Dow dropped 211 (session lows with heavy selling in the last hour of trading), decliners over advancers about 2-1 & NAZ was off 127. The MLP index swat even in the 225s & the REIT index retreated a big 9+ to the 378s on worries about higher interest rates . Junk bond funds saw selling & Treasuries continued to be sold, bringing higher yields. Oil sank 3+ to the 85s & gold finished higher by 6 to 1775 (more on both below).
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Federal Reserve Vice Chair Lael Brainard indicated that the central bank could soon slow the pace of its interest rate increases. With markets expecting a likely step down in Dec from the Fed's rapid pace of rate increases this year, Brainard confirmed that a slowdown if not a stop is looming. “I think it will probably be appropriate soon to move to a slower pace of rate increases,” she said. That doesn't mean the Fed will stop raising rates, but it at least will come off a pace that has seen 4 consecutive 0.75 percentage point increases, an unprecedented pattern since the central bank started using short-term rates to set monetary policy in 1990. “I think what’s really important to emphasize is we’ve done a lot but we have additional work to do both on raising rates and sustaining restraint to bring inflation down to 2% over time,” Brainard said. “We have raised rates very rapidly ... and we’ve been reducing the balance sheet, and you can see that in financial conditions, you can see that in inflation expectations, which are quite well-anchored,” she said.
Fed Vice Chair Brainard says it may ‘soon’ be appropriate to move to slower pace of rate hikes
Markets overreacted to the news that inflation slightly waned in the US in Oct, according to Federal Reserve governor Christopher Waller said. Data showed just 0.3% growth in inflation from Sep-Oct, the smallest monthly bump all year, but Waller cautioned that Americans shouldn't read too much into it, according to a published report. Inflation has been the top issue on Americans' minds throughout 2022, with polls showing voters cared more about it than anything else in the midterm elections. "The market seems to have gotten way out in front on this," Waller said. "Everybody should just take a deep breath—calm down. We have a ways to go yet." The drop only manifested in the Labor Dept's report on "core prices," which does not include food & energy costs. The Consumer Price Index, however, did show a 0.4% increase in inflation compared to Sep.
Fed official throws cold water on report of declining inflation
Americans are bracing for higher inflation
in the short, medium & longer terms, a monthly survey shows. However,
they see the rate of price increases moderating over time. The latest read on consumer inflation expectations by the Federal Reserve of New York shows: Americans are bracing for higher inflation
in the short, medium & longer terms, a monthly survey shows. However,
they see the rate of price increases moderating over time. The latest read on consumer inflation expectations by the Federal Reserve of New York shows:
- 1-year inflation expectations increased by 0.5 percentage points to 5.9%
- 2-year inflation expectations went up by 0.2 percentage points to 3.1%
- 5-year inflation expectations rose by 0.2 percentage points to 2.4%
The deterioration in the expected path of inflation last month may create new challenges for the Federal Reserve, which is now engaged in a very aggressive campaign of rate rises aimed at lowering price pressures from their highest readings in 40 years back to the official 2% target. Central bank officials contend that where the public sees inflation in the future has a strong influence on current inflation readings. The relative stability of expected levels of inflation, mainly over longer horizons, has given central bank officials confidence that the public retains faith in the Fed to get inflation down over time. The Oct survey further showed expectations for home price growth were unchanged, while Americans think gas prices will increase sharply. The median expected change in gas prices rose by 4.3 percentage points to 4.8% — the largest one-month increase on record. The average price for gas is $3.77 per gallon, down from $3.80 last week, but up 36¢ from a year ago. Anxiety over unemployment reached the highest level since Apr 2020. Mean unemployment expectations — or the mean probability that the US unemployment rate will be higher one year from now — increased to 42.9%, the highest reading since Apr 2020. Household income growth expectations increased to a new series high, while households' expectations about credit access one year from now worsened. The median expected growth in household income increased to 4.3%, a series high, from 3.5% in Sep. The increase was most pronounced for those over the age of 60 & those with annual household incomes under $50K. Median household spending growth expectations increased to 7.0% from 6.0%. The increase was broad-based but most pronounced for respondents with no more than a high school education.
Americans see higher inflation ahead, survey shows
Gold futures climbed to hold ground at their highest finish since Aug. Judging by the action in gold, traders are increasingly expressing their domestic doubts about the American economy by betting on bullion. Last week's break of gold’s 2022 downtrend, plus the surge back thru what had been failed support around $1680, makes the technical picture look very supportive for the precious metal. Gold for Dec rose $7 (0.4%) to settle at $1776 an ounce, the highest most-active contract finish since Aug 16.
Gold prices settle at highest since mid-August
Oil futures declined, with US prices losing more than 3% to erase Fri's gain & then some. Losses followed a modest reduction in the Organization of the Petroleum Exporting Countries' 2022 global demand forecast, as uncertainty continues to surround China's COVID-19 policy & its outlook for energy demand. Still, with China looking to ease COVID restrictions & the potential price cap possibly Russia taking oil barrels off markets, there is risk to the upside in energy markets. US benchmark West Texas Intermediate crude for Dec fell $3.09 (3.5%) to settle at $85.87 a barrel after posting a gain of 2.9% on Fri.
Oil futures settle lower, with U.S. prices down more than 3%
After a sluggish start buyers bid prices higher in the midday period. Hopes were raised for smaller rate hikes. But the enthusiasm did not last. The articles above have thoughts about inflation & future rate hikes. Weakness in the REIT index above came from negative thoughts about the future of interest rates
Dow Jones Industrials
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