Dow bounced back 215, advancers over decliners better than 3-2 & NAZ climbed 262. The MLP index slid lower in the 201s & the REIT index added 1 to the 467s. Junk bond funds were little changed & Treasuries saw more selling, taking the yield on the 10 year Treasury up 6 basis points to 2.37% (more below). Oil was off 1+ to 111 & gold declined 14 to 1915.
AMJ (Alerian MLP index tracking fund)
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Oil prices continue to jump as EU nations consider joining the US in the ban on Russian energy. There's a new pressure to increase US oil production, but experts in the industry say it's not that simple. "It's not just turning a switch like they think," said Mike Moncla, the pres of the Louisiana Oil & Gas Association. Moncla is also a co-owner of Moncla Workover & Drilling, a rig service company. Companies need rigs to get wells back online & produce more oil,
but many had "stacked" or stored their rigs as they weren't in use. "Oil
companies are doing all they can to get rigs back out, but when metal
stacks, in this humid, south Louisiana environment, you get rust,"
Moncla said. Moncla added that fixing a rig can take $75-125K. "It's
hard to afford to fix all these rigs when you don't know how long this
is going to last," Moncla continued. "We were all struggling to stay alive a
year ago."
Oil companies hit with more challenges as they try to ramp up production
The 10-year Treasury yield hit a multi-year high today as investors digested comments from Federal Reserve Chair Jerome Powell on rate hikes. The yield on the benchmark 10-year Treasury note rose 6.4 basis points to 2.381% & the yield on the 30-year Treasury bond gained 5.5 basis points to 2.591%. Yields move inversely to prices & 1 basis point is equal to 0.01%. The benchmark 10-year yield earlier in the session hit a fresh high of 2.39%, the highest level in almost 3 years. Powell said, “inflation is much too high,” in a speech for the National Association for Business Economics. He emphasized the Fed would continue to raise interest rates until inflation is under control & that hikes could get even more aggressive than forecast. “If we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so,” Powell added. On the geopolitical front, talks between Russia & Ukraine have so far failed to make progress. Ukraine yesterday rejected an ultimatum to surrender its besieged port city of Mariupol to Russian forces. Pres Volodymyr Zelenskyy said that ultimatums won't work as trapped Ukrainians will “fight till the end.” Investors are also keeping an eye on the spread of an China’s worst Covid-19 outbreak since the beginning of the pandemic.
10-year Treasury yield hits the highest since 2019 after Powell’s remarks
The EU is unlikely to impose an immediate oil embargo on Russia over its unprovoked invasion of Ukraine, according to sources with knowledge of the discussions. The US decided to ban imports of the commodity earlier this month, but intl allies have so far refused to do so given their dependency on Russian energy. In 2020, Russian oil imports accounted for about 25% of the EU's oil purchases, according to the region's statistics office. The EU's reluctance in taking action against Russian oil accentuated a dip in prices today. Whereas Poland & the Baltic nations are among the most vocal supporters of restricting the purchases of Russian oil, other nations — notably Germany & Hungary — are concerned about what this step would mean for prices. “Only a minority of countries are in favor [of an oil embargo],” an EU official said. A 2nd EU official said: “Discussions continue but no decision likely this week unless [Russian President Vladimir] Putin does something even more outrageous.” European leaders will be gathering in Brussels later this week to further coordinate their response to the invasion of Ukraine. Pres Biden will also be in attendance.
European Union unlikely to impose an oil embargo on Russia, sources say
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