Dow sank 463, decliners over advancers a massive 10-1 & NAZ dropped 214. The MLP index declined 11+ to 198 & the REIT index dropped 5+ to 374. Junk bond funds continued to be sold & Treasuries saw a little selling, taking yields higher (more below). Oil plunged 5+ to the 78s & gold tumbled 30 to 1651.
AMJ (Alerian MLP index tracking fund)
Yields climbed & the yield on the 2-year Treasury note notched a new 15-year high as markets assessed the Federal Reserve's latest rate hike & what it means for the economy going forward. The policy-sensitive 2-year Treasury hit a fresh 15-year record of 4.266% earlier in the session but was last trading off that high at 4.18%. Meanwhile, the yield on the 10-year hit an 11-year high of 3.829% earlier in the session but last traded flat at 3.713%. Yields & prices move in opposite directions, with one basis point equaling 0.01%. The climb in yields came as markets weighed the implications of the Federal Reserve's latest policy decisions as it signals its willingness to accept a recession ahead if it stops surging inflation. The Fed on Wed delivered another large 75 basis point interest rate hike & indicated it intends to stay aggressive, bumping up interest rates to 4.6% in 2023 & 4.4% by the end of 2022. Global central banks took a note from the Fed's playbook, implementing their own substantial hikes in the wake of the decision.
2-year Treasury tops 4.2%, a 15-year high as Fed continues to jolt short-term rates higher
The embattled £ fell more than 2% against the $, after the new UK gov announced a radical economic plan in a bid to boost growth. Sterling dipped as low as $1.1029, a couple of hours after the measures were unveiled in the House of Commons. Later it was trading around $1.1070. The £ has been on a precipitous fall against the greenback this year, hitting levels this month not seen since 1985. Today's measures were billed by the gov as heralding a new era for the UK focused on growth & included a mix of tax cuts & investment incentives for businesses. Investors also ditched UK bonds amid a rise in expected gov debt. Paul Johnson, director of the Institute for Fiscal Studies, said markets appeared “spooked” by the scale of the “fiscal giveaway,” & said it represented the highest level of tax cuts in ½ a century. Yields on 2-year UK gov bonds hit their highest level since 2007 & 10-year yields reached the highest level since 2010. Yields move inversely to prices. The 10-year yield was set for its biggest daily rise since 1998 after it had risen 26 basis points to 3.759%. UK equity markets also fell, with the FTSE 100 hitting its lowest level since Mar. It comes after the Bank of England said yesterday that the UK economy was likely already in a recession as it raised interest rates by 50 basis points.
British pound plunges, bonds sink after government announces tax cuts
As the Federal Reserve hikes interest rates to the highest level
since the 2008 financial crisis, the White House is trying to navigate a
way to combat inflation without sending the country into a full-scale
recession. "I believe there is a path through this," Treasury Secretary Janet Yellen said. "I think of a full-scale recession as a
period when there's excessive unemployment. You don't have a strong
labor market. We have one of the tightest labor markets right now." Yellen predicts that inflation will finally be under control next year. "There
are risks. The Russian invasion of Ukraine hasn’t come to an end. We
are seeing Putin weaponize oil and gas," Yellen said. "We will remain
vulnerable to supply shocks." Yellen is keeping an eye on where Russian’s oil reserves will be
distributed in the global market as the US tries to solidify its
energy capacities. "Russia is now seeking very actively to find
places to sell their oil. They're giving enormous discounts to China and
to India, who were two big purchasers," she added.
Treasury secretary claims economic recovery hinges on 3 key factors
Stocks have no friends. Financial firms are cutting growth models for GDP & popular stock indices. WTI is back to where it was at the start of 2200 on worries about reduced economic growth in the US & globally. Powell said high rates will bring pain. He is right & nervous investors are selling stocks.
Dow Jones Industrials
No comments:
Post a Comment