Markets drop as economic data suggests more Fed tightening

Dow retreated 351 with some buying into the close, decliners over advancers 3-1 & NAZ sank 225.  The MLP index sold off 4+ to the 218s, following oil's decline, & the REIT index fell 3+ to the 379s.  Junk bond funds continued mixed & Treasuries were heavily purchased taking yields lower.  Oil  dropped 2+ (almost 1 year low) to the 74s & gold added 2 to 1779 (more on both below).

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JPMorgan Chase (JPM), a Dow sock, CEO Jamie Dimon warned that stubbornly high inflation could trigger a US economic recession next year as steep prices cause consumer spending to dry up.  Businesses are still in good shape & consumer spending remains strong, with households hoarding $1.5T in excess savings from pandemic relief programs, Dimon said.  But he warned that may not last long.  "Inflation is eroding everything I just said, and that $1.5 trillion will run out sometime mid-year next year," Dimon added.   "When you are looking that forward, those things very well may derail the economy and cause this mild to severe recession that people are worried about."  The head of the largest bank in the US first sounded the alarm over the state of the economy in early May, citing concerns over inflationary pressures, a hawkish Federal Reserve & the war in Ukraine.  He ratcheted up those warnings in Jun when he said the US was headed for an "economic hurricane" as a result of the Fed's quantitative tightening & the first European war in decades.  The economic outlook has clouded further as a result of the Fed's most aggressive rate-hike campaign since the 1980s.  The central bank has embarked on one of the fastest monetary tightening paths in decades as it seeks to wrestle consumer prices that are still running near a 40-year high back to 2%.  Policymakers could ultimately lift interest rates as high as 5% next year, Dimon said & even "that may not be sufficient."  "I don't think we've seen that kind of turmoil in the global world for a long a while," he continued.   It will be a mild or severe downturn.  "What I said about a hurricane, I said those storm clouds could mitigate," he added.  "It could be a hurricane. We simply don't know. As a risk manager, I prepare for both, but I'm not guessing which one's going to happen."  Dimon is among a growing number of influential execs & business titans whose opinions on the economy have soured in recent months. 

Jamie Dimon warns inflation could drag US into recession next year: 'It could be a hurricane'

Boeing's (BA), a Dow stock, final 747 is set to roll out of the company's cavernous factory north of Seattle as airlines’ push for more fuel-efficient planes ends the more than half-century production run of the jumbo jet.  The 1574th (& last) 747 is scheduled to leave the assembly plant late today before it is flown by a BA test pilot, painted & handed over to cargo & a charter carrier early next year.  “It’s a very surreal time, obviously,” said Kim Smith, VP & general manager of iss 747 & 767s programs out of the assembly plant here.  “For the first time in well over 50 years we will not have a 747 in this facility.”  The lone 747, covered in a green protective coating, sits inside the company's massive assembly plant in Everett — the largest building in the world by volume, according.  The building was constructed specifically for the jumbo jet's start of production in 1967.  The end of 747 production doesn’t mean the planes will disappear entirely from the skies, since the new ones could fly for decades.  However, they've become rare in commercial fleets.  The stock fell 6.67.
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Boeing’s last 747 rolls out after a more than 50-year production run

White House press secretary Karine Jean-Pierre suggested that Pres Biden will fix "glitches" in the Inflation Reduction Act to assuage European concerns without going to Congress.  The comments came in response to a reporter who asked whether President Biden planned to issue any exec orders to tweak the IRA in response to criticism of the legislation from French officials over the weekend.  Jean-Pierre said the Biden administration was working thru a "substantive consultation with Europe" to fix "glitches" & address their concerns, reiterating comments she made last week.  "We don’t have plans to go back to Congress on that. But when it comes to [Europe’s] concerns, of course, we’re going to have conversations with our European allies," Jean-Pierre added.  Foreign officials have accused the IRA, passed in Aug, of being "protectionist."  French Pres Emmanuel Macron, who dined with Biden during a state visit last week, has complained that subsidies meant to incentivize semiconductor production for electric vehicles have put European leaders at an unfair disadvantage.  Biden acknowledged the $368B spending & tax law may have "glitches" but overall defended what the White House views as a signature achievement of his administration.  "Look, the United States makes no apology and I make no apology, since I wrote it, for the legislation you're talking about," Biden said.  "But there are occasions when you write a massive piece of legislation – and that has almost $368 billion for the largest investment in climate change in all of history – and so there's obviously going to be glitches in it."

White House says Biden will fix Inflation Reduction Act 'glitches,' address Europe’s concerns without Congress

Gold futures staged a partial rebound, but held below $1800 an ounce, helped by some weakness in the $ & a pullback in Treasury yields after the metal's losses in the previous 2 sessions.  Feb gold  added $1 to settle at $1782 per ounce after posting back-to-back session declines.  Gold rebounded a bit today from yesterday's correction, though settled below the key $1800 mark for a 2nd session in a row.  The $ had been giving back some of yesterday's gains, with the ICE US Dollar Index touching a low of 104.89, to trade just above its lowest level since late Jun.  The index, however, was up by 0.3% to 105.59 today.  Meanwhile, the yield on the 10-year Treasury note eased back by nearly 4 points to 3.563%.  Weakness in the $ tends to decrease the opportunity costs for investors considering $-priced gold as an option versus other perceived havens.  Meanwhile, lower yields can raise the prospects for gold against gov bonds.  The direction of yields & the $ is likely to remain the key driver for gold prices, with next week's Federal Reserve meeting the key catalyst when it comes to the next move in prices.

Gold prices score a partial rebound, but hold below key $1,800 level

Oil tallied a 3rd consecutive loss, with US. benchmark crude prices settling at their lowest level in nearly a year.  Worries about more aggressive monetary tightening by the Federal Reserve rippled across markets despite concerns about the impact of the Group of Seven price cap on Russian oil imposed yesterday.  West Texas Intermediate crude for Jan declined by $2.68 (3.5%) to settle at $74.25 a barrel.  It marked the lowest finish for a front-month contract since Dec 23, 2021   Economic data released showed the US economy is still running hot creating scope for more interest rate hikes & downgrading short- to medium-term growth prospects; a scenario that would entail a drop in oil demand.  Data released yesterday showed the US ISM service-sector index climbed to 56.5% in Nov from 54.4% in Oct, signaling that the domestic economy is still expanding at a steady pace.  The data triggered red flashing signals the Federal Reserve may keep interest rates higher for longer, increasing the odds of a US recession.

U.S. oil futures end at lowest price of the year as worries about more Fed hikes rattle mar

Not much cheer for investors although bargain hunting in late day trading trimmed losses for the day.  The threat of higher interest rates & that possible recession is scary for investors.  Long term investors need to be brave.

 Dow Jones Industrials