ounce.  Gold, based on the most-actively traded futures contract, posted a a 2.8% monthly rise & a 6.9% gain for the qtr.  Today, prices for gold had traded as low as $1923, with at least some of that weakness blamed on a sharp decline in oil.  The US oil benchmark fell sharply after news reports said Pres Joe Biden was preparing to order the release of up to 1M barrels of oil a day from the reserve.  Gold prices initially fell, then moved up after data showed that US consumer spending rose by a mild 0.2% in Feb.  Rising prices due to high inflation played a big role & is weighing on the US economy.  Russia issued a decree today, demanding payment for natural gas in rubles, but left a loophole to allow $ & € payments thru a designated bank.

Gold settles higher for the session, month and quarter

Oil prices settled sharply lower with the US announcing its largest-ever release from the nation's crude reserves & OPEC & its allies sticking to a previously agreed plan to raise output in May.  West Texas Intermediate crude for May fell $7.54 (7%) to settle at $100.28 a barrel, the lowest finish since Mar 16. Based on the front month, prices rose 4.8% for the month & gained over 33% for the qtr.  May Brent crude,  the global benchmark, fell $5.54 (4.9%) to end at $107.91 a barrel.  The contract expired at the end of the session, up nearly 6.9% for the month & up almost 39% for the qtr.  The most-active Jun fell $6.73 (6%) at $104.71. Pres Biden said he's authorizing the release of 1M barrels of oil per day for the next 6 months from the Strategic Petroleum Reserve (SPR), more than 180M barrels in total.  Meanwhile, OPEC+ held the line in its meeting, rubber-stamping a previously agreed plan that will lift its production target by 432K barrels a day in May.  OPEC+ has resisted calls by the Biden administration & other energy-consuming countries to more rapidly boost output.  Elsewhere, Russia is reportedly offering hefty discounts of its oil to India, amid sagging demand due to those sanctions.  Yesterday, the EIA reported a 3.4M-barrel fall in last week's US crude inventories, but also showed increases in gasoline & distillate stockpiles.

Oil prices drop on largest-ever release from U.S. crude reserves, as OPEC+ sticks to planned output boost

The markets closed the qtr with heavy selling into the close.  Releasing oil from the SPR will not solve problems.  The big problem is that  demand for oil presently exceeds supply & little is being done to increase supply by an administration that does not want to.  Dow finished up about 800 in Mar, but down about 1700 YTD.

Dow Jones Industrials

 

Markets retreat after key inflation indicator jumps to 40 year high

Dow dropped 158, advancers over decliners 3-2 & NAZ slid back 37.  The MLP index drifted lower by 1 to the 209s & the REIT index added 1+ to the 488s.  Junk bond funds rose in price & Treasuries were being purchased again bringing lower yields.  Oil sank 5+ to the 102s (more below) & gold went up 6 to 1944.

AMJ (Alerian MLP index tracking fund)

CL=F Crude Oil 103.29  -4.53    -4.2%

GC=F Gold       1,944.20 +5.20   +0.3%

 

 

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A key measure of annual inflation that is closely watched by the  Federal Reserve is running at the hottest pace in nearly 4 decades as widespread supply disruptions, extraordinarily high consumer demand & worker shortages fuel rapidly rising prices.  Core prices, which exclude the more volatile measurements of food & energy, soared by 5.4% in the year thru Feb, according to the personal consumption expenditures (PCE) price index data which will be released tomorrow.  That measurement is the Fed's preferred gauge to track inflation; it marks the 11th consecutive month the measure has been above the central bank's target range of 2%.  Including food & energy, the inflation gauge jumped 6.4% in Feb from the previous year, the strongest gain since 1982.  In the one-month period fro Jan to Feb, core prices soared 0.4%, while the headline gain shot up by 0.6%.  The inflation spike largely reflected surging energy costs, which rose 25.7% from a year ago, & food costs, which were up 8% over that same time period.  The PCE report was accompanied by data on household spending, which showed that consumer spending rose faster than expected last month, climbing by 2.7%.  The spending increase followed a 2.1% jump in Dec.  The data is further evidence of a spike in prices illustrated by a separate measure – the Consumer Price Index – which showed inflation rose by 7.9% in Feb from the previous year, a fresh 40-year high.

Key Fed inflation gauge jumps – marking biggest gain since 1983

Oil producer group OPEC+ decided to stick to its strategy of gradually reopening the taps following reports the US is considering the largest ever draw from its emergency oil reserve.  The influential energy alliance of OPEC & non-OPEC partners swiftly agreed to raise its output targets by 432K barrels per day from May 1.  Energy analysts had widely expected OPEC+ to rubber-stamp another modest monthly increase despite sustained pressure from top consumers calling for the group to pump more to cool soaring oil prices & aid the economic recovery.  Oil prices have rallied to a near all-time high on concerns about Russian supply disruptions after the US & intl allies imposed a barrage of economic measures against the Kremlin as a result of its unprovoked onslaught in Ukraine.  Russia is the world's 3rd-largest oil producer, behind the US &Saudi Arabia, & the world's largest exporter of crude to global markets.  It is also a major producer & exporter of natural gas.  It is against this backdrop that the US is considering a plan to cool soaring crude prices by releasing up to 180M barrels from the country's strategic petroleum reserve (SPR).  Pres Biden is expected to deliver remarks later today.  The move would mark the 3rd time the US has tapped its SPR in 6 months & the 2nd since Russia's invasion of Ukraine on Feb 24.  OPEC Secretary-General Mohammad Barkindo encouraged members of the group, which includes Russia, to “stay the course” & “remain vigilant and attentive to ever-changing market conditions.”

OPEC+ sticks to modest oil output hike as U.S. considers unprecedented release of reserves

Russian forces are continuing to hold their positions & carry out shelling strikes around Kyiv, according to British intelligence, despite promises from Moscow this week to scale back its military activity near the Ukrainian capital.  The head of the UK's intelligence & security agency said that Russian Pres Vladimir Putin has “massively misjudged” the situation in Ukraine, & that the Russian leader's advisors were afraid to tell him the truth about what was happening on the ground.  Meanwhile, Ukrainian officials said that Russia had agreed to allow a humanitarian corridor to open in the besieged city of Mariupol, which has been largely destroyed by Russian shelling & is facing a severe humanitarian crisis.  Germany & France rejected demands by Russia that European countries pay for its gas in ruble as an unacceptable breach of contracts, adding that the maneuver amounted to “blackmail.”  Germany Economy Minister Robert Habeck said he had not yet seen a new degree signed by Pres Vladimir Putin mandating gas payments in rubles, adding that Germany was prepared for all scenarios, including a stoppage of Russian gas flows to Europe.  French Finance Minister Bruno Le Maire said France & Germany rejected Russia’s demand.  Russia's attempt to divide Western allies by requiring gas payments in rubles has failed, Habeck said, adding that Western allies are determined to not be “blackmailed” by Russia.

Russia holds onto positions near Kyiv; UK spy chief says Putin ‘massively misjudged’ war

The stock market is holding better than expected after the dreary inflation news.  And the war just drags on.  Dow is still up 1200 in Mar after a dreary start this year. 

Dow Jones Industrials

 

Markets edge lower on Russia - Ukraine developments

Dow dropped 65, decliners over advancers 3-2 & NAZ retreated 177.  The MLP index was steady at 210 & the REIT index fell 4+ to the 485s.  Junk bonds fund fluctuated & Treasuries continued to be purchased.  Oil recovered 3+ to the 107s & gold advanced 19 to 1937 (more on both below). 

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A majority of investors believe the biggest threat facing the markets right now is a policy error by the Federal Reserve as the central bank wrestles with taming decades-high inflation, according to the new CNBC Delivering Alpha investor survey.  About 400 chief investment officers, equity strategists, portfolio managers & CNBC contributors who manage money about where they stood on the markets for the rest of 2022.  The survey was conducted this week.  46% of the survey respondents said a Fed misstep could have the potential to derail the bull market, while 33% said surging US inflation poses a major threat.  11% listed further aggression from Russia after its invasion of Ukraine as the biggest threat to the markets.  Earlier this month, the Fed approved a 0.25 percentage point rate hike, the first increase since Dec 2018.  The central bank also signaled that it will be raise rates 10 times — in less than 2 years — & cut what likely will be Ts off the balance sheet.  Fed Chair Jerome Powell recently vowed tough action on soaring prices, indicating he's open to rate hikes more than the traditional 25 basis points.  Many notable investors are skeptical that the central bank will be able to engineer a soft landing even with a stronger economy.  As for their market outlook, most investors (58%) see flat returns for the S&P 500 in 2022, while 36% believe the equity benchmark could rise about 8% to end the year above the 5000 level.  Only 6% sees a correction before the year-end to take the S&P 500 below 4K.

Investors believe the biggest threat to the markets now is a Fed misstep, CNBC survey shows

The US included 100 killer drones in a colossal weapons package for Ukraine that Pres Biden approved earlier this month, US officials confirmed Wed.  Celeste Wallander, assistant secretary of Defense for intl security affairs, told lawmakers that Kyiv asked for the weapons, which are dubbed “kamikaze drones,” as it fights off a Russian invasion.  “We have committed 100 Switchblade tactical unmanned aerial systems to be delivered in the most recent package of presidential drawdown,” Wallander added in testimony before the House Armed Services Committee.  “We’ve heard the Ukrainians and we take that request very seriously,” she continued.  Pentagon spokesman John Kirby said last week that the drones would arrive in Ukraine soon, but declined to elaborate further.  The decision to equip Ukraine with killer drones, dubbed Switchblade, follows Ukrainian Pres Volodymyr Zelenskyy's request to US lawmakers for additional military equipment.  Deploying Switchblades to the fight in Ukraine could be the most significant use of the weapons in combat, as it is not clear how often the US military has used the killer drones on the battlefield.

U.S. sends 100 killer drones called Switchblades to Ukraine

US consumer confidence edged up in Mar, suggesting solid job growth offset Americans' concerns over decades-high inflation that poses a risk to spending & growth.  The Conference Board's index increased to 107.2 from a downwardly revised 105.7 reading in Feb, which was the lowest in a year.  The called for a reading of 107.  Even though confidence edged up, Americans are facing the highest inflation since 1982, which is outpacing wage gains & being fanned further by the war in Ukraine.  That's already causing some to limit their purchases of certain goods or services, & a slowdown in consumption would pose a risk to economic growth.  Steady labor market gains have pushed employment back to pre-pandemic levels in some sectors, buoying US households.  The share of consumers who said jobs were “plentiful” increased to a record high 57.2%. A separate report Tuesday showed US job openings remained near a record in Feb.  Consumers were also mixed about their short-term financial prospects.  The share who expect their incomes to rise in the next 6 months increased, but those who see their pay dropping also rose.  A gauge of current conditions rose by the most since Jun to 153, suggesting consumers had a more upbeat assessment of business conditions & the labor market.  The Conference Board's expectations index -- which reflects consumers' 6-month outlook -- declined to 76.6, the lowest since 2014.  Concerns over inflation intensified in Mar.  Consumers expect prices to rise 7.9% in the next year, an all-time high.

U.S. Consumer Confidence Unexpectedly Rises Despite

Gold futures finished highe, posting their first gain in 4 sessions in cautious trading as Russia shelled areas near the Ukraine capital of Kyiv despite an earlier pledge to scale back military options.  Gold for Jun, the most active contract, rose $21 (1.1%) to settle at $1939 an ounce after losing 1.4% yesterday.  Gold came under pressure yesterday after the resumption of talks between Russian & Ukraine negotiators.  Although the talks produced no breakthroughs, both sides described the talks as constructive & Russia's military said it would scale back military operations near Kyiv & the northern Ukraine city of Chernihiv.  But optimism soon gave way to skepticism about progress toward a ceasefire.  Kremlin spokesman Dmitry Peskov said that Russia hadn't observed anything “really promising” in Ukraine proposals presented in yesterday's talks.  Ukrainian Pres Volodymyr Zelensky & US officials, meanwhile, cast doubt on whether any pledge to pull Russian troops back amounted to a shift.  Gold pared some gains after the ADP National Employment Report showed US private payrolls rose by 455K in Mar, compared with a gain of 450K forecasted.  Gov data also showed that corp profits rose in Q4 & hit a record high.  Adjusted pretax profits rose 0.7% to an annualized $2.94T in Q4-2021, versus in Q3.

Gold posts first gain in 4 sessions with traders wary of Russia’s pledge to cut military operations

Oil futures ended higher, as skepticism emerged over progress made a day earlier in negotiations with Russia to bring an end to the war in Ukraine, renewing worries about crude supplies in region.  Prices continued higher after US gov data showed a weekly decline in crude inventories & a climb in stocks of gasoline & distillates.  West Texas Intermediate crude for May rose $3.58 (3.4%) to settle at $107.82 a barrel after posting a loss of 1.6% yesterday.  May Brent crude, the global benchmark, rose $3.22 (2.9%) to $113.45 a barrel following a 2% loss a day earlier.  Oil prices clawed back from yesterday's losses & then some.  Yesterday's decline came as hopes over signs of progress between Russian & Ukraine negotiators drove investors out of the commodity.  Russia's Deputy Defense Minister Alexander Fomin reportedly said his country would decrease military activity in the direction of Kyiv & Chernihiv.  But Kremlin spokesman Dmitry Peskov was reported as saying today that Russia hadn't noticed anything “really promising” in those Ukraine proposals yesterday.  Ukrainian Pres Volodymyr Zelensky and US officials also cast doubt on whether any pledge to pull Russian troops back amounted to a shift.  Pentagon spokesman John Kirby said the US had detected a small number of Russian ground forces backing away from Kyiv, but it looked like forces were just being repositioned.  In a Jul meeting last year, OPEC+ said that starting May 1, 2022, baseline output for the group would see a modest increase for some members, but the group as whole has been unable to meet their full production quotas.

Oil prices end higher as skeptical views emerge over progress between Russia-Ukraine talks

Markets drifted lower as investors eyed developments on Russia-Ukraine discussions & assessed mixed data on the US economy.  The Volatility Index (VIX) held near 20, its lowest level in more than 2 months.  So far Dow is up 1300 in Mar but down 1100 YTD.

Dow Jones Industrials

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