Dow dropped 133, decliners over advancers 3-1 & NAZ pulled back 219. The MLP index fell 2+ to the 189s & the REIT index was off 1 to the 406s. Junk bond funds were a little lower & Treasuries had heavy buying, sharply reducing yields. Oil fell 2+ to the 102s & gold slid 3 to 1739.
AMJ (Alerian MLP index tracking fund)
The Federal Reserve minutes from its Jun meeting, showed that another 75-basis point
rate hike could be on the table at its next Federal Open Market
Committee (FOMC) meeting later this month. The
minutes show what the FOMC members spoke about during
their Jun meeting, revealing that they are prepared for another large
rate hike at the Jul meeting. "Many participants judged that a
significant risk now facing the committee was that elevated inflation
could become entrenched if the public began to question the resolve of
the committee," the minutes said. "They recognized the possibility that
an even more restrictive stance could be appropriate if elevated
inflation pressures were to persist." In Jun, the Fed raised rates
by 75 basis points, the highest increase since 1994. The increase was
the 3rd interest rate hike of 2022 & pushed the federal funds target
from 1.5% to 1.75%. Inflation is currently surging at a 40-year high & is showing no signs of slowing. The Consumer Price Index (CPI), a
measure of inflation, rose 8.6% annually in May, according to the latest report from the Bureau of Labor Statistics (BLS). This comes after inflation had eased slightly in Apr, falling to 8.3% annually. On a monthly basis, inflation increased 1% from Apr to May. After the Jun meeting, Federal Reserve Chair Jerome
Powell said another 75 or 50 basis point increase will likely be
warranted as inflation continues to rise. And the Federal Reserve system is likely to continue raising rates after
its Jul meeting due to these inflation expectations, experts project. There could be several rate hikes to come in the year ahead & into
2023.
Another interest rate hike likely this month, Fed minutes show
Treasury yields fell as traders continued to digest strong numbers in the latest jobs report & braced for key inflation figures due out later this week. The 2-year dropped 8 basis points to trade at 3.04% but remained above the 10-year Treasury which fell about 10 basis points to 3.0%. The yield on the 30-year Treasury bond was traded 8 basis points lower at 3.184%. Yields move inversely to prices & a basis point is equal to 0.01%. Investors are looking ahead to key inflation data this week. The Jun consumer price index will be released Wed & is expected to show headline inflation, including food & energy, rising above May’s 8.6% level. Also, the Jun producer price index is due out Thurs & the University of Michigan consumer sentiment report for Jul will be released Fri. On Fri, investors absorbed the Jun employment report that showed jobs growing at a faster clip than expected. Nonfarm payrolls increased 372K last month, according to the BLS. The forecast predicted the US economy would add 250K jobs. Yields jumped Fri after the release with the report likely to keep the Federal Reserve more aggressive with its rate hiking path.
Treasury yields fall as traders brace for key inflation data later this week
Europe is bracing for an extended shutdown of Russian gas supplies as maintenance work begins on the Nord Stream 1 pipeline that brings gas to Germany via the Baltic Sea. Operator Nord Stream AG confirmed the work, which is scheduled to run from Mon thru Jul 21, got underway as planned today. Russian gas flows via the pipeline are expected to drop to zero later in the day. The Nord Stream 1 pipeline is Europe's single biggest piece of gas import infrastructure, carrying around 55B cubic meters of the fuel per year from Russia to Germany. Europe fears the suspension of deliveries could be extended beyond the 10-day timeline, derailing the region's winter supply preparations & exacerbating a gas crisis that has prompted skyrocketing energy bills for households & emergency measures from policymakers. It comes as European govs scramble to fill underground storage with gas supplies to provide households with enough fuel to keep the lights on & homes warm during winter. The EU, which receives roughly 40% of its gas via Russian pipelines, is trying to rapidly reduce its reliance on Russian hydrocarbons in response to Pres Vladimir Putin’s monthslong onslaught in Ukraine. Klaus Mueller, the head of Germany's energy regulator, believes the Kremlin may continue to throttle Europe's energy supplies beyond the scheduled end of the maintenance work. “We cannot rule out the possibility that gas transport will not be resumed afterwards for political reasons,” Mueller said. Analysts agree that the risk of a temporary interruption is high, particularly as Russian gas flows have already dropped by about 60% in recent months.
Europe on high alert as Russia temporarily halts gas flows via major pipeline
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