Dow retreated 160, decliners over advancers better than 3-1 & NAZ was off 45. The MLP index fell 1+ to the 225s & the REIT index slid back 1+ to the 429s following yesterday's big decline. Junk bond funds did little & Treasuries had more selling, raising yields. Oil was off fractionally to the 121s & gold dropped 11 to 1844.
AMJ (Alerian MLP index tracking fund)
World Bank President David Malpass warned that "many countries will have a hard time avoiding a recession," while
noting that countries like the US "could increase [energy] supply
substantially" which "would affect prices immediately." "It’s
not a global recession yet, the downside risk is that it could be a
global recession," Malpass warned. "One
of the key variables is whether supply comes back online to add growth
and slow the inflation rate," he added. "This is the sharpest slowdown in 80 years," Malpass remarked, noting that the recent economic downturn is "really hitting the poorer countries hard." Malpass responded that "it’s global" but noted it "particularly hits the developing countries." "The
reason that this is a prolonged risk for the world is that we’re coming
off of a very exceptionally low period of interest rates," he said. "Last year I called it uncharted territory on both fiscal policy, which
was massively expansionary, and the monetary policy." Fiscal policy includes gov spending by elected officials, including Pres Biden's $1.9T stimulus bill
in Mar 2021. Monetary policy refers to the policies of the Federal
Reserve, which include setting interest rates, purchasing stocks &
increasing the money supply. Malpass noted that "energy is at the core of a lot of the supply"
chain & that "it’s what makes fertilizer, it's makes electricity." He
continued, "As Russia is excluded from this, it means there is a big
shortfall of energy and it's not being made up for in new supply." "It’s imperative that there be more supply in the world, especially of energy," he said.
World Bank president warns of ‘global recession’ risk
Initial jobless claims spiked to their highest level since mid-Jan last week despite signs of an otherwise strong employment picture, the Labor Dept reported. First-time filings for last week totaled 229K, an increase of 27K from the upwardly revised last week & well ahead of the 210K estimate. The period covered includes the Memorial Day holiday; seasonal adjustments normally would lead to a higher number. The last time initial claims were that high was Jan 15. However, continuing claims, which run a week behind the headline number, were unchanged at just over 1.3M, below the estimate of 1.35M. The 4-week moving average for continuing claims, which accounts for volatility in the numbers, declined slightly to 1.3M, the lowest level since 1970. The rise in claims comes less than a week after the Bureau of Labor Statistics reported that nonfarm payrolls increased by 390K in May<, considerably better than expected.
Weekly jobless claims hit 229,000, the highest level since January
The ECB confirmed its intention to hike interest rates at the policy meeting next month & downgraded its growth forecasts. Following the latest monetary policy meeting, the Governing Council announced it intends to raise key interest rates by 25 basis points at the Jul meeting. The ECB expects a further hike at the Sep meeting, but said the scale of that increment would depend on the evolving trajectory of the medium-term inflation outlook. For now, the interest rates on the main refinancing operations, marginal lending facility & deposit facility remain unchanged at 0.00%, 0.25% & -0.50%, respectively. “Beyond September, based on its current assessment, the Governing Council anticipates that a gradual but sustained path of further increases in interest rates will be appropriate,” the ECB said. “In line with the Governing Council’s commitment to its 2% medium-term target, the pace at which the Governing Council adjusts its monetary policy will depend on the incoming data and how it assesses inflation to develop in the medium term.” Annual consumer price inflation across the 19-member euro area hit a fresh record high of 8.1% in May, but the ECB in its previous guidance indicated that a first rate hike would only come following the formal end of its net asset purchases on Jul 1.
European Central Bank confirms July rate hike plans, raises inflation projections significantly
More economic revisions & all are on the negative side. Jobless claims continue at low levels, although recent upticks do not send favorable signals. Tomorrow's consumer price index will get a lot of attention & probably remain dreary.
Dow Jones Industrials
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