Dow jumped 269 (100 lower than the opening high), advancers over decliners 5-1 & NAZ advanced 254, The MLP index added 1 to the 224s & REIT index recovered 4+ to the 382s. Junk bond funds rose along with stocks & Treasuries saw more buying, lowering yields (more below). Oil was off pennies in the 85s after yesterday's selloff & gold only inched higher following its recent run.
AMJ (Alerian MLP index tracking fund)
Wholesale prices increased less than expected in Oct, adding to hopes that inflation is on the wane, the Bureau of Labor Statistics reported. The produce price index (PPI), a measure of the prices that companies get for finished goods in the marketplace, rose 0.2% for the month, against the estimate for a 0.4% increase. On a year-over-year basis, PPI rose 8% compared to an 8.4% increase in Sep & off the all-time peak of 11.7% hit in Mar. The monthly increase equaled Sep's gain of 0.2%. Excluding food, energy & trade services, the index also rose 0.2% on the month & 5.4% on the year. Excluding just food & energy, the index was flat on the month & up 6.7% on the year. One significant contributor to the slowdown in inflation was a 0.1% decline in the services component of the index. That marked the first outright decline in that measure since Nov 2020. Final demand prices for goods rose 0.6%, the biggest gain since Jun an traceable primarily to the rebound in energy, which saw a 5.7% jump in gasoline. The deceleration came despite a 2.7% increase in energy costs & a 0.5% increase in food. The index is generally considered a good leading indicator for inflation as it gauges pipeline prices that eventually work their way into the marketplace . PPI differs from the more widely followed consumer price index as the former measures the prices that producers receive at the wholesale level while CPI reflects what consumers actually pay.
Wholesale prices rose 0.2% in October, less than expected, as inflation eases
The lame-duck Congress is eyeing hundreds of Bs of $s in new borrowing at the year that would create new inflationary pressures in the US just as prices began to ease in Oct, a federal budget hawk warned. Maya
MacGuineas, pres of the Committee for a Responsible Federal
Budget, said that Congress will come under pressure in the
next few weeks to send the national debt even higher, in the form of
extending tax breaks & possibly some new spending items. Unless
Congress agrees to spending offsets, those programs will require even
higher levels of federal borrowing. "Most members have
acknowledged that our debt is too high, and everybody would acknowledge
that borrowing more contributes to inflation," she said. But she said when presented with the idea of no new borrowing, "they
start thinking about all the things they might want in a year-end deal." New
borrowing would be needed if Congress agrees to extend some tax cuts
beyond their expiration date. For example, companies are currently
allowed to deduct the full cost of business equipment expenses
immediately, but this 100% bonus depreciation rule will start to phase
out in 2023. Other tax breaks have already expired but could be renewed,
such as the ability to immediately deduct research expenses instead of
stretching out that deduction over several years. Extending those breaks would create a revenue shortage that would
have to be made up with new borrowing & the same holds true for
decisions to expand federal spending programs. One of those programs
could be new military aid to Ukraine or a broad increase in spending
authorization across the entire gov when a full-year
appropriations bill comes up. MacGuineas said these sorts of
priorities could amount to hundreds of Bs in new spending that
would only spark more demand & keep inflationary pressures elevated. Her
organization is pushing members of Congress to agree to no new
borrowing for the rest of the year & then taking a serious stand
against any further expansion of the $31M national debt. But the
temptation among Reps & Dems to approve these programs is
so great that they might pass regardless of the inflationary damage
they might do.
Congress eyes billions in year-end spending while inflation risks loom
Treasury yields fell as markets after Oct's producaer price index figures came in less than expected, further confirming to investors that inflation may be easing. The yield on the benchmark 10-year Treasury note fell about 6 basis points to 3.801%, its lowest level since the beginning of Oct. The 2-year Treasury yield was last about 4 basis points lower at 4.363%. Yields & prices have an inverted relationship. One basis point is equivalent to 0.01%. Today's inflation data further indicated to investors that inflation is likely cooling after solid consumer inflation figures last week hinted at that. The PPI reflects wholesale inflation by measuring how prices paid to producers for goods & services develop. Fed Governor Christopher Waller suggested yesterday that last week's data was only part of the bigger picture & other data points would have to be considered before drawing any conclusions. He also indicated that the Fed would consider slowing rate hikes, but a pause to them is not imminent. Federal Reserve Vice Chair Lael Brainard also hinted at a potential slowdown of rate hikes in remarks yesterday.
Treasury yields slip after wholesale prices report comes in less than expected
Dow Jones Industrials
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