Dow finished down 252, decliners over advancers 5-4 & NAZ was off 104. The MLP index went up 1+ to the 227s (along with the rise in oil) & the REIT index was off 1+ to the 388s. Junk bond funds were mixed & Treasuries continued to be sold, raising yields. Oil rose 1 to go over 80 & gold soared 26 to 1923 (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 Governor Lael Brainard said that interest rates need to remain high, even though there are signs inflation is starting to ease. Echoing recent comments from her fellow policymakers, Brainard insisted that the Fed won't waiver in its commitment to taming prices that have come down some in recent months but remain near 4-decade highs. “Even with the recent moderation, inflation remains high, and policy will need to be sufficiently restrictive for some time to make sure inflation returns to 2% on a sustained basis,” she said. Her comments come less than 2 weeks before the rate-setting Federal Open Market Committee holds its next meeting, on Jan 31-Feb 1. Markets are assigning a near-100% probability that the FOMC will a raise its benchmark interest rate another qtr percentage point, taking it to 4.5-4.75%, according to CME Group data. That, however, would represent another less-severe step in the Fed's move to tighten monetary policy. As Brainard put it, the FOMC in Dec “downshifted” the level of its rate increases to ½ a point, after 3 consecutive increases of 3-qtrs of a percentage point. “This will enable us to assess more data as we move the policy rate closer to a sufficiently restrictive level, taking into account the risks around our dual-mandate goals,” she said. Brainard pointed to a number of areas where she sees inflation starting to come down. She noted weaker numbers recently in retail sales and wages & expressed doubt that the economy is seeing a 1970s-style wage-price spiral where higher earnings keep pushing prices higher & vice versa. “Together, the price trends in core goods and nonhousing services, the tentative indications of some deceleration in wages, the evidence of anchored expectations, and the scope for margin compression may provide some reassurance that we are not currently experiencing a 1970s-style wage-price spiral,” Brainard added. “Inflation is high, and it will take time and resolve to get it back down to 2%. We are determined to stay the course,” she said.
Fed Governor Lael Brainard sees high rates ahead even with progress on inflation
Procter & Gamble (PG), a Dow stock & Dividend Aristocrat, reported year-over-year declines in revenue & profit, as higher prices look to offset declining sales volumes. For the 3-month period ended Dec 31, EPS was $1.59, excluding items, down from
$1.66 per share, a year earlier. Net sales fell to $20.77B, a 1% decrease from the previous year, which topped projections of $20.73B. Organic revenue, which excludes the impact of foreign currency, acquisitions & divestitures, increased 5% during the fiscal 2nd qtr. That rise was a result of higher pricing, which outweighed shrinking consumer demand. All
of the divisions reported declining sales volume, despite seeing increases in organic sales as a result of higher
pricing. Its grooming division, which houses brands like Gillette &
The Art of Shaving, & which has historically underperformed for the
company, reported no sales growth — its volume declines completely
canceled out its higher prices. Execs noted that consumer demand is responsible for at least ½ of
the 6% sales volume decrease. The remaining volume decline was due to
reining in business in Russia as the war in Ukraine persists, along with inventory reductions in China, its 2nd-biggest market, as Covid lockdowns disrupted the region. The company now anticipates headwinds of $3.7B for the remainder
of its fiscal year, marking a slight improvement. But
it warned those headwinds would continue to squeeze gross
margins, which saw a 160 basis point decrease during the 2nd qtr
versus a year ago. The company will further increase prices in the coming months. PG
slightly lifted its outlook for 2023 sales growth to 4-5% from a prior range of 3-5%. The company lowered its estimated
impact of foreign exchange to 5-6%. The stock dropped 3.13.
If you would like to learn more about PG, click on this link:
club.ino.com/trend/analysis/stock/PG_aid=CD3289&a_bid=6ae5b6f7
Procter & Gamble revenue and profit fall as company looks to higher prices to offset declining sales
Dutch Prime Minister Mark Rutte said it was imperative that Europe continued to stand up to Russia's aggression, saying the region had to do “everything we can to help Ukrainians.” “If an aggressor is not challenged and can go about his business, it won’t end with Ukraine. The whole West is threatened,” Rutte said as he discussed Europe's response to the war in Ukriane at the World Economic Forum in Davos. Rutte referenced the 1938 Munich Agreement in his discussion, where the allied forces agreed that Czechoslovakia would surrender its border regions & defenses to Nazi Germany. “People feel that this is about values, that we cannot accept one country invading another country … It is also about our collective safety,” he added. Rutte also said Europe needs to do more to help Ukraine, but that the issue of sending tanks is “a sensitive decision.” “I do agree there is an argument to send [tanks] to Ukraine. There is also an argument to take the decision in conjunction with others, including our friends in the U.S.,” he said, adding that he was “fairly optimistic” that the situation “could get to a landing spot.” “We have to do everything we can to help Ukrainians,” Rutte said. Ukraine has repeatedly asked its Western allies to provide tanks to help it fight Russia, which has caused tension between European countries, with some fearing the provision of weapons could further provoke Moscow.
The whole West is threatened if an aggressor isn’t challenged, Dutch PM says
Oil futures finished higher, with expectations for stronger energy demand from China still providing support, despite data showing a 4th straight week of gains in US crude supplies. The Energy Information Administration reported an 8.4M-barrel climb in domestic crude stockpiles for the week. That figure has been inflated by lackluster refining activity to start the year, but also points to a general oversupply for crude during a seasonal weak point for refined product demand. The US benchmark WTI crude for Feb rose 85¢ (1.1%) to settle at $80.33 a barrel. Prices fell 0.9% yesterday after 8 session gains in a row.
Oil futures end higher, with U.S. prices back above $80 a barrel
Gold futures gained, with prices returning to their highest level since Apr after posting back-to-back session declines. Gold prices are rallying as investors seek safety as recession & default risks won't be going away anytime soon. Gold for Feb rose $16 (0.9%) to settle at $1923 an ounce. That was the highest most-active contract finish since Apr 22.
Gold Futures Mark First Gain in 3 Sessions
The stock market continues to meander, looking for direction. Some earnings have not been inspiring. And fears of high inflation & a recession are not going away soon.
Dow Jones Industrials
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