Dow sank 269 with selling in the PM, decliners over advancers 5-2 & NAZ dropped 88. The MLP index fell 3+ to the 227s (after reaching a 2+ year high yesterday) & the REIT index sank 10+ to 430. Junk bond funds fluctuated & Treasuries continued weak, raising the yield on the 10 year Treasury to 3.03%. Oil jumped 2+ to the 122s & gold gained 4 to 1856 (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)
Investors are on the alert for signs of a looming economic recession as the Federal Reserve tries to tame the hottest inflation in nearly 4 decades – & one gauge indicated this week that a downturn could be on the horizon. A closely followed measurement from the Atlanta Federal Reserve Bank suggests the economy could be headed for a 2nd-qtr decline in GDP, the broadest measure of goods & services produced in a country. The GDPNow tracker shows the economy grew at an annualized pace of just 0.9% in the spring, a steep decline from its previous estimate of 1.3% on Jun 1. Recessions are technically defined by 2 consecutive qtrs of negative economic growth & are characterized by high unemployment, low or negative GDP growth, falling income & slowing retail sales, according to the National Bureau of Economic Research (NBER), which tracks downturns. Economic growth in the US is already slowing: The Bureau of Labor Statistics reported last month that GDP unexpectedly shrank in the first qtr of the year by 1.5%, marking the worst performance since the spring of 2020, when the economy was still deep in the throes of the COVID-induced recession. Should the economy decline in the 2nd qtr, it could meet the technical criteria for a recession – though the NBER, the official arbiter, may not confirm it immediately. A growing number of economists & financial firms are forecasting the possibility of a recession within the next 2 years, as the Federal Reserve moves to aggressively tighten monetary policy in order to cool consumer demand & bring inflation back down to its 2% target. The Fed is hoping to achieve the rarest of economic feats as it moves into full inflation-fighting mode: cooling consumer demand enough so that prices stop rising, without crushing it so much that it throws the country into a recession. Although Fed policymakers are counting on finding that elusive sweet spot — known as a soft landing — history shows that the central bank often struggles to successfully thread the needle between tightening policy & preserving economic growth. The Fed already voted to lift the short-term interest rate by 50-basis points in May & has signaled that similarly sized hikes are on the table at upcoming meetings as inflation remains near a 40-year high. Hiking interest rates tends to create higher rates on consumer & business loans, which slows the economy by forcing employers to cut back on spending. Fed Chair Jerome Powell has echoed that sentiment in recent public forums & promised the Fed will raise rates as high as needed to cool prices, raising concerns of a central bank-induced recession.
In a potentially good sign for the economy, the CNBC All-America Workforce Survey finds many Americans who retired or became unemployed during the Covid pandemic would consider coming back to work, but they are looking for the right pay & the right job. The online poll of 2000 Americans nationwide looked at how the pandemic has changed the work & lives of 1200 employed Americans & 450 retirees & 400 unemployed workers who left the workforce during the pandemic. It found that 94% of those who say they are unemployed & 68% of retirees would consider a job. The unemployed cite pay & flexible hours & work-life balance as the top criteria for the right job, followed by a job they feel they are qualified for & company benefits. For those who retired during the pandemic, flexible hours are the most important criteria, followed by pay & work-life balance. Most retirees said they would prefer to come back part time. The question of whether those who dropped out would return to work is critical to the outlook for the economy. The labor force participation rate, or the percentage of the population that is available to work, stands at 62.3%, having rebounded from its pandemic lows, but remaining 1.1 percentage points below where it was before the crisis. Returning the participation rate to the prior level would bring another 1.8M workers into the labor force who could help alleviate a nationwide worker shortage that threatens higher inflation by driving up wages & prices. The survey confirms gov data that many retirees accelerated their departure, with 62% of retirees saying they left earlier than planned. In fact, 67% said they left at least 2 years early. A significant percentage made that call after being laid off. The new poll, part of CNBC's All-America Economic Survey, also showed that unemployment benefits paid during the pandemic had positive & negative effects on workers & the workforce. Among the employed, 55% reported that the benefits allowed them to stay out of work longer than they otherwise would have, & that was true for 50% of both retirees & the currently unemployed. Now, about 1/3 of the unemployed say the benefits allow them to remain out of work. For those currently employed, large percentages said they used the benefits to spend more time finding the right job & paying down their debts. 69% of parents said it helped them pay for child care during the pandemic.
Many who lost jobs during pandemic would return, CNBC survey finds
The top US securities regulatorproposed rule changes to transform how financial firms handles retail stock trades after the meme stock mania last year raised questions about whether mom-&-pop investors were getting the best price. The plan, unveiled by Securities & Exchange Commission chair Gary Gensler, would require trading firms to directly compete to execute trades from retail investors to boost competition. The watchdog plans to scrutinize the controversial payment for order flow (PFOF) practice, in which some brokers are paid by wholesale market makers for orders. “I asked staff to take a holistic, crossmarket view of how we could update our rules and drive greater efficiencies in our equity markets, particularly for retail investors,” Gensler told an industry audience today. He added the new SEC rules would mandate market makers disclose more data around the fees these firms earn & the timing of trades for the benefit of investors. His announcement, the biggest shake-up of US equity market rules in over a decade, will likely lead to formal proposals this fall. The public can then weigh in on them ahead of an SEC vote to adopt them. The intended changes would fundamentally alter the business model of wholesalers. They could also affect brokers' ability to offer commission-free trading to retail investors.
U.S. SEC chief Gary Gensler unveils plan to overhaul Wall Street stock trading
Gold prices scored back-to-back gains, despite modest gains in other haven plays, including the strong $ & the 10-year Treasury yield as it pushed back above the 3% threshold. Gold futures expiring in Aug rose $4 to settle at $1856 per ounce. A strong $ & higher Treasury yields — most notably the 10-year Treasury yield, which was holding above 3% — were blamed for stealing some of the shine from precious metals & keeping a lid on gold. Gold competes with the $ & Treasuries as a safe haven asset & higher Treasury yields tend to make bonds a more attractive choice. As for the $, it climbed to a new multi-decade high against the Japanese ¥, with a $ buying more than 134¥.
Gold scores back-to-back gains even as the dollar, bond yields rise
Oil prices rose to a 13-week high as US demand for gasoline has kept rising despite record pump prices, on expectations China's oil demand will rise & on supply concerns in several countries. Brent futures rose $2.77 (2.3%) to $123.34 a barrel & US West Texas Intermediate (WTI) crude rose $2.70 (2.3%) to $122.11. US commercial crude oil inventories rose unexpectedly last week, while crude in the Strategic Petroleum Reserve fell by a record amount as refiners' inputs rose to their highest since Jan 2020, the Energy Information Administration said. US gasoline stocks fell by a surprise 0.8M barrels as demand for the fuel rose despite sky-high pump prices. The forecast expected gasoline stocks to rise 1.1M barrels.
Oil prices advance despite U.S. inventory rise
Dow Jones Industrials
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