Markets soared after Powell signals smaller rate hikes ahead

Dow surged 736 (session high), advancera over decliners 5-1 & NAZ advanced 484.  The MLP index was 2+ higher, taking it to the 228s, & the REIT index went up 7+ to the 391s.  Junk bond funds rose along with the stock market & Treasuries saw purchasing.  Oil was up 2+ to go over 80 & gold added 13 to 1777 (more below).

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The House of Representatives passed legislation to avert a national railroad strike, but questions remain about whether the effort can clear the 50-50 Senate.  By an 290-137 vote, House lawmakers voted to pass legislation blocking nearly 100K railroad workers from striking in early Dec.  Economists & the White House have warned that a railroad strike could paralyze the nation's economy ahead of the holiday season.  "We must act to prevent a catastrophic strike that would touch the lives of nearly every family," House Speaker Nancy Pelosi said.  The legislation gives unionized train engineers & conductors 3 unpaid sick days a year for medical appointments, provided employers are given at least 30 days' notice about the time off.  It's based on an agreement that railroad companies & transportation unions agreed to in Sep.  While 8 unions have already adopted the agreement, 4 have not.  The standoff between the holdout unions & railroad companies has failed to resolve itself even as White House officials have become increasingly involved.  Pres Biden said the failure to achieve a breakthrough forced him to ask Congress to intervene & prevent a strike.  "I am calling on Congress to pass legislation immediately to adopt the Tentative Agreement between railroad workers & operators — without any modifications or delay — to avert a potentially crippling national rail shutdown," Biden said.  "A rail shutdown would devastate our economy," Bidenad added.  "Without freight rail, many U.S. industries would shut down."  "We must act to prevent a catastrophic strike that would touch the lives of nearly every family," said Nancy Pelosi.

 

House passes Biden-backed bill to avert rail strike

Federal Reserve Chair Jerome Powell said the central bank could slow its interest rate increases at its meeting next month, but stressed that policymakers have more work to do in order to crush stubbornly high inflation.  "The time for moderating the pace of rate increases may come as soon as the December meeting," Powell said during a speech in DC.  Still, he noted that "going increases will be appropriate" & that the focus on rate hike speed is less important than the question of how long rates should be held in restrictive territory.  The Fed raised rates by 75 basis points at the beginning of Nov for the 4th straight meeting as it tries to wrestle inflation closer to its 2% target with the most aggressive tightening since the 1980s.  A majority of traders expect the Fed to approve a smaller ½-point rate hike at the conclusion of a 2-day meeting Dec 14, with just 17% forecasting another super-sized, 75 basis point increase.

Powell signals smaller interest rate hikes could begin in December

Job openings dipped in Oct amid the Federal Reserve's efforts to cool off a red-hot employment market, the Labor Dept reported.  The Job Openings & Labor Turnover Survey (JOLTS), a closely watched gauge of slack in the labor force, showed there were 10.3M vacancies for the month.  That's a decline of 353K from Sep & down 760K compared with a year ago.  That left 1.7 job openings per available worker for the month, down from a 2 to 1 ratio just a few months ago.  The Fed has instituted a series of rate hikes aimed at bringing down runaway inflation.  One area of particular focus has been the ultra-tight jobs market, with a 3.7% unemployment rate & wage gains that are helping to fuel price pressures.  While the monthly numbers can be volatile, the JOLTS report provided at least some measure that the Fed's inflation-fighting efforts could be having an impact.  The report came the same day that payroll processing firm ADP reported job gains of just 127K in Nov, the lowest total since Jan 2021.  The quits level, a measure of worker confidence that they can easily move from one job to another, also declined, edging lower to 4M, down 34K from a month ago & well below the record 4.5M in Nov 2021 during what had been dubbed the “Great Resignation.”  Total separations nudged higher to 5.7M, while layoffs & discharges also rose, up 58K to 1.39.

Job openings fell in October amid Fed efforts to cool labor market

Gold futures finished a bit lower as Federal Reserve Chair Jerome Powell spoke at the Brookings Institution, but prices ended the month with their first monthly gain since Mar.  A weaker $ & falling 10-year Treasury rates will continue to support gold prices.  In turn, the $ & 10-year rate levels will be directed by inflation & economic strength or weakness exhibited in the US & globally.  Gold for Feb fell $3 to settle at $1759 an ounce.  Based on the most-active contracts, prices ended 7.3% higher for the month, their first monthly rise in 8 months

Gold futures log their first monthly gain since March

Oil futures climbed, buoyed by a hefty weekly decline in US crude inventories.  Traders also looked for signs of any easing of China's zero-COVID restrictions, which have influenced energy demand & hints on major oil producers' decision on production levels expected Sun.  OPEC+ is not expected to make any changes to current output targets, which should leave oil range bound.  US benchmark WTI crude for Jan rose $2.35 (3%), to settle at $80.55 a barrel, the highest finish since Nov 22.  For the month, prices based onwelcomed by imvestor the front month fell 6.9%.

Oil futures end higher for the session, but post a loss for the month

Thought about lower rate hike were welcomed by investors.  However all rate hikes will make more costly for business.  The bill to avert a rail strike still must be passe3d by the Senate which could be touchy for Senators who support unions.  The Dow was up 1850 in Nov, but that's only where it was 6 months ago on the way down.  It still needs more good news to extend this rise.                  

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