Dow fell 14, advancers & decliners were even & NAZ rose 61. The MLP index was fractionally higher to the 232s & the REIT index gained 2+ to the 397s. Junk bond funds went up & Treasuries were sold, raising yields (more below). Oil went up 1 to 81 & gold pulled back 17 to 1925.
AMJ (Alerian MLP Index tracking fund)
The US economy ended 2022 on solid footing, but momentum seems to have cooled slightly as consumers confront the dual threat of stubbornly high inflation & rising interest rates. Gross domestic product, the broadest measure of goods and services produced across the economy, grew by 2.9% on an annualized basis in Q4, the Commerce Dept said in its first reading of the data. The forecast expected the report to show the economy had expanded by 2.6%. It marked a decline from the 3.2% pace recorded in Q3. Consumer spending, which accounts for about 2/3 of GDP, remained solid in Q4. It rose 2.1% for the period, a slight drop from the previous pace of 2.3%. Increases in private inventory investments, a boost in federal gov spending & a jump in non-residential fixed income also helped to boost the GDP numbers. However, high mortgage rates continued to drain demand from the real estate market, with investment in housing plunging 27% for a 2nd straight qtr. GDP grew 2.1% for the entirety of 2022 after increasing 5.9% in 2021. Despite the surprising show of resilience, there are growing signs the economy is beginning to slow. Job growth is moderating, the housing market – which is vulnerable to higher interest rates – entered a recession last year & consumer spending has shown signs of cooling off. A separate report released last week showed that retail sales tumbled 1.1% in Dec as spending on big-ticket purchases like cars & furniture dried up. Economists widely expect the economy to slide into a recession sometime this year as a result of the Federal Reserve's aggressive interest rate hike campaign. Policymakers raised its benchmark borrowing 7 times in 2022 to 4.25-4.5%, the highest since the 2008 financial crisis. Officials signaled that further rate hikes are coming this year, despite signs that inflation has peaked.
US GDP grew at 2.9% pace in fourth quarter as economy cools
Ahead of Pres Biden's speech on the economy, White House press secretary Karine Jean-Pierre touted economic growth when asked how the pres will address recession fears. she said, "There are concerns that the big tech layoffs and the banking layoffs will spill over into the broader economy." While the press secretary first acknowledged Americans' "fears" before arguing that jobs & inflation data prove the economy is "building back up" since Biden's time in office. "We understand the fears. But what I will say is that and I've spoken to this a couple of times, that there is data, job data that we have seen, job opening data that we have seen where layoffs remain [at a] record low," Jean-Pierre responded. "I've talked about the consumer price index. I've talked about the PPE numbers that we have seen as we've seen inflation continue to come down over the last six months. And that is important as we talk about the economy, as we talk about how the economy is building, we're building jobs, building back up." But according to the latest labor reading, US hiring cooled in Dec to the lowest pace in 2 years. Employers added 223K jobs in Dec, the Labor Dept said in its monthly payroll report, topping the 200K jobs forecast.
Biden Administration downplays recession fears, touts economic growth
Treasury yields rose after Q4 GDP report was better than expected even as investors worry about a looming economic recession. The benchmark 10-year Treasury yield rose 2 basis points to 3.485% & the 2-year Treasury yield was up 3 basis points at 4.166%. Yields & prices have an inverted relationship & one basis point equals 0.01%. Jobless claims data showed a decline last week, another indication that the labor market remains strong despite the Fed’s rate hikes. Fears of a recession have grown louder in recent months as many investors believe the pace of the Federal Reserve's interest rate hikes to tame high inflation could lead to the economy contracting. GDP is an important piece of data that could show if the economy is in recession or not - some economists say that 2 consecutive negative quarterly GDP readings signals such a slowdown. The Fed is next meeting on Jan 31 & Feb 1. Markets are expecting the central bank to further increase interest rates by 25 or 50 basis points as its battle with persistent inflation continues.
10-year U.S. Treasury yield climbs after better-than-expected GDP report
As is common, the GDP report is giving mixed signals. GDP growth was fairly good, although it also signals the Fed has more work to do to slow economic growth. Recession fears are on the minds of many investors.Dow Jones Industrials
No comments:
Post a Comment