Dow lost 34 (but 300 above early losses), advancers over decliners 4-3 & NAZ went up 134. The MLP index crawled up 1 to 200 & the REIT index recovered 1+ to the 417s. Junk bond funds slid lower along with stocks & Treasuries saw heavy buying, bringing lower yields (more below). Oil added 1+ to the 107s & gold fell 12 to 1841.
AMJ (Alerian MLP index tracking fund)
Wholesale prices accelerated more than expected in Apr as inflation
continued to hover near a 40-year high as a result of strong consumer
demand, pandemic-related supply chain snarls & the Russian war in
Ukraine. The Labor Dept said that its producer
price index, which measures inflation at the wholesale level before it
reaches consumers, climbed 11% in Apr from the previous year. On a
monthly basis, prices grew by 0.5%. Although that marks a slight
moderation from Mar's reading of 11.2%, the gauge still came in higher
than the 10.7% forecast, suggesting
inflationary pressures remain strong. Core
inflation at the wholesale level, which excludes the more volatile
measurements of food & energy, increased 0.6% for the month, following
a 0.9% increase in Mar. Over the past 12 months, core prices were up
6.9%. Overall, prices for goods jumped 1.3% last month, the 4th
consecutive rise & the biggest contributor to the headline inflation
figure. That included gains for items like motor vehicles, diesel fuel & eggs. Prices for construction also soared by 4% in Apr, while
prices for services held steady last month. Energy moderated in Apr, rising by 1.7% after surging 6.4% the previous month following the Russian invasion of Ukraine. The surge in wholesale prices comes on the heels of a separate Labor Dept report released yesterday that showed the consumer price index climbed 8.3%
in Apr from the previous year, far more than expected. Consumers are paying more for everyday necessities. Sky-high
inflation has created a political headache for Pres Biden – who
has blamed rising prices on the war in Ukraine, as well as
pandemic-related disruptions in the supply chain – & has forced the Federal Reserve to chart an even more aggressive course to cool demand & bring inflation down.
Wholesale inflation climbs 11% in April, remaining near 40-year high
Mike Sommers, the American Petroleum Institute pres & CEO, argued that a long-term energy
strategy is needed to reduce prices & stressed that the US has
resources that can be developed quickly "if we get the policies right." Sommers noted that the long-term energy strategy should include renewables as well as oil & gas. "We’ve seen the short-term approach, which is more release from the Strategic Petroleum Reserve, but the real concern is you’re drawing that Strategic Petroleum Reserve and you’re not filling it back up," he said. In Mar, the Biden administration announced
it will release 1M barrels of oil each day for the next 6
months from the Strategic Petroleum reserve in an effort to combat
soaring gas prices. Prices at the pump hit a new all-time high yesterday, amid rising
inflation & Pres Biden's restrictions on oil & gas production. The
national average for gas was $4.40 a gallon yesterday, which is 17¢ higher than the week before & 28¢ higher than the month
before. "American producers are responding to these price issues that we’re seeing right now," Sommers said. "At the same time, this industry is dealing with the same issues that a lot of other industries are dealing with." He
explained that that includes supply chain constraints & labor
shortages, which are contributing to higher prices for energy. "We’re having issues with supply chain on steel," Sommers noted. "There are issues with frac sand as well." "So
things that are existing within this economy, inflationary pressures,
are really pressuring the American oil and gas industry also," he
added.
Inflation 'really pressuring' US oil and gas industry: Petroleum Institute CEO
Investors continued their search for safety & flooded into bonds as the relentless selling persisted in the stock market, pushing Treasury yields lower. The yield on the benchmark 10-year Treasury note dropped 7 basis points to 2.842% after rising to its highest level since 2018 earlier in the week. The yield on the 30-year Treasury bond moved 5 basis points lower to 2.992%. Yields move inversely to prices & 1 basis point is equal to 0.01%. As the sell-off in equities continued, investors moved back into bonds in search of safety. The shift further pushed up bond prices while lowering yields, which move inversely to one another. Apr's consumer price index, released yesterday, rose 8.3% year-on-year. That was higher than the anticipated 8.1% growth in inflation, but was below Mar's 8.5% CPI reading. The 10-year Treasury yield climbed back above 3% following the release of the report, but then eased back. The latest inflation reading supports the Federal Reserve's plans to more aggressively hike interest rates to combat persistent pricing pressures, fueling recession fears.
10-year Treasury yield pulls back to 2.84% as investors rotate into bonds for safety
Dow Jones Industrials
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