Dow dropped 147, decliners over advancers about 2-1 & NAZ was off 42. The MLP index fell 1+ to 211 & the REIT index pulled back 5+ to the 358s. Junk bond funds were slightly lower & Treasuries saw more selling, bringing higher yields (more below). Oil rose to the 88s & gold slid back 1 to 1719.
AMJ (Alerian MLP index tracking fund)
Treasury yields rose following several days of wild swings that saw the 10-year top 4% last week & drop below 3.6% at one point this week. The benchmark yield on the 10-year Treasury note was 3 basis points higher at 3.795% & the policy-sensitive 2-year Treasury rose 4 basis points to 4.194%. Yields & prices move in opposite directions & one basis point equals 0.01%. After inflation rose persistently for months without any signs of slowing down, economic data released this week gave some early signs of prices starting to fall again. An unexpected fall in job openings, announced on Tues, led investors to believe the US. labor gap may be starting to close. The growing gap was one of the key drivers of rising inflation as it drove up salaries. ADP payroll data revealed yesterday that private companies added 8K more jobs than anticipated in Sep. More labor market data is expected to be published throughout the week, with weekly initial jobless claims today & Fri seeing the release of unemployment & non-farms payroll numbers for Sep. Investors are looking for indications about Federal Reserve policy, specifically whether the central bank will continue to hike interest rates. Fears about rate hikes dragging the US economy into a recession have been growing.
Treasury yields climb as jitters over inflation and Fed policy linger
The number of Americans filing first-time unemployment benefits rose more than expected last week, a sign the labor market is starting to cool as the Federal Reserve raises interest rates at the fastest pace in decades. Continuing claims, or the number of Americans who are consecutively receiving unemployment aid, continued to inch higher, edging up to 1.4M for the week ended Sep 24. One year ago, nearly 4.2M Americans were receiving unemployment benefits. The weaker-than-expected data comes as the Federal Reserve tries to crush runaway inflation with the most aggressive rate hikes in decades. Policymakers have already approved 5 straight rate increases & have signaled that more hikes are to come as they try to cool the economy & the labor market. Updated projections released in Sep show that Fed officials expect unemployment to climb to 4.4% by the end of next year, up from the current rate of 3.7%. "We think we need to have softer labor market conditions," Powell said. "And if we want to set ourselves up really light the way to another period of a very strong labor market, we have got to get inflation behind us. I wish there were a painless way to do that. There isn't." The data precedes the release of the Sep jobs report tomorrow, which is expected to show that employers hired 250K workers following a gain of 315K in Jul & the unemployment rate is expected to hold steady at 3.7%.
Jobless claims rise more than expected as market starts to cool
The White House angrily pushed back at OPEC+ after the oil producer group announced its largest supply cut since 2020, lashing out at what Pres Biden's administration described as a "shortsighted" decision. Energy analysts believe the deep production cuts could yet backfire for OPEC kingpin & US ally Saudi Arabia, particularly as Biden hinted Congress would soon seek to rein in the Middle East-dominated group's influence over energy prices. OPEC+ agreed yesterday to reduce oil production by 2M barrels per day from Nov. The move is designed to spur a recovery in crude prices, which had fallen to roughly $80 a barrel from more than $120 in early Jun. The US had repeatedly called on the energy alliance, which includes Russia, to pump more to help the global economy and lower fuel prices ahead of midterm elections next month. The White House said Biden was “disappointed by the shortsighted decision by OPEC+ to cut production quotas while the global economy is dealing with the continued negative impact of Putin’s invasion of Ukraine.” It added that Biden had directed the Dept of Energy to release another 10M barrels from the Strategic Petroleum Reserve next month. “In light of today’s action, the Biden Administration will also consult with Congress on additional tools and authorities to reduce OPEC’s control over energy prices,” the White House added.
U.S. delivers angry rebuke of OPEC+ output cut — and it could backfire for Saudi Arabia
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