Dow surged 641 to near session highs, advancers over decliners better than 3-1 & NAZ jumped 270. The MLP index went up 8+ to the 195s & the REIT index rebounded 6+ to the 395s. Junk bond funds continued strong along with higher stock prices & Treasuries were heavily sold, raising yields. Oil added 1 to go over 110 & gold was off 7 to 1833 (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)
The US unemployment rate must rise before Americans see any relief from inflation, economist & former Treasury Secretary Larry Summers said. US inflation is sitting at roughly 8.6% year-over-year, the highest point in 40 years & shows no signs of slowing down. He argues the US must sustain a jobless rate of more than 5% for 5 years if inflation is to drop. "We need five years of unemployment above 5% to contain inflation – in other words, we need two years of 7.5% unemployment or five years of 6% unemployment or one year of 10% unemployment," Summers added. "There are numbers that are remarkably discouraging relative to the Fed Reserve view," he continued. The US unemployment rate currently sits at 3.6%. Summers' statement came hours after Pres Biden argued that a recession was not "inevitable." He said he came to that conclusion after a conversation with Summers. During an appearance on televison, Summers himself had predicted that a recession was likely. Several high powered CEOs have also begun bracing for a recession. "My best guess is that a recession is ahead. I base that on the fact that we haven't had a situation like the present with inflation above 4% and unemployment beyond 4% without a recession following within a year or two. And so I think the likelihood is that in order to do what's necessary to stop inflation the Fed is going to raise interest rates enough that the economy will slip into a recession," Summers said.
Summers warns Americans will have to lose jobs to fight inflation
Chinese manufacturing orders are reportedly down by as much as 20-30%, according to logistics sources responsible for moving the finished products from Chinese manufacturing plants to the Chinese ports. “As consumers move from purchasing stuff to buying services, importers continue to work on balancing order flow with sales expectations,” said Alan Baer, CEO of OL USA. “Some industries are forecasting purchase order reductions of 20 to 30 percent, while others see no interruptions in their order flow. Overall, the risk appears to be to the downside. The decrease appears tied to economic uncertainty and not the migration of operations out of China.” It is important to note even with this decrease in orders, the number of orders is still above pre-pandemic levels. This order decrease will have no impact on the current container volumes leaving China bound for the US. “Orders are now fairly normal after the lock-down,” said Goetz Alebrand, head of Ocean Freight Americas, DHL Global Forwarding. “Some raw materials are missing for production and we also see more caution among some groups of importers in placing bookings. We see this as most likely signaling a tipping point where the U.S. economy is moving from ‘ship at any cost’ to ‘ship at a cost that our inventory can accommodate.’ ... Shipping volumes are not falling from a cliff but the ultra-high growth rates we have seen in recent times are moderating,” he added. Alebrand said there were some manufacturing shifts away from China that started under the Trump administration, with Vietnam & India among the countries that are benefiting from a growing share, but China remains the dominant sourcing locale for many products imported to the US. One question that DHL Global Forwarding Americas is watching closely is whether Latin American countries will benefit from the shift. “Any meaningful change will not happen overnight,” he said.
Chinese manufacturing orders decline for some shippers as consumers pull back
Kellogg (K) is planning to separate into 3 independent public companies,
sectioning off its iconic brands into distinct snacking, cereal &
plant-based businesses. The
announcement comes a decade after Kellogg's $2.7B
purchase of Pringles, which signaled the company's shift to focusing on
the global snacks business with people increasingly eating more often
between meals. Kellogg, along with rivals,
have leaned into the trend by introducing more snacks & snapping up
smaller brands. Cereal sales have stagnated in the
US as people eat on the go & reach for a greater variety of options
in the morning. Brands including Special K, Froot Loops & Rice
Krispies had for decades been a foundation of Kellogg, but are no longer
seen as key growth drivers for the company. The pandemic briefly
revived the cereal category as more consumers ate breakfast at home, but
Kellogg expects flat revenue growth for its North American cereal
business in the future. The stock rose 1.35.
If you would like to learn more about Kellogg, click on this link:
club.ino.com/trend/analysis/stock/K?a_aid=CD3289&a_bid=6ae5b6f7
Kellogg shares jump on plans to separate into three companies
Gold futures settled lower as a rise in the US stock market dulled demand for the safe-haven metal & concerns over rising global interest rates & signs of weakness in gold demand in China & India outweighed support for gold from a weaker $. Aug gold fell $1 to settle at $1838 per ounce after losing 0.5% on Fri & posting a weekly decline of 1.9%. Gold has been pushed around within the $1,800-$1875 range over the past couple of weeks amid all the central bank rate hikes, inflation worries & recession talk. Conflicting factors at play have prevented the metal from making a decisive move. Rising yields & a generally strong $ are never positive influences for assets that pay no interest or divs, yet the fact it hasn't completely broken down means other factors are supporting it.
Gold futures stretch losses into a second session
Oil futures climbed,
with US prices recouping a portion of the more than 9% loss last
week. The oil market remains too tight over the short-term & rising
expectations over tougher sanctions with Russian crude should keep
demand especially strong. West Texas Intermediate crude for Jul rose $1.09 (1%) to settle at $110.65 a barrel on the contract's expiration day. Aug WTI oil,
which is now the front month, settled at $109.52, up $1.53 (1.4%).
U.S. oil futures end higher to recoup a portion of last week's loss
This was bargain hunter day. After being greatly oversold, they returned to bid prices higher with a little selling into the close. Powell will testify before Congress on Wed & Thurs to give his regular, semi-annual updates on monetary policy. That will get a lot of attention.
Dow Jones Industrials
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