Dow retreated 653 (near session lows which includes selling in the last hour of trading), decliners over advancers about 8-1 & NAZ was off 521. The MLP index sank 11+ to the 203s & the REIT index nosedived 20 to the 424s. Junk bond funds (stocks with high yields) continued to be sold along with stocks & Treasuries were strong, reducing yields. Oil plunged 6+ to the 408s & gold remained weak, dropping 27 to 1855 (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)
Americans' inflation fears remained near a record-high in Apr, with consumers expecting the price of everyday goods to stay elevated in the coming years, according to a key Federal Reserve Bank of New York survey. The median expectation is that the inflation rate will be up 6.3% one year from now, down from an 11-year-high of 6.5% recorded in May, according to the New York Federal Reserve's Survey of Consumer Expectations. 3 years from now, consumers see inflation hitting 3.9% – an increase of 0.3% from the previous month, but still below the peak of 4.2% recorded in late 2020. "Median inflation uncertainty – or the uncertainty expressed regarding future inflation outcomes – increased slightly to a new series high at the short-term horizon and was unchanged at its series high at the medium-term horizon," the report said. With consumers lowering their expectations for inflation over the next year, they believe that things like gasoline, food & medical care will get cheaper in the coming months. But Americans said they believe the price of rent & college tuition will increase over the next year. The survey plays a critical role in determining how Fed policymakers respond to the recent inflation spike. That's because actual inflation depends, at least in part, on what consumers think it will be. It's a sort of self-fulfilling prophecy – if everyone expects prices to rise by 3% in the year, that signals to businesses that they can increase prices by at least 3%. Workers, in turn, will want a 3% pay raise to offset the rising costs. "The risk is rising that an extended period of high inflation could push longer-term expectations uncomfortably higher," Fed Chair Jerome Powell said recently. The biggest question now is whether central bank officials can successfully tame inflation & stabilize prices without triggering an economic recession. Raising the federal funds rate tends to create higher rates on consumers & business loans, which slows the economy by forcing them to cut back on spending. Economic growth is already slowing, although consumer spending & business investment remain strong. Last week, the Bureau of Labor Statistics reported that the economy unexpectedly shrank in Q1, marking the worst performance since the spring of 2020, when the economy was still deep in the throes of the COVID-induced recession. Powell has argued the labor market & consumer demand are strong enough to prevent a downturn.
Americans' inflation fears hit near record highs in April, survey shows
The US will have to limit the next generation of Covid vaccines this fall to individuals at the highest risk of getting seriously sick from the virus if Congress fails to approve funding to purchase the new shots, according to a senior Biden administration official. The official warned that the US faces a substantial surge of Covid infections this fall as immunity from the current vaccines wanes & the omicron variant mutates into more transmissible subvariants. The US needs more money for next-generation vaccines, therapeutics & tests to prevent infections from turning into hospitalizations & deaths. Pfizer (PFE) & Moderna (MRNA) are developing redesigned vaccines that target the omicron variant's mutations to boost protection against infection. The current shots are still targeting the original virus strain that first emerged in Wuhan, China. As the virus has evolved over the past 2 years, the vaccines have become less effective at preventing mild illness, though they generally still protect against severe disease. The Food & Drug Administration is expected to make a decision by early summer at the latest on whether the US should switch to the redesigned shots for a fall vaccination campaign, with its advisory committee set to hold a meeting on Jun 28 to discuss the issue. However, the US currently does not have enough money to purchase the new shots for everybody in the US ahead of the fall. The Senate has failed so far to pass $10B in additional Covid funding for vaccines, therapeutics & testing despite Senate Majority Leader Chuck Schumer & Sen Mitt Romney striking a deal in early Apr. The $10B Senate deal is less than ½ the $22.5B the White House originally requested. “We will be able to get some vaccines of the new generation but it’ll be a very limited amount and really only for the highest risk individuals, but it will not be available for everybody,” the official said. The elderly & people with weak immune systems are the highest risk of severe illness from Covid. Congress needs to pass funding within the next few weeks to ensure that contract negotiations between the federal gov & the vaccines makers are in an advanced stage by Jul. However, Reps in the Senate have vowed to block the money unless the White House reinstates Title 42, which allowed the US to turn away asylum seekers at the nation's borders during the pandemic.
U.S. to limit new Covid shots to high-risk people if Congress doesn’t OK funding
The US will suspend Trump-era tariffs imposed on Ukrainian steel for one year, Commerce Secretary Gina Raimondo announced. Through the move, the US aims to bolster one of Ukraine's key domestic industries while the country defends itself against the Russian invasion. “We can’t just admire the fortitude and spirit of the Ukrainian people—we need to have their backs and support one of the most important industries to Ukraine’s economic well-being,” Raimondo said. Before the war, Ukraine's steel industry employed 1 out of every 13 Ukrainians. But it is unclear how much of that industry is still operating & how much the steel plants still in production are exporting as Ukraine races to manufacture weapons for its armed forces. During peace time, base metals like steel are far & away the top export product from Ukraine to the US. In 2019, Ukraine exported roughly $780M worth of base metals to the US, a figure that represented 59% of all its US exports that year, according to Commerce Dept data. Until the announcement, Ukrainian steel exported to the US was subject to a 25% import duty.
U.S. will suspend tariffs on Ukrainian steel
Gold futures fell, booking their worst daily percentage drop in a week, as investors chose the greenback over the yellow metal as the safe place to hide while the Federal Reserve ratchets up interest rates. Futures fell 1.3% ($24) to settle at $1858 an ounce, marking the worst daily percentage decline for the most-active contract since May 2. Jitters over the central bank's plans to aggressively tighten financial conditions this year to combat inflation at a 40-year high has led to sharp volatility in stocks, bonds & other financial assets, while sending investors flocking to safe-haven assets like the $, gold and other gov debt. Gold futures are up 2.5% this year, compared to the 8.2% rise for the US dollar index. The benchmark 10-year yield also has surged, briefly topping 3.20% today before pulling back, but is still nearing peak levels in 2018, or before America's last economic recession. Even when stocks tumble, gold's appeal as a non-interest bearing asset can be dulled by rising Treasury yields, while a strong $ can erode the attractiveness of commodities priced in the unit, making them more expensive to users of other currencies. Traders are looking ahead to Wed's release of the consumer price index, which could show a peak in inflation. Fri's data showing a 428K gain in nonfarm payrolls & an unchanged unemployment of 3.6% did little to change the market's outlook of steep Fed rate hikes.
Gold books worst day in a week as traders pick dollar as haven for Fed rate hike cycle
Bostic says inflation may cool faster, leaving less for Fed to do
Crude tracked a selloff in global assets, with the commodity pressured as Saudi Arabia cut prices for Asian customers & elsewhere, China reported sharply weaker export data. A steep slide for stocks appeared to fan additional selling. West Texas Intermediate crude for Jun dropped $6.68 (6.1%) to settle at $103.09 a barrel on the New York Mercantile Exchange. It was the US benchmark's biggest one-day drop since Mar 31. Jul Brent, the global benchmark, dropped $6.45 (5.7%) to close at $105.94 a barrel, its largest one-day drop since Mar 28. Saudi Arabian oil company Saudi Aramco said yesterday that it reduced oil prices of all types of crude for Europe, Asia, Europe & the Mediterranean for Jun. The biggest cuts were seen in the Mediterranean. US prices were unchanged. The markets brushed aside news that G-7 countries agreed on the weekend on a gradual import ban for Russian oil, as that country's forces continued to bear down on Ukraine. Meanwhile, the market was reminded of China's fragile economy to start the week, after data showed exports rose just 3.9% on year in Apr, after a blistering 14.7% gain in Mar. The slowdown came as COVID lockdowns hit supply chains & closed factories, adding to worries about growth in the world's #2 economy. Investors are already concerned that the Federal Reserve won't get the balance right in its interest rate increases, which could possibly trigger a recession.
Oil prices close 6% lower to start the week as Saudis lower prices, China exports slump
It seems like everything is either bad or worse. Nothing is going right. At the start of 2022, the Dow was pushing on 37K. Since then it has dropped 4700. That's one brutal drop in a short amount of time. The main issues are the same: high inflation & interest rates along with a slowing economy which may be headed into a serious recession as the Fed tries to control higher prices. The Volatility Index (VIX) is in the 34s, double where it was when the Dow peaked at the start of the year. Investors are VERY nervous.
Dow Jones Industrials
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