Dow jumped 220, advancers over decliners 3-2 & NAZ went up 192. The MLP index fell 1 to 211 & the REIT index gained 4+ to 436. Junk bond funds crawled higher & Treasuries were sold, raising yields which have been dropping in recent weeks. Oil was off 2 to the 92s & gold dropped 18 to 1771.
AMJ (Alerian MLP index tracking fund)
St Louis Federal Reserve Pres James Bullard said that the central bank will continue raising rates until it sees compelling evidence that inflation is falling. He expects another 1.5 percentage points or so in interest rate increases this year as the Fed continues to battle the highest inflation levels since the early 1980s. “I think we’ll probably have to be higher for longer in order to get the evidence that we need to see that inflation is actually turning around on all dimensions and in a convincing way coming lower, not just a tick lower here and there,” Bullard added. That message of continued rate hikes is consistent with other Fed speakers this week, including regional pres's Loretta Mester of Cleveland, Charles Evans of Chicago & Mary Daly of San Francisco. Each said yesterday that the inflation fight is far from over and more monetary policy tightening will be needed. Both Bullard & Mester are voting members this year on the rate-setting Federal Open Market Committee. The group last week approved a 2nd consecutive 0.75 percentage point increase to the Fed's benchmark borrowing rate. If Bullard has his way, the rate will continue rising to 3.75%-4% by the end of the year. After starting 2022 near zero, the rate has now come up to 2.25%-2.5%. Consumer price inflation is running at a 12-month rate of 9.1%, its highest since 1981. Even throwing out the highs & lows of inflation, as the Dallas Fed does with its “trimmed mean” estimate, inflation is running at 4.3%. “We’re going to have to see convincing evidence across the board, headline and other measures of core inflation, all coming down convincingly before we’ll be able to feel like we’re doing our job,” Bullard said.
Fed’s Bullard sees more interest rate hikes ahead and no U.S. recession
OPEC+ is set to raise oil output by a tiny 100K barrels per day in what analysts described as an insult to Pres Biden after his trip to Saudi Arabia last month to persuade OPEC's leader to pump more to help the US & global economy. The increase, equivalent to 86 seconds of global oil demand, comes after weeks of speculation that Biden's trip to the Middle East & DC's clearance of missile defense systems sales to Riyadh & the UAE will bring in more oil. An OPEC+ document showed the group was set to raise output by 100K bpd from Sep & 2 sources said it has been effectively rubber-stamped by a close-door meeting. OPEC & its allies led by Russia have been previously increasing production by about 430-650K bpd a month although they have struggled to meet full targets as most members have already exhausted their output potential. The US has put OPEC leaders Saudi Arabia & UAE under pressure to pump more oil to help rein in prices boosted by rebounding demand & Moscow’s invasion of Ukraine. US & Western sanctions on Russia have caused prices of all types of energy to soar, resulting in inflation at multi-decade highs & central bank interest rate hikes. Biden traveled to Riyadh last month to mend ties with Saudi Arabia. US inflation hit 40-year highs this year & threatens Biden's approval ratings unless gasoline prices fall. Saudi de-facto ruler, Crown Prince Mohammed bin Salman, whom Western intelligence accused of being behind the Kashoggi murder - which he denies - also traveled to France last month as part of efforts to rebuild ties with the West.
OPEC+ set to approve minuscule oil output rise in rebuff to Biden
A decline in the rate on a 30-year mortgage had a positive effect on several areas of the real estate market in the past week. "The 30-year fixed rate saw the largest weekly decline since 2020, falling 31 basis points to 5.43%," said Joel Kan, MBA's associate VP of economic & industry forecasting. "The drop in rates led to increases in both refinance and purchase applications, but compared to a year ago, activity is still depressed." The mortgage rate fell from 5.74%. That move set off a domino effect with the refinance index rising 2% from the prior week. The seasonally adjusted purchase index increased 1% from the week before. Overall demand for mortgage applications was on the rise, gaining 1.2% in the past week. "Lower mortgage rates, combined with signs of more inventory coming to the market, could lead to a rebound in purchase activity," added Kan. The Federal Reserve raised its benchmark interest rate by 75 basis points last week, in an attempt to rein in rising inflation. The move puts the key benchmark federal funds rate at 2.25% to 2.50%, the highest since the pandemic began 2 years ago.
30-year fixed mortgage rate saw biggest weekly decline since 2020
The stock market is waiting for employment reports this week. Meanwhile the bulls are taking prices higher today. Changes in interest rates need to be watched. Treasury rates have dropped in recent weeks, but are higher today. After oil fell about 20% from highs in the last 2 months, that market continues to be very choppy. Today Nancy left Taiwan but tensions there remain high.
Dow Jones Industrials
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