Dow finished up 254, (below early highs), advancers over decliners better than 2-1 & NAZ was up 223. The MLP index added 3+ to the 231s & the REIT index crawled up 1+ to the 393s. Junk bond funds fluctuated & Treasuries continued to be sold, bringing higher yields. Oil was off pennies in the 82s & gold was steady at 1928 (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)
After a year of soaring prices for everyday goods & interest rate hikes, Americans are increasingly leaning on credit cards to make ends meet. And although pandemic-era stimulus payments were able to keep delinquencies at bay by bolstering household savings for a time, those accounts have since dwindled. Now, signs of a looming debt crisis among US consumers are beginning to flash, & it is a triple whammy: credit card balances are at an all-time high, annual percentage rates (APRs) are up & more consumers are taking on debt than in 2021. The debt relief industry has already warned that it is seeing a surge in demand that began last summer as struggling consumers increasingly scrambled to stay afloat. But the dam is starting to crack & the defaults have already begun to roll in. Discover Financial Services CFO John Greene issued an ominous warning last week, noting a sharp uptick in delinquencies. "In the card portfolio, the net charge-off rate of 2.37% was 87 basis points higher than the prior year and 45 basis points higher sequentially," he said. Meanwhile, credit card balances have been climbing after months of elevated inflation outpace wage gains, signaling the worst is yet to come. Greene said Discover anticipates the default rate to grow higher in 2023, to 3.5-3.9% on an annual basis. The Federal Reserve Bank of New York recently reported a 15% year-over-year increase in total credit card balances for Q3-2022, which amounts to the largest surge in more than 20 years. A new report from CreditCards.com shows nearly 3 out of 4 (72%) credit card debtors added to their balances over the past year. Nearly ½ took on additional debt due to rising costs, while 34% saw their balances jump due to rising interest rates. 24% reported having a disruption in household income. According to the company's sister site Bankrate.com, there are also more people carrying debt, too. Some 46% of credit card holders are carrying debt from month to month, up from 39% a year ago. "Especially for people with lower incomes, it’s easy to see how everyday essentials can overwhelm a paycheck with everything from rent to groceries, gas and more costing so much," Bankrate senior industry analyst Ted Rossman said. "It can be a vicious cycle, too, because most households don’t have enough emergency savings." "We’ve found previously that emergency expenses are the most common explanation for credit card debt – for example, some sort of unexpected medical bill, car repair or home repair," Rossmans added. "Next are day-to-day expenses. That seems especially relevant in the current context of high inflation."
Consumers are piling on credit card debt, flashing signs of potential crisis
A growing number of business economists expect companies to reduce their headcounts for the first time since the pandemic, a sign the job market is beginning to cool amid an increasingly dark economic outlook. That's according to a new survey published by the National Association for Business Economics (NABE), which shows that about 20% of the group's members expect employment at their company to fall in the coming months. "For the first time since 2020, more respondents expect falling rather than increased employment at their firms in the next three months," NABE Pres Julia Coronado, the founder & pres of MacroPolicy Perspectives, said. "Fewer respondents than in recent years expect their firms’ capital spending to increase in the same period." Just 12% of those surveyed expect employment to rise over the next 3 months – fewer than ½ of the share who reported hiring more workers over the past 3 months. Roughly 2/3 of the respondents reported wages increasing in the past 3 months, which is unchanged from Nov. Wage growth has been a big contributor to stubbornly high inflation, which remains about 3 times higher than the pre-pandemic average. The results "indicate widespread concern about entering a recession this year," Coronado said. More than ½ of respondents see the possibility of a recession over the next year at 50% or higher. The Jan survey included responses from 60 NABE members & was conducted between Jan 4-11. Although the labor market remains healthy & one of the few bright spots in the economy, there are signs that it is beginning to soften in the face of higher interest rates. The economy added just 223K jobs in Dec, the smallest gain in 2 year & there have been a number of high-profile tech layoffs over the past month. Federal Reserve officials have made it clear that they expect unemployment to climb as a result of their aggressive interest rate hike campaign, which could force consumers & businesses to pull back on spending. Updated projections from the central bank's Dec meeting show that officials expect unemployment to rise to 4.6% by the end of this year, up from the current rate of 3.5%.
More US companies brace for job cuts amid likely recession, survey shows
The Food & Drug Administration (FDA) has laid out a road map for what Covid-19 vaccination may look like moving forward. In a briefing document, the FDA said the vaccines will probably need an annual update as the virus continues to evolve. The agency would select the Covid strain for the vaccine in the spring so the updated shots could roll out every Sep in time for a fall vaccination campaign. Most people would receive one shot to restore their protection against the virus moving forward. This would apply to people who have been exposed to the virus's spike protein at least twice, either thru vaccination or infection. But older adults & people with compromised immune systems may need 2 doses, according to the proposed vaccination schedule. Young children who have received only one shot previously would also get 2 doses. The FDA released the road map ahead of a meeting of the agency's independent vaccine experts. The expert panel will vote on whether to make all Covid vaccines in the US bivalent shots, meaning they protect against both the omicron BA.5 subvariant as well as the original strain of Covid discovered in Wuhan, China, in late 2019. Currently, only Moderna's (MRNA) & Pfizer's (PFE) booster doses target the omicron variant. If adopted, the primary series would also contain the omicron strain. The proposed system for updating Covid vaccines resembles how the FDA selects flu shots every year. The agency said it could update & rollout the Covid vaccines without clinical data, which is also the case with the annual process to change the flu shot. The Centers for Disease Control & Prevention on Thurs is also expected to provide more information about an investigation into what it has described as a “very unlikely” risk of stroke in seniors who received PFE's omicron booster.
FDA: Most people will probably need only one Covid vaccine shot moving forward
Gold futures ended with a slight gain, giving up early losses to hold ground at their highest price since Apr. For now, gold seems to be able to brush off any bearish factors, such as the risk of recession fading a little & a more optimistic tone on stock markets, & has built up sufficient support to keep it close to its highest level since Apr. However, a lot of this is down to a perception of what the Fed will do, therefore if the Fed doesn’t conform to expectations, then the gold price could be in for a sharp shock. Gold for Feb rose a smidgen to settle at $1928 an ounce.
Gold Futures Hold Ground at Highest Since Apri
Oil futures finished little changed, down by just pennies, after ending last week at their highest since Nov. Oil bulls have been drawing strength from rising demand hopes as China's economy re-opens, while a softer $ seems to be supporting upside gains. US benchmark oil prices may push higher not only because of China's improving outlook, but expectations around the Federal Reserve toning down its pace of rate hikes. When factoring the pending restrictions on Russian oil that are due to commence in Feb, the dynamics remain in favor of bulls. The EU's ban on imports of Russian oil products begins on Feb 5. US benchmark West Texas Intermediate crude for Mar fell 2¢ to settle at $81.62 a barrel.
U.S. oil futures settle lower after ending last week at the highest since November
The rally was strong in the AM. However much of that strength faded in the last 2 hours with a small rally in the last hour. The GDPNow model from the Fed estimate for real GDP growth (seasonally adjusted annual rate) in Q4 remained at 3.5% on Jan 20. The first official estimate for Q4 will be released on Thurs.
Dow Jones Industrials
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