Dow was off 208, decliners ahead of advancers 5-4 & NAZ slid back 17. The MLP index added 1+ to 190 & the REIT index was off 1 to 406. Junk bond funds inched higher & Treasuries remained in demand bringing lower yields. Oil edged higher into the 96s & gold went up 10 to 1735 (more below).
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The price of oil has tumbled below $100 per barrel as recession fears mount, raising concerns around demand for crude. But Chevron (CVX), a Dow stock & Dividend Aristocrat, CEO Michael Wirth said the downturn could be fleeting. “The tightness in supply hasn’t gone away,” he said. “I think it’s great for the economy that prices have moderated, but I also see the risks remaining skewed towards the upside.” Russia’s invasion of Ukraine at the end of Feb upended global energy markets. West Texas Intermediate crude futures, the US oil benchmark, traded above $130 per barrel in Mar — a price last seen in 2008. The surge boosted gasoline, with the national average for a gallon of regular gas topping $5 in Jun for the first time on record. Rapidly rising fuel costs have been a major factor driving inflation, which is running at the hottest pace in more than 40 years. Wirth said some of the recent weakness in oil is also due to demand destruction from high prices. The demand side of the equation can have a more immediate response, but longer-term supply remains tight. “Now the real challenge for the globe, I think, is to see the investment in supply ... as we come through whatever form of economic slowdown we see what the supplies are to support growth going forward,” he added. Wirth pointed to several factors that could lead to a resurgence in demand, including China reopening fully following a spike in Covid cases. Additionally, global energy markets are being reordered following Western nations slapping sanctions on Russian energy. While oil prices have pulled back, WTI is still up nearly 30% for 2022. The national average for a gallon of gas stood at $4.63 currently which is below record levels but still $1.49 more expensive than this time last year. Biden sent a letter to a number of oil execs in June calling on them to increase refining capacity. CVX responded with a letter of its own, saying the administration has “largely sought to criticize, and at times vilify, our industry.” Wirth said that his company is working with the gov.
Oil’s price decline may be short-lived: Chevron CEO says market remains tight
Social Security beneficiaries will be in line to receive a record high cost-of-living adjustment in 2023 due to inflation. The question is exactly how high it may be. Based on new consumer price index data for Jun released today, The Senior Citizens League, a nonpartisan senior group, now estimates the cost-of-living adjustment will be 10.5% for 2023. A 10.5% COLA would amount to a $175 increase to the average monthly retirement benefit of $1668, according to The Senior Citizens League. In comparison, the group’s estimates from the past 2 months indicated the COLA for next year might be 8.6%. That's as the Consumer Price Index for all Urban Consumers, or CPI-U, climbed 9.1% in Jun over the previous 12 months, the fastest pace since 1981. Meanwhile, the measurement used by the Social Security Administration to calculate the COLA each year — the Consumer Price Index for Urban Wage Earners & Clerical Workers, or CPI-W — shot up 9.8% over the last 12 months.
Social Security cost-of-living adjustment could be 10.5% in 2023, according to a new estimate
The 2-year Treasury yield popped today while its 10-year counterpart fell, pushing the inversion between the2 to its biggest level since 2000. Yield-curve inversions are seen by many traders as signals that a recession lies on the horizon. The 2-year, which is more sensitive to changes in monetary policy, traded 9 basis points higher at around 3.13%. The benchmark 10-year rate, meanwhile, slid nearly 5 basis points to 2.91%. Yields move inversely to prices & a basis point is equal to 0.01%. Those moves came after the gov said after the consumer price index rose 9.1% on a year-over-year basis in Jun. That's well above an estimate of 8.8% & marked the fastest pace for inflation since 1981. It also added to worries of even tighter monetary policy from the Federal Reserve. The data comes as investors assess the possibility of a US economic recession.
Yield curve inversion between 10-year and 2-year rates reaches biggest point since 2000
Oil future ended higher, marking a partial rebound from losses that pulled US & global benchmark crude prices below $100 a barrel, even as US crude supplies climbed for a 2nd week in a row & traders continued to weigh risks to energy demand. West Texas Intermediate (WTI) crude for Aug rose 46¢ (0.5%) to settle at $96.30. Sep Brent crude, the global benchmark, added 8¢ at $99.57 a barrel. Yesterday WTI & Brent crude futures both settled at their lowest since Apr. Fears of recession & the potential for renewed COVID restrictions in China were blamed for a rout that saw WTI slump nearly 8% & Brent down more than 7% yesterday. Analysts said the drop left crude oversold and due for a bounce. Meanwhile, the Intl Energy Agency said today the worst oil-supply crisis in decades is showing tentative signs of easing as flagging economic growth weighs on demand for crude while sanctions on Russia's oil industry are having less impact on production than expected. The based agency cut its demand forecast for 2022 by 240K barrels a day to 99.2M barrels a day in its monthly report. Demand in 2023 will also be 280K barrels a day less than earlier forecasts at 101.3M barrels a day. However, IEA Executive Director Fatih Birol this week warned that the worst of the energy crisis may not be over & that Europe faces a “very, very difficult” winter as it deals with curtailed natural gas supplies from Russia.
Oil prices end higher after selloff sends crude below $100 a barrel
Gold prices shook off losses from the hotter-than-expected US inflation data to finish higher, buoyed by a pullback in the $. The yellow metal had settled higher for a 2nd session yesterday. Gold futures for Aug rose $10 (0.6%) to settle at $1735 an ounce, after dropping to as low as $1704. Before the turn higher, prices based on the most-active contract were on track for the lowest finish since Mar. Just as precious metals analysts had anticipated, gold prices slumped immediately after the US Jun consumer-price index came in hotter than expected, but somewhat unexpectedly gave up those losses to turn higher
Gold prices shake off losses to finish higher after U.S. June inflation number
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