Dow dropped 182, decliners slightly ahead of advancers & NAZ gained 40. The MLP index fell another 4+ to the 187s & the REIT index recovered 2+ to the 389s (its recent decline is shown below). Junk bond funds fluctuated & Treasuries were being purchased, reducing yields (more below). Oil tumbled 5+ to the 112s & gold fell 5 to 1844.
AMJ (Alerian MLP index tracking fund)
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 US 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 that economic growth in the spring was flat at 0%, a steep decline from its previous estimate of 1.3% on Jun 1 & 0.9% on Jun 8. 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 Q1 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 Q2, it could meet the technical criteria for a recession, though the NBER, the official arbiter, may not confirm it immediately.
US economy headed for imminent recession, Fed GDP tracker shows
Federal Reserve Chair Jerome Powell reiterated the central bank's determination to crush the hottest inflation in 40 years, saying that it is imperative for the global financial system for consumer prices to stabilize. "My colleagues and I are acutely focused on returning inflation to our 2% objective," Powell said in introductory remarks to a Fed conference on the role of the $. "The Federal Reserve’s strong commitment to our price-stability mandate contributes to the widespread confidence in the dollar as a store of value." His comments came just 2 days after the Fed voted to raise its benchmark interest rate by 75 basis points for the first time since 1994, underscoring just 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 1.50-1.75%, the highest since the pandemic began 2 years ago. Powell said following the meeting that another 75-basis point or 50-basis point increase is on the table in 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 upgrade from their Mar projections. Powell said the central bank's ability to successfully fulfill its dual mandate of full employment & stable prices ultimately hinges on maintaining financial stability. "The Fed’s commitment to both our dual mandate and financial stability encourages the international community to hold and use dollars," he added.
Powell pledges the Fed is 'acutely focused' on tackling inflation
Treasury yields pulled back as a
volatile week, which saw central banks around the world signaled a more
aggressive effort to curtail soaring inflation, drew to a close. The yield on the benchmark 10-year Treasury note was 9 basis points lower at 3.214%, while the yield on the 30-year Treasury bond also dropped 9 basis points to 3.271%. Yields move inversely to prices. The 2-year yield, which is typically more sensitive to monetary policy changes, was flat at 3.164%. The S&P 500 is on course for sharp weekly losses
as investors flee risk assets amid fears that a starker tightening of
monetary policy may tip the US economy into recession. Some investors
sold stocks & scrambled into bonds yesterday, driving up Treasury
prices & reducing yields. Members of the Federal Open Market Committee reiterated the Fed’s
commitment to stabilizing inflation & indicated that a stronger path
of rate increases lies ahead. Officials also cut their 2022 economic
growth outlook to just 1.7% from 2.8%.
U.S. Treasury yields fall after tumultuous week
Dow Jones Industrials
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