Dow dropped 210, decliners over advancers about 3-2 & NAZ pulled back 246. The MLP index fell 1+ to 211 & the REIT index declined 3+ to the 385s. Junk bond funds were little changed & Treasuries ran into more selling, taking yields higher (more below). Oil was off almost 3 to the 95s (more below) & gold went up 9 to 1954.
AMJ (Alerian MLP index tracking fund)
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Oil prices slid lower, accelerating 2 straight weeks of declines as lockdowns in China sparked demand fears. Intl benchmark Brent crude declined 3.9% ($4.02) to $98.72 per barrel. West Texas Intermediate (WTI) crude futures, the US oil benchmark, shed $3.95 (4%) to $94.33 per barrel. China is the world's largest oil importer & the Shanghai area consumes roughly 4% of the country's crude. The potential hit to demand comes as the supply side of the equation has been front & center given Russia's role as a key oil & gas producer & exporter. Last week the Intl Energy Agency announced that its member countries would release 120M barrels from emergency stockpiles, of which 60M barrels would be from the US. The announcement followed the Biden administration saying it would release 180M barrels from the Strategic Petroleum Reserve in an effort to alleviate soaring prices. WTI fell 1% last week while Brent declined 1.5%, with both contracts posting their 4th negative week in the last 5. Oil prices have been on a roller-coaster ride since Russia invaded Ukraine. WTI briefly traded as high as $130 on Mar 7, the highest level since 2008. The contract has fallen nearly 30% since. Brent meantime spiked to $139 in Mar.
Oil drops, Brent crude falls below $100 as China lockdowns spark demand fears
China's factory-gate & consumer prices rose faster than expected in Mar as Russia's invasion of Ukraine, persistent supply chain bottlenecks & production snags caused by local COVID flare-ups added to commodity cost pressures. The surge in raw materials costs is hobbling economies worldwide & in China has raised questions among some analysts about just how much its central bank will be able to ease monetary policy. China's producer price index (PPI) increased 8.3% year-on-year, data from the National Bureau of Statistics (NBS) showed. While that was slower than the 8.8% seen in Feb, it beat a forecast for a 7.9% rise. Upstream pressures pushed up consumer prices, which rose 1.5% year-on-year, the fastest in 3 months, speeding up from 0.9% in Feb & beating expectations of 1.2%. China reported 26K new asymptomatic cases yesterday, more than 25K in the financial hub of Shanghai, which is currently under a city-wide lockdown. Most analysts expect the PBOC to lower borrowing costs & cut reserve requirements for banks or lower interest rate to pump more cash into the economy..
Inflation soars in China as supply chain issues worsen
The 10-year Treasury yield topped 2.76%, while the 5-year & 30-year rates remained inverted. The yield on the benchmark 10-year Treasury note climbed 4 basis points to 2.7629%, having hit 2.7741% yesterday. The yield on the 30-year Treasury bond moved 1 basis point higher to 2.7560%, while the 5-year rate jumped 5 basis points to 2.8154%. Yields move inversely to prices & 1 basis point is equal to 0.01%. Treasury yields have been on the rise recently, with concerns that rising inflation & the Federal Reserve's plans to aggressively tighten monetary policy could slow economic growth. These fears have caused Treasury yields to invert, with investors selling out of shorter-dated gov bonds in favor of long-dated debt, which has historically occurred prior to recessions. However, investors have been careful to point out that the yield curve inversion is not a guarantee of a recession & that this signal can flash red as many as 2 years before an economic downturn takes hold. 2 sets of inflation data are due out this week, with the Mar consumer price index scheduled for release tomorrow & last month's producer price index slated to follow on Wed.
10-year Treasury yield tops 2.76% to start the week
Dow Jones Industrials
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