Dow slid back 34, decliners over advancers 3-1 & NAZ dropped 119. The MLP index was off 1+ to the 228s & the REIT index pulled back 2+ to the 407s. Junk bond funds retreated & Treasuries continued to be sold. Oil finished fractionally higher to the 74s & gold went up 6 to 1882 (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)
Treasury Secretary Janet Yellen said she sees a path in which the US economy avoids a recession, citing a slow-but-steady decline in inflation, strong job growth & a historically low unemployment rate. "You don't have a recession when you have 500,000 jobs and the lowest unemployment rate in more than 50 years," Yellen said. "What I see is a path in which inflation is declining significantly, and the economy is remaining strong." Her comments came just a few days after the Labor Dept reported that the US economy unexpectedly added 517K jobs in Jan, well above the 185K forecast & the unemployment rate dropped to 3.4%, the lowest since 1969. It marked the best month for job creation since Jul. The surprisingly strong hiring data, which occurred despite a slew of layoffs in the tech sector, dashed investor hopes that the Federal Reserve will soon pause its aggressive rate-hike campaign as it tries to cool inflation & the labor market. While Yellen said that tackling inflation remains Pres Biden's #1 domestic priority, she argued the recent data proved the economy is still healthy. "What I see is a path in which inflation is declining significantly, and the economy is remaining strong," she said. "And really that’s a path I believe is possible, and it’s what I’m hoping we will be able to achieve."
Janet Yellen: 'You don't have a recession' with unemployment at 50-year low
As markets await big earnings data this week & more commentary from Federal Reserve Chair Jerome Powell, Bank of America Vice Chairman Keith Banks detailed why it is still forecasting a recession for 2023. As that happens, they've got to get out in front of the cost quickly," Banks said. "What's been announced so far to us is not going to be enough," he continued, "which is why we do think you'll see additional labor weakness as we go through the year." His comments come as Powell prepares to speak tomorrow after the central bank raised interest rates by a qtr of a point. A number of Wall Street banks are forecasting a downturn this year, although they remain uncertain about its severity. Banks are bracing for a recession because persistent & elevated inflation has pushed the Federal Reserve to raise interest rates at the fastest pace since the 1980s, which threatens to curtail consumer & business spending by pushing borrowing costs higher. Policymakers already approved 7 straight rate increases in 2022, raising the federal funds rate to 4.25-4.5%, the highest level since 2007, & forecast a peak rate of about 5%. He predicted Q4 earnings will come in lower than expected, marking the start of a slowing economy. "We think as the economy slows, revenue is going to slow, and as a result, you're going to start to have some margin pressure and also negative operating leverage, none of which is good for earnings," Banks added.
Bank of America 'still forecasting' 2023 recession
In the wake of a US missile attack Sat that destroyed a Chinese surveillance balloon, political & diplomatic fallout ramped up today in both Beijing & DC. The latest Chinese spy balloon is believed to be the 5th Chinese surveillance balloon detected over the continental US since 2017, John Kirby, spokesman for the White House National Security Council, told reporters. 3 of those balloons crossed into US territory during the Trump administration, & there was one previously during Biden's presidency. But each of those incursions “was for brief periods of time, nothing at all like what we saw last week.” Trump & several of his former intelligence chiefs have disputed the idea that surveillance balloons flew over the US during his presidency, saying they were never briefed about anything like this. Kirby appeared to confirm this, telling reporters that the 3 breaches were only discovered after Trump left office. The decision to shoot down the balloon was “unacceptable and irresponsible,” a Chinese Foreign Ministry spokeswoman said in Beijing. She insisted the military surveillance balloon was merely “a civilian airship used for meteorological and other research purposes,” & she claimed that shooting it down violated Chinese sovereignty. Kirby dismissed this explanation. The balloon “was conducting surveillance over sensitive military sites inside the United States,” he said. “We have reached out to key officials from the previous administration and offered them briefings on the forensics that we did,” said Kirby, & “walk them through what we learned.” Kirby also revealed new information about the balloon itself, including that it had propellers. “This balloon has the ability to maneuver itself, to speed up, or slow down and to turn, so it has propellers ... that allow it to to change directions,” he added. Flying 60K feet in the air, the balloon did not have a steering system like a car or a plane, however. “The presence of propellers does not mean that you don’t still have limited maneuverability,” said Kirby, adding that the propellers were on the top of the balloon. Still, he said, “it has the capability to loiter, and to introduce some limited maneuvers.”
Chinese spy balloon fallout roils Washington and Beijing
Gold futures climbed to recoup a small portion of last week's losses. The precious metal was left licking its wounds, after sliding almost 5% from its highs last week. Gold was already looking quite overbought & was struggling for momentum on its most recent surge. So it was potentially primed for a correction but the US jobs data certainly finished the job. Gold for Apr rose $2 to settle at $1879 ounce. Prices for the most-active contract were 2.8% lower on Fri to settle at their lowest since Jan 10.
Gold futures rebound after falling to three-week low
Oil futures settled higher, logging a partial rebound from last week's steep losses. Saudi Arabia unexpectedly lifted most prices for oil that will be shipped to Asia in Mar. The higher prices offer a sign of stronger than anticipated Chinese oil demand & that should give the market a lot of support amid growing concerns about spare oil production capacity. US benchmark West Texas Intermediate crude for Mar rose 72¢ (1%) to settle at $74.11 a barre. Front-month contract prices, fell 3.3% on Fri to settle at their lowest since Jan 4, down 7.9% for the week
Oil finishes higher on signs of growing Chinese energy demand
Nothing like higher interest rates (after their recent retreat) & recession comments to shake up investors. Nervous ones are buying safe haven gold.
Dow Jones Industrials
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