Dow went up 82, decliners over advancers 2-1 & NAZ was off 3. The MLP index declined 3+ to 191 & the REIT index fell 3+ to the 407s. Junk bond funds drifted lower & Treasuries continued to be purchased. Oil reversed course & slid 2 to the 109s & gold was about even at 1820 (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 vowed that policymakers would not allow inflation to take hold of the US economy over the longer term. “The risk is that because of the multiplicity of shocks you start to transition to a higher inflation regime. Our job is literally to prevent that from happening, and we will prevent that from happening,” he said. “We will not allow a transition from a low-inflation environment into a high-inflation environment.” Speaking to an ECB forum, Powell continued his tough talk on inflation in the US that is currently running at its highest level in more than 40 years. In the near term, the Fed has instituted multiple rate hikes to try to subdue the rapid price increases. But Powell said that it/s also important to arrest inflation expectations over the longer term, so they don't become entrenched and create a self-fulfilling cycle. “There’s a clock running here, where we have inflation running now for more than a year,” he added. “It would be bad risk management to just assume those longer-term inflation expectations would remain anchored indefinitely in the face of persistent high inflation. So we’re not doing that.” The Fed now is charged with bringing down those expectations while not crashing the economy. Powell said he's confident that will happen, though he acknowledged the risks ahead. “We’re strongly committed to using our tools to get inflation to come down. The way to do that is to slow down growth, ideally keeping it positive,” he continued. “Is there a risk that would go too far? Certainly, there’s a risk. I wouldn’t agree that it’s the biggest risk to the economy. The bigger mistake to make ... would be to fail to restore price stability.” Since the Fed started raising rates in Mar, market indicators of inflation expectations have fallen considerably. A measure of the outlook over the next 5 years that compares inflation-indexed gov bonds to standard Treasuries fell from nearly 3.6% in late Mar to 2.73% this week.
Powell vows to prevent inflation from taking hold in the U.S. for the long run
Mortgage rates have eased recently, but overall remain elevated, which has had an impact on parts of the mortgage industry, especially when it comes to refinancing. The Refinance Index increased 2% from the previous week, but is way down from year-ago levels. "The
decline in mortgage rates led to a slight increase in refinancing,
driven by an uptick in conventional loans," said Joel Kan, MBA's
associate VP of economic & industry forecasting. "However,
refinances are still 80 percent lower than a year ago and more than 60
percent below the historical average." Demand for mortgage applications saw an overall increase over the prior week by 0.7%. "Mortgage
rates continue to experience large swings. After increasing 65 basis
points during the past three weeks, the 30-year fixed rate declined 14
basis points last week to 5.84%," added Kan. "Rates are still
significantly higher than they were a year ago, when the 30-year fixed
rate was at 3.2%." "Overall purchase activity has weakened in recent months due to the
quick jump in mortgage rates, high home prices, and growing economic
uncertainty," said Kan. The average size of a purchase loan continues to decline to $413K. The record size of $460K was hit in Mar 2022. The survey covers over 75% of all UD retail residential mortgage applications & has been conducted weekly since 1990.
Mortgage refinancing 80% lower than last year's levels
The Western military organization NATO has officially invited Sweden & Finland to join the alliance in a historic move. The development comes after the alliance reached a deal with Turkey to accept the membership bids from both countries after initial objections from Ankara. The summit — arguably the most important meeting of the alliance in recent months, & perhaps years — has also seen the alliance reiterate its condemnation of Russia’s invasion of Ukraine, pledge to beef up its defenses in Europe, & slam China as posing a “challenge” to its interests. NATO's Secretary-General Jens Stoltenberg announced this week that the Western military organization would increase the number of troops within its rapid response force — which comprises land, air, sea & special forces units that are capable of being deployed quickly — to 300K from about 40K personnel. Russia has issued an initial reaction to the NATO deal that allows its expansion to go ahead, roughly doubling the land border Russia will have to share with NATO members, with one official calling it “a purely destabilizing factor.” The US will work with Turkey on modernizing its F-16 fighter jet fleet on the heels of a brokered deal to allow Finland & Sweden to join the NATO alliance. “The U.S. Department of Defense fully supports Turkey’s modernization plans for its F-16 fleet. These plans are in the works. And, you know, they need to be worked through our contracting processes,” Celeste Wallander, assistant secretary of Defense for intl security affairs, said. “The United States supports Turkey’s modernization of its fighter fleet because that is a contribution to NATO security and therefore American security,” she added. All 30 NATO members must approve a country's bid for it to be accepted into the alliance. Yesterday, NATO Secretary-General Jens Stoltenberg said that the world's most powerful military alliance reached a deal to admit the 2 countries.
Russia calls NATO expansion deal ‘destabilizing’; Ukraine releases footage of deadly mall strike
Gold futures ended lower, with strength in the $ contributing to a fall in prices for the precious metal to their lowest in more than 2 weeks. Gold for Aug fell $3 to settle at $1817 per ounce. That was the lowest most-active contract finish since Jun 14. During a panel discussion at a ECB policy conference today, Fed Chair Jerome Powell said the Fed “will not allow a transition from a low inflation environment into a high inflation environment.” A final reading on Q1 GDP showed the US economy contracted at a slightly faster clip than previously believed. The final reading showed the economy shrunk by 1.6%, compared with the 1.5% contraction reflected in the first revision. That fed fears over a recession, which can provide haven-demand for gold. In Europe, the headline reading on German inflation declined in Jun for the first time since Jan, but inflation data out of Spain showed price pressures accelerating at their fastest pace in decades. According to preliminary data released by German statistics office Destatis, consumer prices rose 7.6% year-over-year, lower than the 8% forecast. In Spain, the annualized inflation rate in Jun topped 10%, the highest since 1985. The ICE US Dollar Index, a measure of the $'s strength against a basket of rivals, edged up by 0.5% at 105.03.
Gold ends lower as strength in the U.S. dollar helps pull prices to a more than 2-week low
Oil futures settled lower, easing back after 3 consecutive session gains, even as a more than 3M-barrel drop in US crude supplies over the past 2 weeks fed concerns over tight global inventories. West Texas Intermediate crude for Aug fell $1.98 (1.8%) to settle at $109.78 a barrel. The front month the global benchmark Aug Brent crude contract shed $1.72 (1.5%) to $116.26 a barrel. The most active Sep Brent crude contract lost $1.35 (1.2%) to end at $112.45 a barrel. Prices had seen an early boost, driven by China's moves to ease COVID restrictions, continued worries about tight supplies & a constrained outlook for production increases, though fears of recession remained, as the Federal Reserve & other major central banks tighten monetary policy aggressively in an effort to rein in inflation. OPEC held a meeting today, ahead of a broader gathering of OPEC members & their allies (OPEC+) tomorrow. OPEC+ is expected to confirm an already agreed supply increase of 648K barrels a day in output for August. The Energy Information Administration released data showing declines in US crude supplies in the past 2 weeks, totaling more than 3M barrels, excluding oil from Strategic Petroleum Reserve.
Oil prices snap 3-day winning streak
Dow Jones Industrials
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