Dow dropped 84, decliners over advancers 4-3 & NAZ was off 81. The MLP index stayed near 212 & the REIT index was off 1 to the 368s. Junk bond funds were little changed & Treasuries saw heavy selling, bringing higher yields. Oil gained 2+ to the 79s & gold was up 6 to 1801.
AMJ (Alerian MLP index tracking fund)
The Senate approved a $1.7T spending bill with help from more than a dozen Rep lawmakers after a fight over immigration policy nearly derailed the legislation. In an 68-29 vote, the Senate passed a bill that provides $858B for defense, $787B for non-defense domestic programs & nearly $45B for military & humanitarian aid to Ukraine. The more than 4K-page bill funds the gov for the rest of the fiscal year, & includes more than 7200 earmarks totaling more than $15B. Senate passage sends the bill to the House, where Speaker Nancy Pelosi is expected to hold a vote this evening to allow lawmakers to depart for the Christmas holiday. "The bill is so important to get done because it will be good for families, for veterans, our national security, even for the health of our democratic institutions," said Senate Majority Leader Chuck Schumer. "Senate Republicans should instead support a short-term spending bill, allowing the new Congress — with the incoming Rep House — to start the spending process over again in January," said Sen Mike Lee.
Senate passes $1,700,000,000,000 spending bill just before govt. shutdown
An inflation gauge closely watched by the Federal Reserve showed
welcome signs of slowing in Nov, but it still remained abnormally
high, according to data released today. The Personal
Consumption Expenditures (PCE) index showed that consumer prices climbed
0.1% from the previous month & rose 5.5% on an annual basis,
according to the Bureau of Labor Statistics. Core prices, which
strip out the more volatile measurements of food & energy, climbed
0.2% from the previous month & rose 4.7% on an annual basis. Those
figures are both in line with forecasts. While the Fed is targeting the PCE headline figure as it tries to wrestle consumer prices back to 2%, Chair Jerome Powell previously told reporters that core data is actually a better indicator of inflation. "Core inflation is a better predictor of inflation going forward," Powell said. "Headline inflation tends to be volatile." Both
the core & headline numbers point to inflation that is running well
above the Fed's preferred 2% target, a troubling sign as the central
bank is already hiking interest rates at the fastest pace in decades. Policymakers have already approved 7 straight rate hikes, pushing
the federal funds rate well into restrictive territory. The central bank
has signaled that it will raise rates higher than previously
anticipated, though it plans to pause the increases at some point in
2023.
Fed's preferred inflation gauge cools as prices continue to soar
An often-overlooked economic gauge signaled that the US economy is headed for a recession – or already in one – as the Federal Reserve fights inflation with a series of aggressive interest rate hikes. The Conference Board's Leading Economic Indicators index showed that conditions further deteriorated in Nov with the gauge down 1% from the previous month. That follows a 0.9% decline in Sep. "The U.S. LEI fell sharply in November, continuing the slide it's been on for most of 2022 after peaking in February," said Ataman Ozyildirim, the senior director of economics at the Conference Board. "Only stock prices contributed positively to the LEI in November. Labor market, manufacturing, and housing indicators all weakened—reflecting serious headwinds to economic growth." The slump reflects a worsening outlook among consumers, who are increasingly worried about steeper interest rates & stubbornly high inflation, as well as a prolonged slump in the housing market. There is a growing expectation that the Fed will trigger an economic downturn as it raises interest rates at the fastest pace in 3 decades to catch up with runaway inflation. Officials this month approved a 7th consecutive interest rate hike, lifting the federal funds rate to 4.25-4.5% – well into restrictive levels – & indicated they plan to continue raising rates in the early months of 2023. But in a troubling development, the Fed's rate hikes have so far failed to tame inflation. The gov reported this month that the consumer price index soared 7.1% in Nov from the previous year, about 3 times the pre-pandemic average. That suggests the Fed will have to continue charting its aggressive course, raising the odds that it will crush consumer demand & cause unemployment to rise. Hiking interest rates tends to create higher rates on consumer & business loans, which slows the economy by forcing employers to cut back on spending. Officials also indicated that economic growth will slow sharply next year & that unemployment will march substantially higher to a rate of 4.6% as rate hikes bring the US to the brink of a recession. The Fed expects the jobless rate to remain elevated in 2024 & 2025 as steeper rates continue to take their toll by pushing up borrowing costs. That could mean roughly 1.7M Americans lose their jobs.
Economic index falls for ninth straight month, flashing recession warning
The economic data was mixed, at best. Inflation is slowing, but there are no signs that it will evaporate suddenly. That means higher interest rates are coming next year. And there is another signal about a recession in the wind. The $15B in earmarks (should be called pork) in gov spending will do very little for the US economy with much of it going for projects outside the US. Some traders started their long weekend today. Price swings today should be minimal & not meaningful.Dow Jones Industrials
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