Dow went down 95, decliners over advancers 2-1 & NAZ added 28. The MLP index was off 1+ to the 226s & the REIT index fell 4+ to the 403s. Junk bond funds fluctuated & Treasuries had only limited buying. Oil recovered 1+ to the high 75s & gold advanced 12 to 1891.
AMJ (Alerian MLP Index tracking fund)
Minneapolis Federal Reserve Pres Neel Kashkari said that explosive jobs growth in Jan is evidence that the central bank has more work to do when it comes to taming inflation. That means continuing to hike interest rates, as he sees a likelihood that the Fed's benchmark borrowing rate should rise to 5.4% from its current range of 4.5-4.75%. “We have a job to do. We know that raising rates can put a lid on inflation,” Kashkari said. “We need to raise rates aggressively to put a ceiling on inflation, then let monetary policy work its way through the economy.” Kashkari spoke just a few days after the Labor Dept reported that nonfarm payrolls grew by 517K in Jan, nearly triple the expectation & the strongest growth for the first month of the year since 1946. The strong jobs growth came despite the Fed’s efforts to use higher interest rates to correct what officials have termed “imbalances” in the labor market between supply & demand. There are nearly 2 open jobs for every available worker, & average hourly earnings rose 4.4% in Jan from a year ago, a pace the Fed considers unsustainable & inconsistent with its 2% inflation goal. The data “tells me that so far we’re not seeing much of an imprint of our tightening to date on the labor market. There’s some evidence that it’s having some effect, but it’s pretty muted so far,” Kashkari added. “I haven’t seen anything yet to lower my rate path, but I’m obviously keeping my eyes open and we’ll see how the data comes in,” he continued. Kashkari's indication that the fed funds rate needs to rise to 5.4% puts him in a more aggressive slot compared with his fellow policymakers, who indicated in Dec that they see the “terminal rate,” or end point of hikes, around 5.1%. The funds rate is what banks charge each other for overnight lending but feeds into a multitude of consumer debt instruments such as car loans, mortgages & credit cards.
Fed’s Neel Kashkari says central bank has not made enough progress, keeping his rate outlook
Valentine's Day spending is expected to reach $25.9B in 2023, one of the highest-spending years on record, according to the National Retail Federation. This year, Americans will shell out $193, on average, on candy, cards, flowers & other gifts for friends, loved ones, classmates & even coworkers, the report found, up from $175 in 2022. Those in a relationship will spend roughly $187 for their significant other, according to a separate LendingTree survey of more than 2000 adults. That's despite the fact that many Americans are already going into more debt just to afford their day-to-day expenses as prices rise. Yet, 27% of couples said they will need to rely on credit cards to cover Valentine's Day costs &, for most of them, it will take at least 2 months to pay it off, LendingTree also found. Almost 1 in 5 Americans think a Valentine's Day gift is worth the credit card debt, according to another report by WalletHub. “It’s always important to be careful about what you are spending on but especially when interest rates are as high as they’ve ever been,” said LendingTree's chief credit analyst Matt Schulz. “The good news with Valentine's Day is that there are so many creative things you can do that don’t cost you any money that can be a really big hit,” he added.
Isn’t it romantic? Valentine’s Day spending jumps, even if it means more credit card debt
Treasury yields were little changed as investors awaited comments from Federal Reserve officials that could provide fresh hints about the economic outlook. The yield on the 10-year Treasury was trading at 3.634% after rising by less than 1 basis point & the 2-year Treasury yield was last down around 3 basis points at 4.431%. Prices & yields move in opposite directions. One basis point equals 0.01%. Fed speakers including Chair Jerome Powell are due to make remarks today. Investors will be scanning the comments for clues about what central bankers expect from the economy, especially in relation to inflation easing & a looming recession. After the Fed's latest meeting ended last week, Powell said disinflation had begun, but also indicated that the central bank would continue its efforts to cool the economy & ease inflationary pressures. Further Fed speakers are due to make remarks as the week continues.
Treasury yields are flat as investors look to remarks from Fed Chairman Powell
Higher interest rates are coming, with the only question being about high they will go. Consumers want to spend which means the Fed has more work to do to control inflation. Unfortunately that signals economic pain is in the winds & gold is favored by nervous investors. The Dow keeps trending sideways (see below).Dow Jones Industrials
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