Dow went up 133 (off early highs), advancers over decliners better than 3-1 & NAZ gained 71. The MLP index remained in the 214s & the REIT index added 7 to 378 as Treasury yields declined. Junk bond funds traded higher & Treasuries remained in demand, driving yields lower. Oil continued weak, sinking 4+ to the 72s, & gold rose 10 to 1856 (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)
Federal Reserve officials are committed to fighting inflation & expect higher interest rates to remain in place until more progress is made, according to minute from the Dec meeting. At a meeting where policymakers raised their key interest rate another ½ a percentage point, they expressed the importance of keeping restrictive policy in place while inflation holds unacceptably high. “Participants generally observed that a restrictive policy stance would need to be maintained until the incoming data provided confidence that inflation was on a sustained downward path to 2 percent, which was likely to take some time,” the meeting summary stated. “In view of the persistent and unacceptably high level of inflation, several participants commented that historical experience cautioned against prematurely loosening monetary policy.” The increase ended a streak of 4 consecutive 3-qtr point rate hikes, while taking the target for the benchmark fed funds rate to 4.25%-4.5%, its highest level in 15 years. Officials also said they would focus on data as they move forward & see “the need to retain flexibility and optionality” regarding policy. Officials further cautioned that the public shouldn't read too much into the rate-setting Federal Open Market Committee's move to step down the pace of increases. “A number of participants emphasized that it would be important to clearly communicate that a slowing in the pace of rate increases was not an indication of any weakening of the Committee’s resolve to achieve its price-stability goal or a judgment that inflation was already on a persistent downward path,” the minutes said. Following the meeting, Fed Chair Jerome Powell indicated that while there has been some progress made in the battle against inflation, he saw only halting signs & expects rates to hold at higher levels even after the increases cease. The minutes reflected those sentiments, noting that no FOMC members expect rate cuts in 2023, despite market pricing. Markets currently are pricing in the likelihood of rate increases totaling 0.5-0.75 percentage point before pausing to evaluate the impact the increases are having on the economy. Traders expect the central bank to approve a qtr-point increase at the next meeting, which concludes Feb 1, according to CME Group data.
Fed officials see higher rates for ‘some time’ ahead
In the 5th vote in 2 days, Rep leader Kevin McCarthy again failed to secure enough support to win the House speakership, setting the chamber up for a 6th round of votes & plunging the party into further chaos. The previous vote saw a core group of 20 GOP holdouts nominate & vote for Rep Byron Donalds, a sophomore Repn lawmaker who today had publicly shifted his support away from McCarthy. While the vote is still ongoing, McCarthy has already lost about a dozen Reps. With 222 Reps in the House, McCarthy can only afford to lose a handful of them & still win the 218 votes necessary to take the gavel. All 212 Dems voted for that party's incoming Minority Leader, Rep Hakeem Jeffries. Rep Lauren Boebert re-nominated Donalds in the 5th round of voting, which is currently underway, before asking McCarthy to withdraw his nomination. “You’ve been having my favorite president call us and tell us we need to knock this off,” Boebert said on the House floor, referring to former Pres Trump. “I think it actually needs to be reversed. The president needs to tell Kevin McCarthy that, ‘sir, you do not have the votes and it’s time to withdraw.’”
Republican leader Kevin McCarthy fails to win enough support in fourth vote for House speaker
2023 is arriving with plenty of uncertainty, as recession prospects, continued inflation concerns & the potential for a consumer spending pullback are all clouding forecasts. But corp capital spending looks to continue to forge ahead, according to the results of the recent CNBC CFO Council Q4 survey. More than 1/3 of respondents said that they expect their company's capital spending to increase over the next 12 months, while 39% said their capital spending will stay about the same as last year. Only 22% said that spending would decrease. An equal percentage of roughly 40% of CFOs say their company's headcount will also remain the same next year as those who expect it to increase. The Q4 2022 survey is a sample of the current outlook among top financial officers. It was conducted among 23 chief financial officers at major organizations between Nov.30 - Dec 20. As the CFO outlook on spending & investment plans remained relatively stable even amid the weakened economy & stock market last year, it''s unclear what could shift that thinking. Roughly 65% of the CFOs said they think inflation has already peaked, while more than 80% are already forecasting a recession for 2023. In Fed Chair Jerome Powell's most recent public speech on Nov. 30, he suggested that small interest rate increases are likely ahead as “it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down.” However, he also said that “Despite some promising developments, we have a long way to go in restoring price stability.”
Corporate spending likely to continue in 2023 amid recession fears, CFOs say
Gold futures tallied a 4th straight session gain, with
prices for the most-active contract settling at their highest since Jun
10. Analysts have been eyeing the current rally in gold with caution in recent
weeks as the risk of another hawkish surprise, either from economic data
or Fed speak, has been on the rise. However, prices action has become increasingly favorable & the technical outlook turned bullish with
gold ending last year at a 6-month high. Gold for Feb delivery rose $12 (0.7%) to settle at $1859 an
ounce
Gold futures log a 4th straight session climb
US oil futures marked their lowest settlement
in more than 3 weeks, pressured by ongoing worries about the
outlook for global economic growth, which can lead to lower demand for
oil. Data from the Energy Information Administration due out tomorrow is
also expected to reveal a weekly rise in US with a forecast for an
increase of 4.5M barrels. The US benchmark WTI
crude for Feb fell $4.09 (5.3%) to settle at $72.84 a barrel, the lowest finish for a front-month contract since
Dec 9
U.S. oil futures log lowest finish in more than 3 weeks
Dow Jones Industrials
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