Dow went up 145, decliners over advancers 3-2 & NAZ declined 59. The MLP index added 1 to the 206s & the REIT index rose 1 to the 343s. Junk bond funds crawled higher & Treasuries had selling, bringing higher yields (more below). Oil was of 1+ to the 89s & gold inched up 2 to 1677.
AMJ (Alerian MLP index tracking fund)
The IMF slashed its global growth outlook for next year, warning the world economy is headed for "stormy waters" & that there is a growing risk of a painful worldwide recession if major central banks fumble the fight against inflation. The institution said in its latest World Economic Outlook that global GDP will still grow by 3.2% this year, but now anticipates it will slow sharply to just 2.7% in 2023. That is down 0.2 percentage points from its previous estimate & is a marked decline from its estimate of 3.8% at the beginning of the year, highlighting just how much the global economy has weakened in recent months. Inflation could remain elevated for longer than previously expected, according to the IMF, which forecast prices peaking later this year & declining from 8.8% in 2022 to 6.5% in 2023. "The worst is yet to come, and for many people 2023 will feel like a recession," the report added. The IMF expects that about 1/3 of the world economy will enter a technical recession this year & next; a technical recession is defined as at least 2 consecutive qtrs of economic contraction. In total, the lost output thru 2026 will be about an enormous $4T. In the US, economic growth already contracted in the first 2 qtrs of the year, with GDP declining by 1.6% in the winter & 0.6% in the spring. The slowdown comes as the US confronts the hottest inflation in 4 decades, which has drained household savings & an increasingly aggressive Federal Reserve that's determined to wrestle prices under control with higher interest rates. The Fed has even faced calls, including from the UN, to slow its interest rate hike path amid fears that tighter monetary policy could trigger a recession that seeps throughout lower-income countries. But the IMF said that doing too little to fight inflation now will only make the fight more difficult later. It also called on govs to avoid enacting fiscal policies that threaten to exacerbate the inflation crisis.
'Worst is yet to come' for global economy, IMF says
Federal Reserve Vice Chair Lael Brainard reiterated the central bank's
plan to continue tightening monetary policy until there is clear
evidence that inflation has slowed down, warning the US economy will
likely slow further as a result of elevated interest rates. "Monetary
policy will be restrictive for some time to ensure that inflation moves
back to target over time," Brainard said. "It will take time for the
cumulative effect of tighter monetary policy to work through the economy
and to bring inflation down." The Fed has already
raised interest rates 5 times this year as it tries to wrestle
inflation that is still running near a 40-year high back to its 2%
target goal. Brainard, the Fed's #2 & a permanent voting member of the
Federal Open Market Committee, said that
the economy is likely to cool over the next year as rates remain
elevated. "The moderation in demand due to monetary-policy tightening is only partly realized so far," she added. The
economy has already cooled significantly in the US, with GDP, contracting by 1.6% in the winter & 0.6% in the spring. Brainard noted that Americans' savings have also dwindled faster than
the Fed anticipated, suggesting there could be a pullback in spending
soon.
Fed vice chair talks inflation, hotels hit by crime wave
Treasury yields traded higher as investors digested yesterday's market retreat & the previous week's data releases that will guide the Federal Reserve's policymaking. The yield on the benchmark 10-year Treasury note rose 4 basis points, trading at 3.927% & the yield on the 30-year Treasury bond climbed 8 basis points to 3.923%. Yields move inversely to prices & a basis point is equal to 0.01%. The yield on the 2-year Treasury, the part of the curve most sensitive to Fed policy, fell by one basis point to 4.302%. The retreat from US bonds appears to be picking up pace as commercial banks, pension funds & foreign govs step away, & the Fed increases the pace at which it plans to sell treasuries from its balance sheet. UK bonds are also seeing a dramatic slump as the Bank of England's emergency move to purchase more gilts failed to calm markets.
Bond yields higher following market slumps, job data
Dow Jones Industrials
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