Dow finished up 67, advancers over decliners 3-2 & NAZ crawled up 27. The MLP index added 5+ to the 211s & the REIT index rose 5+ to the 456s. Junk bond funds were a little higher & Treasuries saw some buying, but the 10 year Treasury yield remains near 3%. Oil slid back 2+ to the 102s & gold added 3 to 1887 (more on both below).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
US natural gas surged today to the highest level in nearly 14 years as Russia's invasion of Ukraine wreaks havoc on global energy markets. Henry Hub prices jumped more than 9% to $8.14 per M British thermal units earlier, the highest level since Sep 2008. Campbell Faulkner, senior VP & chief data analyst at OTC Global Holdings, said the increase was sparked by a “flurry of tighter market conditions,” including the EU considering a 6th round of sanctions against Russia that could include the nation's energy complex. In addition, production is down in the US & gas in storage is 21% lower than at this time last year. “Higher power burn this summer with zero coal gas ... switching will reduce the amount of spare gas for storage infill which is pushing prices up in a classic commodity cycle (’backwardation”) to get gas into the market now,” he added. Over the last 2 sessions, natural gas prices have jumped more than 12%, which follows a nearly 30% gain in Apr. The swift upward price action, which is also being fueled by surging demand for US liquified natural gas, is adding to inflationary pressures across the economy. For example, consumers' electricity bills are rising as utility companies pass along their higher input costs. EBW Analytics also pointed to changing weather patterns as increasing demand for natural gas as warmer temperatures usher in air-conditioning season. “A faster-than-expected turn hotter, however, is the principle bullish driver as traders jump on early-season heat in Texas — and any further weather model shifts hotter could set up a challenge of recent highs,” the firm added.
Natural gas surges 9% to highest level since 2008 as Russia’s war roils energy markets
Ukrainian forces at the Azovstal steel factory in Mariupol said that Russia's military is now storming the complex. The
move comes almost 2 weeks after Russian Pres Vladimir Putin
ordered his military not to storm the plant, but rather block off the
last pocket of resistance in the besieged Ukrainian city. Asked about reports in Ukrainian media that the plant was being
bombarded, Sviatoslav Palamar, the deputy commander of the Azov Regiment
that is holed up there, said “it is true.” Vadim Astafyev, a
Russian Defense Ministry spokesman, said that Ukrainian fighters
holed up at the plant “came out of the basements, took up firing
positions on the territory and in the buildings of the plant.” Astafyev added Russian forces along with rebel forces from Donetsk were using
“artillery and aircraft... to destroy these firing positions.” Mariupol
Mayor Vadym Boychenko said earlier today that more than 200 civilians
are still at the Azovstal factory following UN-assisted
evacuation efforts there in recent days.
Russian military is now storming Mariupol steel factory, Ukrainian forces say
The Federal Reserve is widely expected to raise its fed funds target rate by a ½-percentage point tomorrow, but investors will be more focused on whether it signals it could get even tougher with future rate hikes. The Fed also is expected to announce the start of a program to wind down its roughly $9T balance sheet by $95B a month, starting in Jun. The 50-basis-point hike would put the fed funds target rate range at 0.75% to 1%. A basis point equals 0.01%. That target rate after this week's boost would be well off zero, but way below market expectations for a funds rate above 2.8% by year-end. The central bank's communications tomorrow will be key, given the slowing in some data while inflation is still hot. Economic growth contracted by 1.4% in Q1, but economists say it was distorted by trade data & they expect Q2 GDP to bounce back. The Fed's forecast shows it expects core personal consumption expenditures inflation to reach 2.3% by 2024 & move back to the Fed's 2% target over the longer run. Central bank officials also forecast a fed funds rate of 1.9% for this year & 2.8% for 2023 & 2024 in their Mar projections. The central tendency for the funds rate for 2023 was 2.4-3.1%. The central bank does not release its next quarterly forecast until the Jun meeting, so much of what the market will hinge on will come from Fed Chair Jerome Powell. He will brief the media following the meeting.. The futures market is pricing in a fed funds rate of 2.82% by the end of this year, which would take roughly 2.5 percentage points of hiking in 2022. Traders are betting on a 50-basis-point hike this week, as well as close to 50 or more for each of the next 3 meetings in Jun, Jul & Sep.
The Fed is expected to raise rates by a half point. Investors wonder if it will get more aggressive
Gold futures finished modestly higher, with the precious metal holding its ground after suffering its worst day in 2 months. Gold for Jun added $7 (0.4%) to settle at $1870 an ounce after slumping 2.5% yesterday. Gold, which had tested the $2K level in Apr before turning south, has suffered as Treasury yields surged to levels last seen in 2018, with real, or inflation-adjusted yields, flirting with positive territory. Rising yields can be a negative for nonyielding assets, like gold. The sharp climb lately in the $ abated somewhat today, sending the ICE US Dollar Index a measure of the currency against a basket of 6 major rivals, down 0.3%, but still near 20-year highs. A stronger $ can be a negative for commodities priced in the unit, making them more expensive to users of other currencies. While the path to higher interest rates could continue to strengthen the $, & weigh on gold, some investors have grown concerned about how high the Fed can raise rates before it becomes a drag on markets or the economy.
Gold ends higher as rise in Treasury yields and dollar eases
Oil prices end lower on China worries, doubts over EU embargo on Russia
This was another choppy day for stocks. Dow was up - flat - down - up - down & finally up into the close. Tomorrow this drama well end when Powell give his comments. The Dow chart below does not look pretty.
Dow Jones Industrials
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