Dow dropped 91 with selling in the last ½ hour, advancers modestly ahead of decliners & NAZ added 8. The MLP index held steady in the 206s & the REIT index sank 7+ to the 454s. Junk bond funds fluctuated & Treasuries were heavily sold, raising the 10 year Treasury yield to nearly 3% (more below). Oil was off 2+ to the 101s & gold plunged 49 to 1862.
AMJ (Alerian MLP index tracking fund)
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Treasury yields continued their push higher, as investors monitored economic data & monetary policy on the first trading day of May. The yield on the benchmark 10-year Treasury note rose more than 9 basis points to 2.977% & the yield on the 30-year Treasury bond added 9 basis points to 3.035%. Yields move inversely to prices & 1 basis point is equal to 0.01%. The 10-year yield rose as high as 2.99% today, its highest level since Dec 2018. The benchmark yield has risen rapidly this year after ending 2021 near 1.5%. It was trading near 2.33% at the end of Mar. Investors are looking ahead to Wed, when the Federal Open Market Committee will issue a statement on monetary policy & Chair Jerome Powell will hold a press conference after. A hot inflation report Fri underscored the difficult macro environment. The core personal consumption expenditures price index — the Fed's preferred inflation gauge — rose 5.2% from a year ago. There were some conflicting readings on the economic front today. The US manufacturing PMI from S&P Global came in at 59.2, down slightly from a preliminary reading but higher than in Mar. The ISM manufacturing PMI, meanwhile, fell to 55.4, missing estimates.
U.S. Treasury yields start May higher as traders look ahead to Fed meeting
Civilian evacuations from the embattled city of Mariupol's last holdout, the blockaded Azovstal steel plant, are set to continue, Ukraine's gov has said after about 100 civilians were evacuated yesterday. Explosions were reported in the Russian border city of Belgorod, which is home to Russian fuel depots & ammunition facilities used for its war operations in Ukraine. The general staff of Ukraine's armed forces say they have identified Belarussian forces in Ukraine. Meanwhile, more than 25% of Russia's troops committed to its ground war in Ukraine have likely been rendered “combat ineffective,” the UK's Ministry of Defense said. UN-led evacuations of civilians trapped in the sprawling Azovstal steel plant in Mariupol are underway, after nearly 2 months of siege warfare on the city by Russia during its invasion. A Russian rocket has hit a strategically important bridge in Ukraine's southwestern Odesa, regional administrative spokesman Serhiy Bratchuk wrote without giving further details. The bridge constitutes the only territorial link to a large portion of the Odesa region, both by road & by rail. Russian forces have already struck it twice. Odesa is also a crucial port city from which much of the country's exports were shipped before the war.
Evacuations from besieged Mariupol steelworks continues; explosions heard in Russian border region
The US is seeing its natural gas production decrease as several countries around the world are looking for new energy suppliers due to sanctions imposed on Russia following its invasion of Ukraine. While the US is the world's largest producer of natural gas, the 3 regions of the country most productive of the energy resource — the Appalachians & West Texas — are seeing production growth diminish. Natural gas companies attribute the slowdown to a lack of adequate pipeline infrastructure. Fuel prices had already begun to surge last fall & following Russia's invasion of Ukraine, they have increased even further. This comes as European nations look to the US for more liquefied natural gas as Europe looks to end its dependence on Russian fuel. The Appalachian region, which supplied about 37% of US gas last year, has seen its production slow due to the difficulties energy firms face in building new pipes to funnel gas out of the Pennsylvania, Ohio & West Virginia area. Analysts are predicting that the Texas-New Mexico basin will also suffer significant declines next year if energy firms do not begin building new pipelines soon. This Permian Shale basin supplied nearly 20& of all US gas in 2021. In Europe, the largest economies import about 18.3B cubic feet per day from Russia while the US can only export about 9.8B cubic feet per day as liquefied natural gas. Appalachia has had steady US gas production gains over the last decade, growing by an average of 36% per year from 2010-2019. Pipeline construction has waned, & output growth dipped to just a 4% average growth rate in 2020 & 2021. The southwest's Permian Shale is the biggest oil field in the US producing oil that comes out of the ground with a lot of associated gas.
US suffers decline in natural gas production
Investors are nervous, as in very nervous. Macro economic data is wishy-washy with numerous headwinds around. Even gold has been hit with heavy selling. The Wed meeting along with the post meeting conference will get a lot of attention. Besides discussing the the rate hikes, those guys will talk about the future of the US economy. Try to keep cool in these difficult times.
Dow Jones Industrials
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