Dow advanced 283, advancers over decliners 4-1 & NAZ went up 226. The MLP index added 2 to the 225s & the REIT index was up 3+ to the 371s. Junk bond funds rose along with stocks & Treasuries saw modest buying (more below). Oil was up 1+ to the 75s & gold climbed 8 to 1878.
AMJ (Alerian MLP index tracking fund)
Treasury yields climbed as investors considered the outlook for inflation & awaited key economic data. The yield on the benchmark 10-year Treasury note was up by almost 3 basis points to 3.599% & the 2-year Treasury traded around 4.27% after rising by about 1 basis point. Yields & prices have an inverted relationship & one basis point is equivalent to 0.01%. Investors continued to assess the outlook for inflation & how that could affect the Fed's next interest rate decision. The central bank is due to meet Jan 31 - Feb 1, & investors are considering whether rate hikes will be slowed further as the Fed’s battle with persistently high inflation continues. On Fri, Dec's nonfarm payrolls report indicated that inflationary pressures could be easing as it showed that wages grew by less than expected throughout the month. The report also showed that that the economy added 233K jobs in Dec, more than the 200K previously estimated.
Treasury yields rise as investors assess inflation outlook
California's gov is facing an estimated budget deficit of $24B this year, a stark reversal from the record-setting surpluses that the state saw in recent years which comes amid ongoing inflation & heightened fears of a looming recession. California's Legislative Analyst's Office (LAO), which provides state officials with nonpartisan budget forecasts, warned in a report that the state faces a projected $24B deficit in 2023-24 mainly because tax revenues are about $41B lower than expected. "Spurred by pandemic‑related federal stimulus, the U.S. economy entered a period of rapid expansion in the summer of 2020 that extended through 2021," the LAO wrote. "Over the last year, however, evidence has mounted that this rapid economic expansion was unsustainable." The COVID Money Tracker produced by the Committee for a Responsible Federal Budget (CRFB) found about $577B in federal relief made its way to California from the outset of the pandemic in early 2020 thru Dec 2022. That figure includes a variety of items ranging from individual stimulus checks & Paycheck Protection Program loans for California businesses to funds for healthcare programs & schools. Those relief funds, in addition to the economic expansion that drove larger income tax receipts from high earners, helped bolster the state's finances. The influx was such that a mere 8 months ago, California Governor Gavin Newsom announced that the state brought in a historic $97B surplus. State officials promptly lined up spending priorities for that surplus. By law, ½ of the surplus went to education projects. However, Newsom also announced an $18B inflation reduction package that included additional stimulus payments to Californians on top of those the state & federal govs provided earlier in the COVID-19 pandemic, while Bs more went to infrastructure projects & other initiatives. Those one-time spending initiatives, known as "augmentations" under California's budget, have been over $30B the last 2 fiscal years & figure to be at a similar level for 2023-24. The LAO recommended that the California legislature identify whether recent augmentations should be paused, delayed, or reassessed to see whether those expenditures are worthwhile or could be put off to relieve pressure on the budget.
California facing $24B budget shortfall amid economic uncertainty
Former Federal Reserve Chair Alan Greenspan
warned Americans that an economic recession is the "mostficials. M likely
outcome," as the central bank continues to tighten monetary policy to
fight inflation. Former
New York Federal Reserve Pres William Dudley reinforced
Greenspan's claims, saying that a US recession is "likely" forthcoming
because the Federal Reserve's rate hikes are inducing one.
Ex-Fed Chair has dire prediction for US economy
Investors are ignoring recession concerns from former Fed officials. Inflation data is due this week & that will not likely show major inflation that is running very low.
Dow Jones Industrials
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