Dow sank 879 (session low), decliners over advancers better than 5-1 & NAZ gave back 414. The MLP index sold off 5+ to 221 & the REIT index dropped 6+ to the 414s on fears of higher interest rates. Junk bond funds continued lower & Treasuries saw massive selling, taking the yield on the 10 year Treasury up an enormous 12 basis points to 3.16%. Oil was off a to about 120 & gold shot up 24 to 1877 (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 case that a recession is looming over the US got stronger today, as blistering inflation & historic lows in consumer sentiment painted an increasingly dark economic picture. As if the consumer price index increase of 8.6% wasn’t bad enough news, that release was followed later by the University of Michigan Index of Consumer Sentiment. That widely-followed gauge of optimism registered a paltry 50.2, the lowest in survey data going back to 1978. That's lower than the depths of the Covid outbreak, lower than the financial crisis, lower even than the last inflation peak back in 1981. Taken together, the data add up to an outlook that is not good for those hoping the US could skirt its first recession since the brief pandemic downturn of 2020. How long it will take to get to that official recession is a matter of debate that only time will resolve. But the recent data suggest the moment of reckoning may be closer than many economists are willing to concede. While consumer spending remains resilient, it’s come at the expense of a savings rate that has dipped to its lowest level since 2008, when Lehman Brothers crashed to set off the worst of the financial crisis. Household net worth in Q1 fell slightly, the first decline in 2 years, according to Federal Reserve data released earlier this week. That came as household debt rose 8.3%, the biggest annualized gain since 2006. The Atlanta Fed is tracking Q2 GDP growth of just 0.9%. Coming after Q1′s decline of 1.5%, a further deterioration in the current period would trigger a common rule-of-thumb for a recession -- 2 consecutive qtrs of contraction. A strong labor market has been the principal firewall against a downturn, but even that has shown some chinks lately: Last week's May nonfarm payrolls tally, though better than expected, represented the smallest gain since Apr 2021. And yesterday's weekly jobless claims report for last week showed the highest level since mid-Jan. Still, the prevailing sentiment by analysts is that the economy still can manage to skirt an actual recession.
Strong inflation, anxious consumers add up to more worries that recession has already arrived
The Biden administration will drop the Covid-19 testing requirement for inbound air travelers from abroad on Sun, ending one of the longest-running travel restrictions of the pandemic. The rule, put in place in early 2021 & later tightened, most recently required inbound travelers, including US citizens, to show proof of a negative Covid test a day before boarding US-bound flights. Travelers entering the US at land border crossings were exempt. Airlines & others in the travel industry had repeatedly pushed the administration to drop the requirement, arguing it was hurting demand for intl trips. The travel industry has been one of the hardest hit by the pandemic. Other countries, including the UK, had previously abandoned Covid testing entry rules. “The Biden administration is to be commended for this action, which will welcome back visitors from around the world and accelerate the recovery of the U.S. travel industry,” Roger Dow, pres of the US Travel Association, said. “International inbound travel is vitally important to businesses and workers across the country who have struggled to regain losses from this valuable sector.”
U.S. drops Covid testing requirement for international travelersAmericans' economic pessimism hit a new all-time-low in Jun. The University of Michigan's consumer sentiment index cratered to 50.2 from 58.4 in an early Jun reading. That reflects the lowest level since regular monthly data collection began in the late 1970s. The print also landed well below the forecast of 58.1. The decline was powered by worsening sentiments across the board. The university's index for current economic conditions deteriorated to 55.4 from 63.3, while the measure for consumer expectations sank to 46.8 from 55.2. Not only have Americans had it with today's economy, they aren't very hopeful that things will get better. 46% of surveyed consumers linked their pessimism to elevated inflation, Joanne Hsu, director of the Surveys of Consumers, said in the report. That's up from 38% in May & the 2nd-largest share since 1981, when inflation last trended so high. That share will likely be larger in the final Jun reading.
University of Michigan Consumer Sentiment Index Hits All-Time-Low
China's 2 largest cities are tightening some Covid measures again, just days after loosening them as the virus appeared under control. Shanghai, which emerged from a 2-month lockdown early this month, said that 7 of its 16 districts would conduct mass testing this weekend. Those areas included financial & downtown districts. During the testing period, residents in affected areas will need to stay home until the testing is over, the city said in the comments section of an official release. It was not clear to what extent other restrictions on business would be applied during the testing. Implementation of Covid restrictions can also vary by apartment neighborhood. Factories can generally remain in operation if their workers live on-site or otherwise operate in a bubble. Minhang, one of the & districts & located near the outskirts of Shanghai, told residents to stay home during virus testing tomorrow. Since yesterday, at least 3 districts in Beijing have ordered bars & some other entertainment venues to close until further notice. After the city reported one new confirmed Covid case for Wedy, a handful of subsequent cases were tied to bars and nightclubs.
China struggles to stamp out Covid as cities reimpose some restrictions
Gold prices headed higher as investors turned to safe havens following a hotter-than-expected reading on US May inflation numbers, but not before briefly tumbling to their lowest levels in 3 weeks early in the session. Gold futures expiring in Aug surged $20 (1.1%) to $1873 per ounce, after earlier touching their weakest level for the most actively traded gold contracts since May 19. Stocks plunged today after the US May inflation report. The CPI data showed the cost of living in the US climbed 1% in May on the back of higher rents, gas & food prices, keeping the rate of US inflation at its highest level in more than 40 years. The headline reading came in at 8.6% annualized, topping the previous cycle high seen in Mar. Gold, Treasury yields & the $ shot higher today, with investors scrambling for safety on concerns about the economic spillover from the surging cost of living & the Federal Reserve's likely response.
Gold turns higher as investors head for havens after hot U.S. inflation report
Oil futures ended lower, erasing early gains after a much hotter-than-expected US May inflation report sent the $ higher & sank equities, though the US benchmark logged a 7th straight weekly gain. West Texas Intermediate (WTI) crude for Jul fell 84¢ (0.7%) to close at $120.67 a barrel, leaving it with a weekly gain of 1.5%. Aug Brent crude, the global benchmark, fell $1.06 (0.9%) to settle at $122.01 a barrel, leaving it with a 1.9% weekly gain & its4th straight winning week. Both WTI & Brent ended at 3-month highs earlier this week. Crude-oil prices pulled back from nearly three-month highs as a measure of the currency against a basket of 6 major rivals, jumped 1%. The move came after a May consumer-price index reading at a year-over-year rate of 8.6%, a 40-year high, stoked expectations the Federal Reserve will be even more aggressive than anticipated in raising interest rates in an effort to get surging prices under control. Oilfield services company Baker Hughes said the number of US oil rigs rose by 6 this week to 580, up from 461 rigs at the same time last year. Oil rallied this week on continued strength in fuel demand. Data earlier this week from the Energy Information Administration showed a further fall in gasoline inventories, signaling a further increase in demand as summer driving season moves into full swing despite the average US pump price expected to hit $5 a gallon for the first time. Investors continue to track developments in China, where parts of Beijing & Shanghai went back on lockdown after previously easing COVID-19 restrictions.
Oil ends lower as dollar jumps, equities tumble, but logs 7th straight weekly gain
Stocks began the day with heavy selling & remained near those levels for the rest of the session. A reminder of very high inflation along with cheerless consumer confidence data brought on continue selling. For the week, the Dow dropped about 1500 & is down almost 5000 YTD. That is one tough market! Try to get a good night's sleep tonight. 😀
Dow Jones Industrials
No comments:
Post a Comment