Dow went up 85, advancers over decliners 4-3 & NAZ lost 50. The MLP index gained 4+ to the 201s & the REIT index added 1+ to the 421s. Junk bond funds traded higher & Treasuries were sold (more below). Oil was fractionally higher to the 95s & gold fell 12 to 1714.
AMJ (Alerian MLP index tracking fund)
A National Association of Business Economics (NABE) survey for Jul 2022 shows the US economy is slowly moving but is struggling to gain traction as the coronavirus pandemic teases a resurgence. While nearly ½ of the respondents reported rising sales for Q2, the figure is a 14-point drop from those who reported rising sales in Apr. "The results of the July 2022 NABE Business Conditions Survey show indications of a slowing U.S. economy," said NABE VP Julia Coronado. "A majority of surveyed firms still reports rising sales, but that share declined sharply from last quarter." The Net Rising Index (NRI) for sales, or the difference between those who reported rising sales vs declining sales fell 22 points, to just 30%, the lowest level since Jul 2020. The NABE survey also found hiring in the US continues to climb as 38% of businesses reported rising employment at their firms, reaching a 4-year high. But, optimism for the future declined as just 24% of businesses expect to continue rising employment figures. US firms are gaining profits & have resumed employment hiring but the cost of doing business is also increasing, narrowing profit margins. The NRI for material costs — business owners who report rising costs vs declining costs — rose to 76%, or the highest-ever recorded figure since the NABE first asked the question in 1994. The survey also found a decline in profit margins for businesses — 22% from 26% last qtr — as a fluctuating labor market & continued supply chain issues have increased production costs. Business firms are also constrained in how they spend their profits, the report found. The NRI for capital spending fell to just 22%, from 40% last qtr & the NRI for equipment, information & communications technology spending fell to 38%, from 47% last qtr.
Businesses are spending more to stay afloat while economic optimism drops: Q2 NABE survey
Treasury yields rose as investors geared up for a big week of corp earnings & a key policy decision from the Federal Reserve. The yield on the benchmark 10-year Treasury note rose 4 basis points to 2.823% while the yield on the 30-year Treasury bond was up 6 basis points at 3.058%. Yields move inversely to prices & a basis point is equal to 0.01%. The yield on the 2-year note was up 2 basis points at 3.016%, maintaining the inversion of the closely watched 2-year/10-year yield curve that markets often interpret as a signal of an impending recession. Much of this week's focus will center on the Federal Reserve's 2-day policy meeting, concluding on Wed, with economists broadly expecting a 75 basis point hike to interest rates. The Fed is attempting to reel in inflation while navigating a backdrop of slowing growth, as evidenced by a slew of weaker-than-expected data on business activity & jobs published last week.
U.S. Treasury yields nudge higher ahead of Fed meeting; recession risk in focus
Despite admitting in May she'd been wrong about the path inflation
would take, Treasury Secretary Janet Yellen said she expected the
Federal Reserve's policies to be "successful." "The
Fed is charged with putting in place policies that will bring inflation
down. And I expect them to be successful," Yellen added after downplaying recession fears. The Biden administration, including Yellen, previously dismissed concerns about rising costs & said the contributing factors were "transitory." "We
have in recent months seen some inflation we — at least on a
year-over-year basis — will continue, I believe through the rest of the
year, to see higher inflation rates, maybe around 3 percent," Treasury
Secretary Janet Yellen said about in inflation in early Jun 2021. "But I
personally believe that this represents transitory factors." Since then, the US has experienced 13 straight months of high
inflation. In Jun, inflation surged to 9.1%, marking the fastest pace
of inflation in more than 40 years. Yellen admitted earlier this
year that her predictions about the path inflation would take had been
wrong. Federal Reserve Chair Powell has additionally delivered
several mea culpas over his wrong inflation call. On Fri,
Powell reiterated the Fed's determination to crush record-high
inflation, saying that it is imperative for the global financial system
for consumer prices to stabilize.
Yellen's new inflation prediction after wrongly calling it 'transitory'
There are many doubts about what the administration has to say about the strength of the economy. Big reports this week will come from the Fed, consumer confidence and GDP data, in addition to earnings reports which could be the weaker ones. Keep your fingers crossed.
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