Markets 2 retreat as the 10 year Treasury note yield climbs towards 3%

Dow dropped 292 (not far from session lows), decliners over advancers a sizable 6-1 & NAZ sank 260.  The MLP index fell 2+ to the 219s & the REIT index pulled back 4+ to the 442s.  Junk bond funds drifted lower & Treasuries saw very heavy selling taking the yield on the 10 year Treasury up to nearly 3%.  Oil was off a tad but held above 90 & gold declined 11 to 1760 (more on both below).

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Historically high inflation continues to affect Americans of all backgrounds including high-income individuals & families who have been driven to Walmart (WMT), food banks & thrift stores as a result of the skyrocketing cost of groceries & goods.  WMT CEO Doug McMillon was asked whether he saw WMT benefiting in terms of greater market share as consumers trade down seeking lower prices to stretch their budgets amid skyrocketing inflation.  "I think we are holding at the lower end and adding at the upper end, generally speaking," McMillon responded, referring to the income levels of customers.  Consumer prices soared 9.1% in Jun compared to the year prior, which notched a new 40-year high for inflation after months of rising costs.  Inflation slowed in Jul, with the consumer price index rising 8.5% last month from a year ago, but prices remain near 40-year highs.  The food insecurity & tightening of family budgets is perhaps nowhere more apparent than at the nation's food banks where industry leaders said that middle class families are becoming a staple in the longest lines that some locations have ever seen.  "They've never had so many people in line," Karen Erren, CEO of Feeding Westchester in Westchester County, New York, said about 2 of the distribution sites her food bank runs in the 2nd-wealthiest county in the state.  Wheeler says that demand at FBNN is up 17% from last year while Erren explained that her food bank was serving 130-150K people per month before the COVID-19 pandemic & is now serving over 200K people each month on average.  Andrew Olsen, pres of Altus Marketing which works with food banks across the country, said that he has heard stories from partners where people who were donors to food banks ended up in line needing food themselves.  Thrift stores in the US are also seeing an influx of consumers looking to save money on clothing they might typically find at department stores as well as school supplies as children head back to school for the fall.

Higher-income earners visit food banks and shop at Walmart as food inflation rises

Inflation is straining school budgets across the country, as districts are forced to pay more for everything from school supplies in the classroom to maintaining the bus fleets picking up kids.  This year could pose another tough year for students, families & school employees.  "It’s not just an inflation issue, it’s a supply chain issue, and a worker issue, that we’re experiencing," Oroville Union High School District Superintendent Corey Willenberg said.  The Oroville Union High School District has more than 2K students & a budget of nearly $40M, according to Willenberg.  The budget is being chewed away at by the rising inflation rates.  Willenberg said the most challenging part of the budget to balance is the food services & generally the district will run over budget in this area.  He says the staff members find ways to make it work.  This year, could pose new issues with higher inflation rates for everything from vegetables, chicken, milk & supply chain shortages.  But it's not just lunchtime that's getting more expensive for schools.  Factor in sporting goods for gym class, which are up 5.2%, musical instruments for band class are up 5.9%, education books & supplies have gone up 3.1% & stationery items, like paper & pencils, have gone up 11%, & balancing this year's budget could be challenging.  Schools are also still struggling to find qualified teachers for vacant positions & certified bus drivers before the school year begins.  Willenberg said finding teachers to come to a rural district is challenging, especially when the pay is competitive with surrounding areas.  "We are all struggling recruiting teachers, even the bigger districts," he explained.

Soaring inflation forces school districts to cut back on supplies and pay more for nearly everything

China issued its first drought emergency this year as scorching temperatures dry up areas of the Yangtze River & put pressure on the power grid while the country battles the record-breaking heatwave.  Authorities issued the national yellow alert late after China’s central & southern provinces endured weeks of extreme heat, with temperatures in dozens of cities surpassing 40 degrees Celsius (104 degrees Fahrenheit).  The heatwave has disrupted crop growth, threatened livestock & prompted some industries to shut down to conserve power for homes.  China's Sichuan province, which has 94M people, ordered all factories this week to shut down for 6 days in effort to ease power shortages in the region.  The shutdowns came after reservoir levels declined & demand for air conditioning spiked amid the heat.  Rainfall in the Yangtze River basin area also declined by roughly 45% compared to the average in recent years, according to data from the Ministry of Water Resources.  As many as 66 rivers across 34 counties in the southwestern region of Chongqing have dried up, according to the state broadcaster CCTV.  Chinese officials this week unveiled measures to reduce the impact of the drought, including cloud seeding to prompt rainfall, $44M in disaster relief for the hardest-hit communities & shutdowns of some energy-intensive sectors.  “It will affect those big energy-intensive industries and it will have [a] knock-on effect throughout the economy and even to the global supply chain,” Dan Wang, the chief economist of Hang Seng Bank China said.

China issues first national drought emergency amid scorching temperatures 

Oil futures climbed, but ended the week with a loss.  Data from the Energy Information Administration (EIA) show robust demand while Russia showed its ability to find new buyers for its oil.  Next week's EIA report will be closely watched to see whether this week's solid demand was just an anomaly or the new norm.  Meanwhile. the Iran nuclear deal seems to be stuck, crushing hopes of additional supplies.  Sep WTI  edged up 27¢ to settle at $90.77 a barrel.  That was the highest front-month finish in a week.  For the week, prices rose 1.4%.

Oil futures end higher for the session, fall for the week

Gold ended at its lowest price in just over 3 weeks, down a 5th straight session to mark its longest losing streak since early Jul, as rising Treasury yields & a resurgent $ undermined support.  Dec gold futures lost $8 (0.5%) to settle at $1762 per ounce with most-active contract at its lowest finish since Jul 28.  Prices marked weekly loss of 2.9%.  Gold's month-long rally hit a wall this week as higher Treasury yields & a rising $ spoiled the party, leaving the yellow metal below the $1800 per ounce level.  Most-active gold futures contract mark their worst weekly percentage decline since the week ended Jul 8.  Gold fell today as the $ continued to see strong support.  The resurgence in the greenback has weighed heavily on the yellow metal, which was already seeing profit-taking after reaching $1800.  The ICE US Doll, a gauge of the $'s strength against a basket of other currencies, was up 0.5% to top 108 for the first time in a month today, while the yield on the 10-year Treasury note climbed 9.7 basis points to 2.975%.

Gold marks longest losing streak

Inflation is pinching the economy hard & continues to be a significant drag on growth.  For the week, Dow finished up a meager 40.

Dow Jones Industrials