Dow went up 194 with buying into the close, advancers over decliners 3-2 & NAZ gained 179. The MLP index dropped 3 to the 184s & the REIT index recovered 7+ to the 407s. Junk bond funds rose in price & Treasuries were heavily purchased, lowering Treasury yields. Oil was off 2 to the 104s & gold dropped 13 to 1825 (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)
Federal Reserve Chair Jerome Powell conceded that aggressive interest rate hikes as part of the central bank's war on inflation could cause some Americans to lose their jobs. Powell – who was testifying before the House Financial Services Committee as part of a regular, semi-annual update on monetary policy – said it is "certainly possible" to control inflation without causing unemployment to rise, but suggested that may not be the case. "There is a risk that unemployment will move up, from what is a historically low level though," the Fed head added. Economic projections from the Fed's Jun meeting show that officials expect the national unemployment rate to climb slightly over the next 2 years, rising from the current rate of 3.6% to 3.9% at the end of 2023 & 4.1% at the end of 2024. Powell said that an unemployment rate of that level would "still be very strong," though it means some workers could be laid off. His testimony comes just one week after the Fed voted to raise interest rates by 75 basis points for the first time since 1994, underscoring how serious policymakers are about tackling the inflation crisis after a string of alarming economic reports. The move puts the key benchmark federal funds rate at 1.50-1.75%, the highest since the pandemic began 2 years ago. Powell told reporters at a press conference following the meeting that another increase of 75 basis points or 50 basis points is on the table for Jul as officials race to catch up with runaway inflation. Officials expect the benchmark federal funds rate to hit 3.4% by the end of the year & 3.8% by the end of 2023, a big increase from their Mar projections.
Powell acknowledges Fed rate hikes could cause unemployment to climb
As record high inflation persists in the US, Americans are feeling a new side effect — insecurity around their emergency savings, according to a new survey from Bankrate.com. The percentage of people who are uncomfortable with the amount of money they have set aside is now 58%, up from 44% just 2 years ago, the Jun survey found. Meanwhile, people who say they are comfortable with their emergency savings is now 42%, down from 54% 2 years ago. Yet there are signs people may have more money set aside now than in years past. The poll found 23% of respondents have no emergency savings at all, down from 25% last year. That is among the lowest levels in 12 years of polling by the personal finance website. At the same time, 27% of households have enough emergency savings to cover 6 months or more of expenses, up from 25% in the past 2 years. That is the highest it's been since 2018. “Despite having more savings, comfort level is way down,” said Greg McBride, chief financial analyst at Bankrate.com. “Inflation being at four-decade highs will erode your comfort level in the buying power of your emergency savings.” Another reason people may feel less secure with their emergency cash is they may have less of it compared to a year ago. About 34% of survey respondents had less in emergency savings than they had a year ago, while less than 24% of people said they have more. “With inflation running as high as it is ... that’s an indicator that that excess savings is being relied upon in a time of inflation outpacing wage gains,” McBride added. Admittedly, it can be difficult to find extra money to set aside when prices are higher everywhere.
High inflation has 58% feeling insecure about their savings, survey finds
A large chip factory currently in the early stages
of being built outside of Columbus, Ohio, could see its scope scaled
back or construction delayed depending on what Congress does with the
CHIPS Act, Intel (INTC), a Dow stock, said. The facility was announced in Jan & would be the most significant expansion of US-based
semiconductor manufacturing in years. INTC estimated the plant could
cost as much as $100B & committed an initial investment of $20B. “We
are excited to begin construction on a new leading-edge semiconductor
manufacturing plant in Ohio and grateful for the support of Governor
DeWine, the state government and all our partners in Ohio. As we said in
our January announcement, the scope and pace of our expansion in Ohio
will depend heavily on funding from the CHIPS Act,” an INTC
spokesperson said in a statement. “Unfortunately, CHIPS Act
funding has moved more slowly than we expected and we still don’t know
when it will get done. It is time for Congress to act so we can move
forward at the speed and scale we have long envisioned for Ohio and our
other projects to help restore U.S. semiconductor manufacturing
leadership and build a more resilient semiconductor supply chain,” the
statement continued. Part of the plan for the facility included subsidies from the US gov from the CHIPS Act, which could fund computer chip
manufacturing with $52B from the US gov to encourage
semiconductor manufacturing & research. The bill was passed by the
Senate last summer but has yet to be signed into law. The stock went up 3¢.
If you would like to learn more about INTC, click on this link:
club.ino.com/trend/analysis/stock/INTC?a_aid=CD3289&a_bid=6ae5b6f7
Intel warns Ohio factory could be delayed because Congress is dragging its feet on funding
Gold prices ended lower, stretching losses into a 4th straight session. Aug gold fell $8 (0.5%) to settle at $1829 per ounce. The decline followed 3 session losses & prices for the most-active contract settled at the lowest in just over a week. Losses for gold are mainly due to the strength in the $, as expectations are that the Federal Reserve may adopt even more hawkish monetary policy, The precious metal had given up early price losses to move briefly higher after data showing a sharp slowdown in US economic growth in Jun.
Gold prices end lower; copper tumbles to 16-month lows on recession fears
Oil futures extended their losses into a 2nd session, with US prices booking their lowest finish in more than 6 weeks as recession worries rise. West Texas Intermediate crude for Aug fell $1.92 (1.8%) to settle at $104.27 a barrel following a loss of 3% yesterday. Based on the front month contract, prices ended at their lowest since May 10. Front month Aug Brent crude, the global benchmark, declined by $1.69 (1.5%) at $110.05 a barrel, the lowest since May 18. Crude prices have lost ground since trading at 3-month highs earlier this month, with analysts tying the decline in part to worries that aggressive efforts by the Federal Reserve & other central banks to rein in inflation could sharply slow the economy, undercutting demand. Federal Reserve Chair Jerome Powell, in 2-day testimony, argued that the US economy was robust enough to handle the Fed's tightening efforts, but acknowledged that achieving a soft landing would be a challenge. Data released today backed prospects for a recession, showing businesses suffered a sharp slowdown in Jun. The S&P US manufacturing index slid to a nearly 2-year low of 52.4. The American Petroleum Institute (API) reported that US crude supplies rose by 5.6M barrels last week. The API also reportedly showed a weekly inventory climb of 1.2M barrels for gasoline, while distillate stockpiles fell by nearly 1.7M barrels. API data showed oil stocks at the Cushing, Okla, delivery hub were down by 390K barrels last week.
Oil extends price losses into a second session as recession fears rise
There was no exciting news from Powell today. However there was another indication (see above) of an economic slowdown in the US. The Fed model for the US economy in Q2 has been reduced to zero growth. And there is a general feeling by many consumers that with high inflation, all is not well. In other words, it feels like the economy is in a recession even if it is only a mild one, so far.
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