Monday, November 7, 2022

Markets push higher ahead of the election

Dow climbed 213, advancers slightly ahead of decliners & NAZ added 10.  The MLP index was up 1+ to the 225s & the REIT index was up 2 to 363.  Junk bond funds rose along with stocks & Treasuries had more selling, taking yields higher (more below).  Oil crawled higher to the 93s & gold gained 5 to 1681 following recent strength.

AMJ (Alerian MLP index tracking fund)


 

 




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The EU has “serious concerns” about the US Inflation Reduction Act, saying it breaches intl trade rules, according to an official document.  The sweeping tax, health & climate bill was approved by US lawmakers in Aug & includes a record $369B in spending on climate & energy policies.  The landmark package comprises tax credits for electric cars made in North America & supports US battery supply chains.  European officials have acknowledged the green ambitions associated with the package, but they are worried about “the way that the financial incentives under the Act are designed,” the document, which will be presented to US officials, says.  The EU listed 9 of the tax credit provisions that it has an issue with.  Speaking in Brussels, the EU's trade chief said: “We have established a taskforce to deal with these issues ... we are currently concentrating on finding a negotiated solution.”  “Hopefully, there is willingness from the U.S. to address the concerns which we are having in the EU side,” Valdis Dombrovski added.  “We are concerned about the consequences due to the Inflation Reduction Act,” Christian Lindner, the German finance minister, told CNBC, saying “our common approach should be that value partners should stay preferred trade partners,” he continued.

EU says it has serious concerns about Biden’s Inflation Reduction Act

Treasury yields were mixed as investors looked ahead to a week filled with Federal Reserve speaker remarks & key economic data releases, including the Oct consumer inflation report.  The policy-sensitive 2-year Treasury  was trading at around 4.69%, having risen by nearly 4 basis points after notching a fresh 15-year high, climbing as high as 4.883%, on Fri.  The yield on the benchmark 10-year Treasury  note was last down 2 basis points to 4.138%.  Yields & prices move in opposite directions.  One basis point is equivalent to 0.01%.  Investors will be scanning Fed speaker remarks & fresh economic data releases for signals about inflation easing & the broader state of the US economy this week.  Thurs the latest consumer inflation report will released.

Treasury yields are mixed to start the week

Subtropical Storm Nicole formed in the Atlantic Ocean today, threatening to bring a prolonged period of hazardous weather to parts of the Bahamas & the southeastern US, but it should still be too far off Fla's coast tomorrow to affect voting on Election Day.  Nicole could be “potentially making landfall in Florida early on Thursday morning as a strong tropical storm,” hurricane specialist Phillippe Papin said.  “We won’t really start to see any significant impacts from Nicole until really Tuesday night to Wednesday, so really it shouldn’t have a huge impact on voting operations tomorrow,” Papin added.  “Unfortunately this is going to be a very large storm, with a very large wind field on the north side. This is going to cause quite substantial surf, potentially dangerous storm surge somewhere along the Florida east coast, and heavy rainfall and probably significant winds over a large area of the eastern Florida peninsula coast,” Papin noted.  The Miami-based National Hurricane Center said in an advisory, “It’s not out of the question for Nicole to reach hurricane strength, especially given how warm the waters are in the vicinity of the Bahamas.”  “It should be stressed, however, that no matter Nicole’s ultimate intensity, the storm’s large size will likely cause significant wind, storm surge, and rainfall impacts over a large portion of the northwestern Bahamas, Florida, and the southeastern coast of the United States during much of the upcoming week.”

Subtropical Storm Nicole threatens Bahamas, Florida coast

Stocks are edging higher in listless trading ahead of the election & inflation data later week.  Meanwhile tech stocks on NAZ continue to be ignored.  The inverted inflation curve yield on the 2 year Treasury remains higher than on the 10 year Treasury continues to nag, sending a signal of a recession around the corner.

Dow Jones Industrials

 






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