Dow dropped 246 following its rise this week, decliners over advancers 2-1 & NAZ was off 36. The MLP index fell 4+ to the 197s & the REIT index slid back 1+ to 413. Junk bonds funds were mixed & Treasuries saw heavy buying (more below). Oil fell 3+ to 96 & gold went up 6 to 1706.
AMJ (Alerian MLP index tracking fund)
Initial jobless claims hit their highest level since mid-Nov last week, the latest sign that a historically tight labor market is beginning to slow, according to Labor Dept data. Claims totaled 251K last week, up 7K from the week before & above the 240K estimate. The gain brought filings for unemployment insurance to their highest weekly level since last Nov & provided another indicator that a jobs market on fire in 2021 has begun to cool this year. Continuing claims, which run a week behind the headline number, increased to 1.4M, the highest total since Apr 23.
Jobless claims rise again in another sign that labor market is cooling
The yield on the 10-year Treasury note nudged higher as investors digested the ongoing deluge of corp earnings & continued to assess the outlook for growth & inflation. The yield on the benchmark 10-year Treasury note climbed to 3.04% while the yield on the 30-year Treasury bond rose to 3.183%. Yields move inversely to prices. The yield on the 2-year note retreated to 3.223%, but remained above the 10-year, continuing the inversion of the closely-watched 2-year/10-year yield curve. Yield-curve inversions — when shorter-term gov bonds have higher yields than longer-term ones despite carrying lower risk — are often viewed by markets as signs that a recession is imminent. Markets are attempting to gauge whether the Federal Reserve will hike interest rates by 75 basis points or the more aggressive 100 basis points at its policy meeting next week, as it looks to rein in sky-high inflation. Risk sentiment among investors has remained volatile, but investors have been enjoying a Jul rebound & major stock indices closed out a 3rd consecutive positive trading session yesterday. However, stock futures slipped slightly on a new round of slightly below par earnings.
10-year Treasury yield nudges higher as traders assess growth outlook
The ECB increased interest rates for the first time in 11 years in an attempt to cool rampant inflation in the euro zone. The ECB, the central bank of the 19 nations that share the € currency, surprised markets by pushing its benchmark rate up by 50 basis points, bringing its deposit rate to zero. Traders had expected a smaller hike of 25 basis points. “The Governing Council judged that it is appropriate to take a larger first step on its policy rate normalisation path than signalled at its previous meeting,” the ECB said. The Frankfurt institution had kept rates at historic lows, in negative territory since 2014, as it dealt with the region's sovereign debt crisis & the coronavirus pandemic. The € rose to a session high on news of the more aggressive rate hike, to trade at $1.0257. The yield on the 10-year Italian bond also jumped on the news, extending gains after reacting to the resignation of Prime Minister Mario Draghi earlier today. The ECB also said that this move in interest rates “will support the return of inflation to the Governing Council’s medium-term target by strengthening the anchoring of inflation expectations and by ensuring that demand conditions adjust to deliver its inflation target in the medium term.” The central bank's inflation target is 2%. The ECB had previously signaled it would be increasing rates in Jul & Sep as consumer prices keep surging, but it was unclear whether it would go as far as bringing rates back to zero. The ECB's deposit rate is now 0%, the main refinancing operations rate is 0.5% & the marginal lending facility is at 0.75%.
European Central Bank surprises markets with larger-than-expected rate hike, its first in 11 years
Dow Jones Industrials
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