Dow sank 516, decliners over advancers a massive 9-1 & NAZ tumbled 268. The MLP index declined 5+ to the 184s & the REIT index was off 4+ to the 401s. Junk bond funds dropped in price & Treasuries were heavily sold, raising yields on the 10 year Treasury 9 basis points to 3%. Oil lost 3+, falling to 93, & gold tumbled 29 to 1705.
AMJ (Alerian MLP index tracking fund)
Wholesale prices accelerated again in Jun as inflation seeps throughout every part of the US economy, squeezing businesses & American households in the form of higher prices for most necessities. The Labor Dept said that its producer price index, which measures inflation at the wholesale level before it reaches consumers, climbed 11.3% in Jun from the previous year. On a monthly basis, prices grew by 1.1%. Both of those figures are higher than the 10.7% annual & 0.8% monthly estimates, underscoring just how strong inflationary pressures still are. Core inflation at the wholesale level, which excludes the more volatile measurements of food & energy, increased 0.3% for the month, following a 0.4% increase in Apr & May. Over the past 12 months, core prices climbed 6.4%. Economists lauded the potential slowdown in core inflation increases, suggesting it could be a sign that consumer prices are beginning to moderate. Overall, prices for goods jumped 2.4% last month, the 6th consecutive rise & the biggest contributor to the headline inflation figure. Nearly 90% of the Jun increase in services stems from a 10% leap in prices for final demand energy, including a stunning 18.% increase in gasoline prices. The services index, meanwhile, advanced 0.4% in Jun, with increases in transportation & warehousing services accounting for about 2/3 of the gain. The surge in wholesale prices comes on the heels of a separate Labor Dept report released yesterday that showed the consumer price index rose 9.1% in Jun from a year ago, exceeding market expectations. It marks the fastest pace of inflation since 1981.
The scorching-hot Jun inflation report has increased the likelihood of
the Federal Reserve inadvertently pushing the US economy into a deep
recession as it tries to combat runaway consumer prices, according to
former Treasury Secretary Larry Summers. "I think it is unlikely — very unlikely — that we will see inflation
come down to target range without a significant economic downturn,"
Summers said yesterday. Summers, a Harvard University professor who
served in both the Clinton & Obama administrations, has repeatedly
sounded the alarm over rising inflation & spent much of 2021 arguing
that the Biden team, as well as Fed policymakers, have underestimated
the risk of soaring consumer prices. He reiterated that warning yesterday after the Labor Dept reported that the consumer price
index rose 9.1% in Jun from a year ago. Prices
jumped 1.3% in the one-month period from May. Those figures were both
far higher than the 8.8% headline figure & 1% monthly gain forecast. "We need a quite substantial slowing just to get to normal and back to
capacity," Summers said. "If you want to have inflation come out of the
system, you have to get below capacity, where supply exceeds demand. My
best guess would be that we're not out of this without a significant
interval, 6% unemployment." But Summers said his concern is whether the Fed has the "resolve" to
carry through with taming inflation, even if it means a higher
unemployment rate. In the past, he noted the Fed — even under Chair
Paul Volcker's leadership — made the mistake of pulling back from
tightening policy when it believed that inflation in the 1980s had
started to subside.
Inflation unlikely to fall without 'significant economic downturn'
Atlanta Federal Reserve Bank Pres Raphael Bostic said that "everything is in play" when asked about the prospect of the central bank raising interest rates by a full percentage point later this month, expressing concern over the morning's news that inflation hit a fresh 40-year-high in Jun. Bostic added he still needed to study the "nuts and bolts" of the latest data, but said he felt "today's numbers suggest the trajectory is not moving in a positive way." With inflation running even hotter than economists expected in Jun, traders are now ramping up the odds of a mega-sized, 100-basis point hike in Jul. Prior to the CPI report, traders in the futures market saw a 14% chance of the Fed raising rates by 100 basis points. Following the news showing inflation hit its highest point since 1981, traders saw the likelihood of a full percentage point hike at more than 80%.
Fed's Bostic on July rate hike options: 'Everything is in play'
After today's inflation report, all thoughts are gloomy. The producer price index signals what new consumer prices will be in the coming weeks & months. Now there is talk of a 100 point rate hike at this month's Fed meeting. The Dow has returned to where it was at the start of 2021 when it was on the way up. Ugh!!!
Dow Jones Industrials
No comments:
Post a Comment