Dow dropped 482 (near session lows), decliners over advancers about 3-1 & NAZ slid back 70. The MLP index dipped below 201 & the REIT index retreated another 4+ to the 592s. Junk bond funds continued to be sold & Treasuries saw buying, reducing their already high yields. Oil was off 1+ to 102 & gold fell 10 to 1937.
AMJ (Alerian MLP index tracking fund)
|
|
The 5-year Treasury yield topped 3%, after Federal Reserve Chair Jerome Powell's suggestion that a 50-basis-point rate hike could be in the cards in May. The yield on the 5-year Treasury note was last down less than 1 basis point at 2.97%. Earlier it climbed as high as 3.05%, higher than the rate on the 30-year Treasury bond, which fell 2 basis points to 2.908%. This is known as a "yield curve inversion," with investors selling out of shorter-dated bonds in favor of long-dated debt, indicating a lack of confidence in the health of the economy. The yield on the benchmark 10-year Treasury note moved 3 basis points lower to 2.883%. Yields move inversely to prices & 1 basis point is equal to 0.01%. Powell said at an IMF panel yesterday that taming inflation is "absolutely essential." He added that hiking interest rates by ½ a percentage point is "on the table" for the Fed's May policy meeting. While the suggestion of a 50-basis-point hike was in line with market expectations, Powell's comments still saw Treasury yields jump. Investors have become increasingly concerned about potential drag on economic growth that could come from rising inflation & the Fed's efforts to control these pricing pressures.
5-year Treasury yield hits 3% following Powell’s comments on rate hikes
Federal tax receipts likely surged to another record high this year, reflecting a booming economy & huge growth in corp profits amid red-hot inflation. The Tax Foundation, a non-partisan think tank, said in a new analysis that it's possible corp tax revenue will go higher – "possibly much higher" – than it did in fiscal year 2021, when the gov raked in a record $372B. That's because the Congressional Budget Office's most recent monthly budget review showed that in the first 6 months of the fiscal year (Oct-Mar), corp tax revenue was 22% higher than last year's record level. If this pattern continues to hold for the remainder of the year, corp tax revenue is in line to hit $454B. "Undoubtedly, inflation has contributed to this year’s boost in corporate tax receipts," the analysis, written by Tax Foundation economist William McBride, said. "However, even as a share of GDP, which also grows with inflation, corporate tax revenue this year is on track to reach its highest level since 2015." The strong corp tax receipts last year reflected a rapidly recovering economy & huge growth in profits that year. S&P 500 profits, for instance, grew 39%. Although analysts expect slower growth this year, they are still forecasting substantial growth in S&P 500 profits of about 10%, "which, to the extent it materializes, also points to record-high corporate tax revenue," McBride wrote. Inflation & the recovering economy have also boosted other sources of revenue for the federal gov. Individual income tax receipts rose to an all-time high of $2.04T in fiscal year 2021. Receipts are currently running 36% higher in fiscal year 2022. At the same time, total federal tax collections, including payroll & other taxes hit an all-time high in nominal terms of $4.05T in fiscal year 2021, about 18.1% of the nation's GDP. That was well above the long-run average of 17.1% before Reps passed the 2017 Tax Cuts & Jobs Act, which slashed the corp tax rate to 21% from 35% & temporarily lowered the top individual income tax rate to 35% from 39.6%. Total collections are running about 25% higher in fiscal year 2022. "If that pattern holds, total federal tax collections will hit $5.04 trillion in fiscal year 2022, or 21.0 percent of GDP—a new all-time high in both nominal terms and as a share of GDP," McBride added.
Corporate tax collection headed for another record high
Russia has for the first time disclosed its goal to fully control Ukraine's eastern Donbas region as well as southern Ukraine, as part of the 2nd phase of its invasion. German Chancellor Olaf Scholz says his top priority is avoiding a Russia-NATO confrontation & that he doesn't believe an EU embargo on Russian gas would convince Pres Vladimir Putin to end the war. Mariupol's mayor is appealing for a full evacuation of the embattled city after attempts to get civilians out safely via humanitarian corridors have mostly failed. Ukrainian officials say satellite images captured by Maxar show mass graves 20 times bigger than a cemetery discovered in the city of Bucha this month. Meanwhile, the EU is calling on people to switch up their habits in order to use less energy, which it says will help to reduce reliance on Russian gas. The EU imports roughly 40% of its natural gas from Russia. A senior White House adviser said he is confident Europe is determined to close off or further restrict remaining Russian oil & gas exports as Moscows war in Ukraine drags on. “I have confidence that Europe is getting the message and they are determined to close off this last source of export revenue,” Daleep Singh, deputy White House national security adviser said. Oil exports are the Kremlin's main source of foreign currency & many within the EU have called for an end to oil payments because they effectively finance Russia's war in Ukraine. Gas is also another major source of revenue for Russia, but its ban has not yet been properly discussed at the EU level because of the bloc's reliance on it. Singh, the White House's point person for sanctions on Russia, said discussions on the topic are ongoing. “It’s important that they do this as soon as they can. And to do it in a way that’s smart,” he said.
Russia declares intent to control Donbas and southern Ukraine; new mass graves found near Mariupol
Dow Jones Industrials
No comments:
Post a Comment