Friday, August 12, 2022

Markets extend their rally for a fourth straight winning week

Dow rose 121, advancers over decliners 2-1 & NAZ went up 124  The MLP index was little changed in the 214s & the REIT index added 3+ to the 448s.  Junk bond funds crawled higher & Treasuries were purchased, reducing yields.  Oil was off 2 to the 92s & gold was steady at 1807.

AMJ (Alerian MLP index tracking fund)

 

 

 




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With the House of Representatives set to pass Dems' social spending, tax & climate bill, energy industry officials are ringing alarm bills that it will handicap their industry at the onset of a recession.  "We believe on balance that this bill is going to do more harm than good for America's energy sector, given the increase in taxes and fees that are going to hit many American energy producers," American Exploration & Production Council CEO Anne Bradbury said.  "With the potential that we are in a recession now, we think that it is a bad idea to be raising taxes on American companies, including American energy producers."  But Sen Joe Manchin said the bill will generally help the fossil fuel industry & one energy policy expert says the overall effect of the bill may be more muted, in part due to poorly directed spending.  The House is set to sync up with the Senate today, sending the bill to Pres Biden's desk in what many Dems consider to be their biggest legislative win yet.  Energy industry groups say taxes in the bill are likely to be among the most harmful factors to their bottom lines.  The American Gas Association, along with more than 2 dozen other industry groups, said in a letter to Congress that a $6.5B tax on methane emissions would result in consumers paying about 17% more for natural gas.  The conservative group Americans for Tax Reform also lists multiple other levies on energy it objects to in the bill, including a $12B tax on imported petroleum products & a $1.2B  tax on coal mining.  A coalition of state coal associations wrote to Manchin specifically railing the taxes included in the bill, arguing that would make their tax bills more complex.  Manchin wrote back to them in a pointed letter, pushing back on the characterization of the coal mining levy as a new tax.  That tax has been around since 1985, he wrote & only recently lapsed.

Energy reps sound alarm on Dems' spending bill during recession

Pres Biden's administration refuted claims that a forthcoming visit by Chinese Pres Xi Jinping to Saudi Arabia signals America's waning influence in the Middle East, insisting that the US is “not going anywhere.”  Tim Lenderking, US special envoy for Yemen, said that diplomatic visits by other global powers were to be expected, but said that the US had asserted its commitment to the region following a visit by Biden in Jul.  “The major message that the president brought to the region is that the United States is not going anywhere,” Lenderking said.  Reports emerged today that Xi is to arrive in Saudi Arabia next week for a meeting with Crown Prince Mohammed bin Salman — the Chinese premier’s first official foreign visit since 2020 — as Beijing & Riyadh seek to consolidate ties.  China's foreign ministry yesterday neither confirmed nor denied the reports.  That Xi is expected to be met with all the pomp & fanfare afforded to former Pres Trump during his 2017 visit does little to improve the optics of Biden's visit, which was a low-key affair that critics say achieved little amid strained personal ties between the 2 leaders.  However, Lenderking insisted that the US retains a “vital” presence.  “The United States is a vital partner to not only Saudi Arabia but each of the countries in the region,” he said.  “America can be counted on to remain in the neighborhood as a support for the countries and their security. That is an American priority,” he added.

U.S. is ‘not going anywhere,’ Middle East envoy says, as China’s Xi expected to visit Saudi Arabia

Long-term Treasury yields were slightly lower as market participants sorted thru a busy week of economic data.  The yield on the benchmark 10-year Treasury note dipped more than 3 basis points to 2.853% & the yield on the 30-year Treasury bond also ticked about 3 basis points lower to 3.124%.  Yields move inversely to prices & a basis point is equal to 0.01%.  The shorter-term 2-year Treasury yield rose slightly to basis points to 3.236% after slipping in the previous session.  Today brought more positive news on inflation.  Import prices were down 1.4% in Jul.  The forecast expected a decrease of 1%.  Export prices also fell more than expected.  The preliminary Aug reading for the University of Michigan consumer sentiment index came in higher than expected & the report also showed one-year inflation expectations fall slightly.  However, 3-year inflation expectations ticked up.

10-year Treasury yield tick lower as investors assess economic data

The tax & spending bill looks like it will be approved.  That's something an economy suffering from high inflation does not need.  At the same time the inverted yield curve with a large spread between the yields on the 2 year & 10 Treasuries should be scary for investors.  That's a classic signal for a coming recession.

Dow Jones Industrials

 






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