Dow rose 250, advancers over decliners 3-2 & NAZ was off 50. The MLP index stayed near 210 & the REIT index added 1+ to the 488s. Junk bond funds fluctuated & Treasuries were sold again, bringing higher yields. Oil slid lower into the 95s & gold went up 9 to 1947.
AMJ (Alerian MLP index tracking fund)
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The 10-year rate hit a fresh 3-year high as investors continued to digest minutes from the previous Fed meeting. The yield on the benchmark 10-year Treasury note
traded around 2.70%, near its highest level since Mar
2019, as it continues its jump following recent comments from the Fed. The 2-year rose about 5 basis points to 2.51%. The yield on the 30-year Treasury bond
advanced 3 basis points to 2.72%, while the 5-year rate climbed 7
basis points to 2.76%. Yields move inversely to prices & 1 basis point
is equal to 0.01%. The 10-year rally comes after Fed minutes
published Wed indicated that the central bank plans shrink its
balance sheet by $95M a month. Fed officials also suggested there
could be one or more 50-basis-point interest rate hikes on the cards. This
more aggressive tightening of monetary policy, along with rising
inflation, has seen yields invert. Investors have been selling out of
shorter-dated Treasury in favor of long-dated gov debt,
indicating concerns about the near-term health of the economy, with
fears of a recession on the rise. Investors also continue to monitor developments in Ukraine as Congress voted to revoke Russia's trade status, banning oil & gas
imports. That followed reports of rape & torture against civilians by
Vladimir Putin's forces, which drew strong condemnation from G-7
members, who voted to remove Russia from the UN Human Rights Council.
10-year yield notches new 3-year high after surge this week on Fed’s tightening plan
With as much as 60% of US consumers living paycheck to paycheck, it's not a surprise to see that the spending cutbacks have started. Even with a strong job market & wage gains, as well as Covid stimulus savings, pricing spikes in core spending categories including food, gas & shelter are leading more Americans to mind their pocketbooks closely. A new survey finds rising concerns about inflation & the risk of recession & Americans saying not only have they've started buying less but will be buying less across more categories if inflation persists. But these financial stress points are not limited to lower income consumers. The survey finds American with incomes of at least $100K saying they've cut back on spending, or may soon do so, in numbers that are not far off the decisions being made by lower income groups. The high-income consumer demographic is key to the economy. While it represents only one-3rd of consumers, it is responsible for up to ¾ of the spending. Mark Zandi, chief economist at Moody's notes, “If the high income consumers are out buying, we won’t see a big impact on raw consumer activity.” Lower-income households are the most at risk, & they are the ones most likely to be making unwelcome tradeoffs to make their money stretch as far as it did just a few months ago, according to the survey results. They are also clearly experiencing more financially anxiety, according to the survey, with 57% of Americans with income under $50K saying they are under more stress than a year ago, versus 45% of those with incomes of $100K or more. The 68% of high-income consumers who said they are worried higher prices will force them to rethink financial decisions is significantly lower than the 82% of Americans with income of $50K or less who told the survey this, but it is still a majority. More than ½ of people with household incomes under $50K say they have already cut back on multiple expenses due to prices, & for those with income of at least $100K, the cutback levels are already similar when it comes to dining out, taking vacations & buying a car.
As inflation bites and America's mood darkens, higher-income consumers are cutting back, too
Natural gas is one of several commodities affected by Russia.s invasion of Ukraine. Prices on the Dutch TTF hub, a European benchmark for natural gas trading more than tripled between Feb 16 & Mar7 before pulling back. But despite being at the center of the largest military conflict in Europe since World War II, Russia's natural gas continues to flow thru Ukraine to the rest of the continent. The EU receives about 40% of its natural gas from Russian pipelines & about a ¼ of that flows thru Ukraine. Germany gets roughly ½ of its natural gas from Russia. At the start of the conflict Germany froze its participation in the Nord Stream 2, a 760 mile long gas pipeline under the Baltic Sea connecting Russia to Germany's coast. The EU announced plans to reduce demand for Russian gas by 2/3 & make Europe independent from Russian fossil fuels by 2030. And the US along with its partners imposed economic sanctions targeting Russia's financial institutions & members of its elites.
The role of natural gas in the Russia-Ukraine conflict
Dow Jones Industrials
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