Dow climbed 216, advancers over decliners better than 3-1 & NAZ went up 69. The MLP index added 2+ to the 229s & the REIT index went up 4+ to the 396s as yields declined. Junk bond funds rose along with the stock market & Treasuries saw heavy purchases of bonds, sharply reducing yields. Oil was up 1 to the 78s & gold jumped 21 to 1900 (more on both below).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
The federal gov is hurtling toward its $31.4T debt limit which will likely be reached within weeks, setting the stage for a summer showdown in Congress over the debt & spending. The national debt has ballooned in recent years as federal spending reached all-time highs. More than $6T in pandemic relief was tacked on to the gov's typical annual spending – which is presently about $1.7T on discretionary programs & roughly $4.2T in mandatory spending on Medicare, Social Security & servicing the national debt. There have been bipartisan contributions to the national debt over the last 2 decades that have led to its rise from about $10T when Pres George W Bush took office, to roughly $14T when Pres Obama followed suit, to $24T when Pres Trump began his term & more than $30T at the start of Pres Biden's administration. Based on current spending & tax revenue collection levels, the gov is expected to reach the debt limit of $31.4T in a month or less. That will force the Treasury Dept to use its "extraordinary measures" to keep paying the govs obligations & avoid default until Congress acts. Those tools essentially consist of the Treasury using cash balances it would otherwise invest in one-day securities & foreign currencies, while also suspending sales of debt by states & localities, & civil service & postal service pensions. The Bipartisan Policy Center (BPC) tracks what it calls the "X Date" which estimates the date when the federal gov will exhaust its extraordinary measures. In recent years, these measures have typically given lawmakers an extra 3-5 months to address the debt limit, but the duration varies based on spending levels & tax receipts. The most recent estimate for the X Date was performed last Jun when it was forecasted to arrive in Q3-2023. BPC's Director of Economic Policy Shai Akabas said that uncertainty about spending levels & economic conditions may mean the X Date arrives sooner than the last forecast: "The recurring extensions of the ongoing student loan pause, faster-than-expected interest rate increases, and persistent inflation have all impacted the debt limit timing for this year — on net, we expect them to accelerate the X Date’s arrival." Akabas noted that some of the uncertainty is due to a Congressional Budget Office report updating budget baselines that's due to be released in the next month and added: "The debt limit X Date will likely arrive sometime around the middle of this year, though we will have a better sense in a few weeks from now when we have new economic projections to work with." With the Treasury Dept. likely to exhaust its extraordinary measures this summer, Congress is expected to have to act on raising the debt limit before lawmakers depart for their annual Aug recess. The changing political dynamics on Capitol Hill may complicate that process.
Unprecedented government debt limit close to maxing out
The number of new applications for unemployment benefits slightly rose to 205K last week, the Labor Dept reported. Low jobless claims are a sign the labor market is remaining resilient despite the Federal Reserve's historic effort to tighten monetary policy to slow economywide spending & drive down inflation. The weekly jobless claims number has been closely watched over the past year or so, given the Fed’s aggressive pace of rate hikes. The report comes after the central bank raised rates by ½ of a percentage point in Dec & is likely to increase the rate again at the end of this month. For a stretch in the late summer, jobless claims defied expectations & remained low, even despite the Fed's aggressive rate hikes. Since the start of Oct, though, they have been above 200K. While the number of new jobless claims has remained low enough to avert fear that the country is already in the throes of a recession, most economists anticipate that the US economy will enter a Fed-induced recession at some point in the new year. That is because rate hikes can take a while to filter thru the broader economy & create recessionary conditions & job losses. It is expected that as the rate hikes begin to ripple across the economy, jobless claims begin to tick up, & then monthly jobs reports will begin to turn negative.
Jobless claims remain low in reassuring sign for economy
Mortgage rates fell for the first time in 3 weeks. The 30-year fixed-rate mortgage averaged 6.33%, down from 6.48% last week, according to mortgage buyer Freddie Mac. A year ago, the 30-year FRM averaged 3.45%. The 15-year fixed-rate mortgage averaged 5.52%, down from last week when it averaged 5.73%. A year ago, the 15-year FRM averaged 2.62%. "While mortgage rates have resumed their decline, the market remains hypersensitive to rate movements, with purchase demand experiencing large swings relative to small changes in rates," said Sam Khater, Freddie Mac's Chief Economist. "Over the last few weeks latent demand has been on display with buyers jumping in and out of the market as rates move." The Fed is expected to raise the federal funds rate again when its policy-setting Federal Open Market Committee concludes a 2-day meeting on Feb 1. Fed officials have signaled that they may raise the central bank's main borrowing rate another 3-qtrs of a point in 2023, which would be 5-5.25%. Fed officials will weigh the latest read on inflation. At its final meeting of 2022, the Federal Reserve raised its rate 0.50 percentage points, its 7th increase last year. That pushed the central bank’s key rate to 4.25-4.5%, its highest level in 15 years. Fed officials will weigh the latest read on inflation. A report today on consumer prices showed that inflation at retail-level eased to 6.5% in Dec, a 6th straight monthly decline.
Mortgage rates dip after two-week climb
Gold futures climbed to settle at their highest since late
Apr after data revealed that the US cost of living in Dec fell
for the first time since the onset of the pandemic in 2020. The data raised expectations for slower Federal Reserve interest-rate
hikes & pressured the $, providing support for precious
metals. Gold for Feb rose $19 (1.1%) to settle at $1898
an ounce, the highest most-active contract finish since Apr
29.
Gold Futures Settle at their Highest Since Late April
Oil futures tallied a 6th straight session climb,
their longest streak of gains since Feb. Prices extended their
gains after posting a loss last week, helped by the weakness in the $ & optimism that a more benign inflation outlook will help
to mitigate concerns over a sharp slowdown in the coming months. The US
benchmark WTI crude for Feb rose 98¢ (1.3%) to settle at $78.39 a barrel.
U.S. oil futures log longest streak of session gains since February
Mixed views on inflation. Some said signs of deflation were enough for officials to pause & even cut interest rates later this year. But others maintained that still-high prices facing consumers would keep the Fed on track with its plans to hike the interest rate to as high as 5%. Dow was weak at the opening but buyers raised it into the black. The inverted yield curve (higher yields for short term debt) remains & that is a signal of a coming recession. Additionally, demand for safe haven gold continues very strong. Go figgah!!
Dow Jones Industrials
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