Dow jumped 618, advancers over decliners 4-1 & NAZ gained 149. The MLP index rose 2+ to 191 & the REIT index recovered 7 to the 408s. Junk bond funds crawled higher & Treasuries saw more buying reducing Treasury yields (more below). Oil rebounded 2+ to the 98s & gold continued weak, falling another 4 to 1701.
AMJ (Alerian MLP index tracking fund)
Americans ramped up their spending at retail stores in June, a sign
that consumers are still opening their wallets even as inflation
persists at a 40-year high. Retail sales, a measure of how much consumers spent on a number of everyday goods,
including cars, food & gasoline, rose 1% in Jun from the prior month,
the Commerce Dept said. The forecast expected sales to rise 0.8%. It marked a major uptick the decline of
0.1% in May, which was upwardly revised from the initial report of a
0.3% decline. The Jun advance is not adjusted for inflation,
meaning that consumers may be spending the same but getting less bang
for their buck. When taking inflation into consideration, retail sales
would likely show a modest but steady decline in recent months. A
burst in spending at gas stations helped to propel retail sales higher. Gasoline sales climbed 3.6% in Jun as prices at the pump notched a
record-high in mid-Jun, with the average gallon of gas briefly topping
$5. Prices have since subsided, hovering around $4.57. The data comes as consumers face the worst inflation spike since 1981.
The gov reported earlier this week that the consumer price index
climbed 9.1% in Jun, much higher than expected. The reading
underscored how sticky & persistent inflationary pressures in the
economy still are – & raised concerns that higher prices are
broadening throughout the economy. The price spike has dampened Americans' confidence in the economy, with
consumer sentiment sinking in early Jun to the lowest level on record.
June retail sales climb more than expected as Americans confront searing-hot inflation
Global interest rates will likely keep rising until 2023 when heated prices will begin to cool in response to the actions from central banks, according to Kristalina Georgieva, managing director of the IMF. Commodity prices, such as oil, may have leveled out & started sliding in recent months, but Georgieva said that they will do so in response to recession risks & not necessarily because inflation has been tamed. “Central banks are stepping up to control inflation, it’s a priority. They have to to keep going until it’s clear that inflation expectations remain firmly anchored,” Georgieva added. “At the moment we still see inflation going up; we have to throw some cold water on it.” Pandemic-led disruptions to supply chains have created bottlenecks while the war in Ukraine has exacerbated these shocks. The result has been a surge in prices of goods including key staples like food, fertilizer & energy. While food price inflation was already in motion before the pandemic & war, the 2 events have only added to the issue. Global food prices reached an all-time high between Mar & Apr this year. Oil prices have leveled out & starting sliding, falling from a high of $120 a barrel in early Jun to under $100 a barrel this week. Yet, consumer inflation in the US registered a 40-year high of 9.1% last month, a condition described by Treasury Secretary Janet Yellen at the G-20 as “unacceptably high”.
Inflation will likely be tamed next year when rate hikes start to work, IMF chief says
A key Treasury yield curve inversion narrowed today, after hitting its steepest level since 2000 the previous day. Yield-curve inversions, or when shorter-term gov bonds have higher yields than longer-term ones, are often viewed by markets as signs that a recession is coming. But the gap between the 2-year & 10-year yields shrunk today as traders weighed the possibility that the Federal Reserve will hike interest rates by 75 basis points at its next meeting, not 100 basis points. The 2-year yield, which is more sensitive to changes in monetary policy, last traded more than 1 basis point lower to 3.13% & the yield on the benchmark 10-year Treasury note fell 1 basis points to 2.948%. Yields move inversely to prices & a basis point is equal to 0.01%. Federal Reserve Governor Christopher Waller said yesterday that he supports a 75 basis point hike at the central bank's next meeting, slated for Jul 26-27. However, he added that he will be watching the data & is open to a larger move if he believes it is needed. It comes after a growing number of analysts were saying a 100-basis-point hike could be on the table, after inflation continued to rise more than expected.
Bond yields slip, key yield curve inversion narrows as investors consider the Fed’s next move
Dow Jones Industrials
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