Dow fell 137, decliners over advancers 2-1 & NAZ sank 225. The MLP index was off 2+ to the 197s & the REIT index was flattish in the 418s. Junk bond funds fluctuated & Treasuries saw massive buying, dragging yields much lower. Oil slipped back 1+ to the high 94s & gold recovered 8 to 1722 (more on both below).
AMJ (Alerian MLP Index tracking fund)
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The Biden administration is trying to get ahead of another potentially brutal economic report that comes out next week, which is expected to show the US economy shrank again in the spring — potentially signaling a recession. The Commerce Dept is set to release the highly anticipated 2nd-qtr GDP reading Thurs, which is expected to show that growth fell 1.6% in the period from Mar-May. The GDP, the broadest measure of goods & services produced in the US, already shrank in the 1st qtr by 1.6%, marking the worst performance since the spring of 2020, when the economy was still deep in the throes of the COVID-induced recession. Recessions are technically defined by 2 consecutive qtrs of negative economic growth & are characterized by high unemployment, low or negative GDP growth, falling income & slowing retail sales, according to the National Bureau of Economic Research (NBER), which tracks downturns. Should the economy decline in the 2nd qtr, it could meet the technical criteria for a recession, which requires a "significant decline in economic activity that is spread across the economy and that lasts more than a few months." Still, the NBER — the semi-official arbiter — may not confirm it immediately. The White House is now seeking to redefine what constitutes a recession before the data release, which is likely to show two consecutive periods of shrinkage. In a new blog post, White House Council of Economic Advisers chair Cecilia Rouse & member Jared Bernstein argued the economy is nowhere near a downturn as defined by the NBER. "While some maintain that two consecutive quarters of falling real GDP constitute a recession, that is neither the official definition nor the way economists evaluate the state of the business cycle," they wrote, noting that a "holistic" approach takes into account the labor market, consumer & business spending, industrial production & incomes. "Based on these data, it is unlikely that the decline in GDP in the first quarter of this year — ev There are growing fears that the Federal Reserve will trigger a downturn as it raises interest rates at the fastest pace in three decades as it races to catch up with runaway inflation.en if followed by another GDP decline in the second quarter — indicates a recession." Although Powell has said the central bank is not trying to induce a recession, he has not ruled out the possibility of a downturn & has admitted the odds of a successful "soft landing" are getting narrower. "There’s a path for us to get there," Powell said, referring to a soft landing. "It’s not getting easier. It’s getting more challenging."
Biden admin on the defensive as dismal economic report looms
China's economic rebound may face a greater uphill
battle than Beijing would otherwise like the world to believe thanks to
pressure within the real estate sector & "frustrations" in the banking industry. "China's
economy has been slowing for quite some time," Craig Singleton, a
fellow at the nonpartisan Foundation for Defense of Democracies, said. "What we're witnessing now is a rapid economic
slowdown." Economists can't seem to make heads or tails of China's current economic situation:
GDP data indicated a sharp slowdown in Q2, but just weeks ago the Hang
Seng hit a 3-month high in what some hailed as signs of
recovery. China's economic rebound may face a greater uphill
battle than Beijing would otherwise like the world to believe thanks to
pressure within the real estate sector & "frustrations" in the banking industry. "One of them happens to be … China's hyper leveraged property market
by some conservative estimates," he explained. "China's property sector
makes up 30% of Chinese GDP, so even small deviations in that market can
have outsized impact on China's broader global domestic product and its
broader growth." Homebuyers across China have threatened to stop making mortgage payments, blaming "stalled" building work, which has added a serious wrinkle against any recovery Beijing has recorded. "We've seen a number of very large defaults of some of the largest
Chinese property construction companies," Singleton added. "We've seen an
increasing amount of frustration from Chinese citizens who have sunk
their life savings into China's real estate market, primarily viewing it
as an investment vehicle or a safe investment, and now many of them are
left unable to move into their homes." The China Banking &
Insurance Regulatory Commission (CBIRC) insisted that the banks should
meet "reasonable" developer financing needs and that "all the
difficulties and problems will be properly solved," was reported. Data for the property sector showed a 7% shrink in the 2nd qtr
compared to the previous year.
China 'in distress': economy suffering 'rapid' slowdown as 'systemic' problems surface
Russia & Ukraine signed a UN-backed deal to resume exports of Ukrainian grain through the Black Sea. The agreement, which will be implemented in the next few weeks, was signed in the Turkish city of Istanbul & was brokered by the gov in Ankara. Ms of tons of wheat have been stuck in the war-torn nation. Grain exporters in Ukrainian port cities like Odessa have been unable to ship their goods due to the conflict, fueling a global shortage of the commodity and pushing up food prices. Ukraine is one of the world's biggest wheat exporters & Russian forces have been blocking the Black Sea, where the grain silos at key Ukrainian ports are located. The deal is significant for global food supplies, but also as its the first major agreement between the 2 sides since Moscow launched it’s unprovoked onslaught on Feb 24. Intl onlookers are cautious on the deal & Russia will be closely watched to make sure it upholds its side of the agreement. Moscow, which blames Ukraine for laying the mines, is also expected to restart its own grain exports in the Black Sea under the agreement.
Russia and Ukraine sign UN-backed deal to resume grain exports via the Black Sea
Gold extended its gains to a 2nd session, posting its first weekly gain in 6 weeks, as the yellow metal rebounded from its recent tumble to its lowest level since early 2021. Gold for Aug gained $14 (0.8%) to settle at $1727 an ounce. Prices based on the most-active contract settled at their highest since Jul & climbed 1.4% for the week, following 5 consecutive weeks of losses. Despite modest intraday recoveries that have led some to call a medium-term bottom, conditions from gold remain far from bullish. Gold should continue to move inversely to the $ but traders may sell on rallies or expectations of persistent $ strength. The ICE US Dollar index was down 0.3% today. The € was up over 1% against the $ this week, with the shared currency set to snap 3 weeks of losses against the $. This week, a decline in Treasury yields helped to boost gold. Higher Treasury yields have helped undermine the price of gold this year by making bonds a comparatively more attractive investment thanks to the greater return. The yield on the 10-year Treasury has fallen more than 20 basis points since the start of yesterday's trading session & was down more than 12 points today at 2.787%.
Gold futures snap 5-week losing streak as prices settle higher for second day
Oil futures ended lower, with US prices holding below $100 a barrel & the front-month contract posting a modest rise for the week. Demand destruction is finally happening with Energy Information Administration numbers showing gasoline demand getting softer. Still, energy prices should be extremely volatile & may regain $100 in the short term. Sep West Texas Intermediate crude fell $1.65 (1.7% to settle at $94.70 a barrel. That was 2.9% below the week-ago settlement of $97.59 for the Aug contract, which was the front month. The Sep contract, which became the front month at the end of Wed's trading session, ended the week a smidgen higher on the week.
Oil ends lower, with U.S. prices holding below $100 a barrel
Dow Jones Industrials
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