Dow dropped 357, decliners over advancers 3-2 & NAZ slid back 78. The MLP index added 1+ to the 232s & the REIT index declined 4+ to the 401s. Junk bond funds were slightly lower & Treasuries had selling which raised yields. Oil was off 1+ to the high 78s & gold slid back 1 to 1862.
AMJ (Alerian MLP Index tracking fund)
Inflation turned higher to start 2023, as rising shelter, gas & fuel prices took their toll on consumers, the Labor Dept reported. The consumer price index, which measures a broad basket of common goods & services, rose 0.5% in Jan, which translated to an annual gain of 6.4%. The forecast had been looking for respective increases of 0.4% & 6.2%. Excluding volatile food & energy, the core CPI increased 0.4% monthly & 5.6% from a year ago, against respective estimates of 0.3% & 5.5%. Rising shelter costs accounted for about ½ the monthly increase, the Bureau of Labor Statistics said. The component accounts for more than 1/3 of the index & rose 0.7% on the month & was up 7.9% from a year ago. The CPI had risen 0.1% in Dec. Energy also was a significant contributor, up 2% & 8.7%, respectively, while food costs rose 0.5% & 10.1%, respectively. Rising prices meant a loss in real pay for workers. Average hourly earnings fell 0.2% for the month & were down 1.8% from a year ago. While price increases had been abating in recent months, Jan's data shows inflation is still a force in a US economy in danger of slipping into recession this year. That has come despite Federal Reserve efforts to quell the problem. The central bank has hiked its benchmark interest rate 8 times since Mar 2022 as inflation rose to its highest level in 41 years last summer. There was some good news in the report. Medical care services fell 0.7%, airline fares were down 2.1% & used vehicle prices dropped 1.9%, according to seasonally adjusted prices. The rise in housing prices is keeping a floor under inflation, though those numbers are widely expected to decelerate later in the year.
Inflation rose 0.5% in January, more than expected and up 6.4% from a year ago
The Biden administration announced another sale of oil from the Dept of Energy's Strategic Petroleum Reserve (SPR),
with 260M barrels set to be delivered to the market from Apr
1 - Jun 30 which will take the number of barrels in the reserve to
a new low dating back to 1983. Unlike the largest-ever drawdown
of the SPR that Biden announced in response to Russia's war in Ukraine,
the latest release of 26M barrels is in response to a requirement
included in 2 laws enacted by Congress during the Obama
administration under the Bipartisan Budget Act of 2015 & the Fixing
America's Surface Transportation (FAST) Act. The announcement comes
ahead of a potential uptick in gas prices as the US nears the summer
driving season. "Biden is front-loading SPR barrels to avoid a
summer gasoline price spike," said Phil Flynn, analyst Price Futures
Group. "There are growing concerns
among the Biden administration that gas prices are headed back to $4.00 a
gallon and the president is fearful of the political heat he will have
to take." Price added, "By pushing barrels forward from previously announced
sales he is robbing Peter to pay Paul but is discouraging future U.S.
oil and gas investment. There should be some backlash from Republicans
who are getting tired of using the SPR for political purposes and
creating short-term price relief in exchange for much higher prices down
the road." When Biden took office, the SPR
contained 638M barrels out of a congressionally authorized
maximum capacity of 713M barrels. After a series of releases
totaling more than 260M barrels, the SPR is at about 371M barrels as of Feb 2023 — the lowest level since 1983, according to data from the Energy Information Administration
(EIA). Selling another 26M barrels from the SPR without adding new barrels of oil
to offset the decline would take the SPR inventory to about 346M
barrels, which would be the lowest level since 1983. The sizable decline in the number of barrels contained during the SPR
has made lawmakers balk at further reductions & the bipartisan omnibus
spending bill that Congress passed in Dec canceled mandated sales
of about 140M barrels that were going to occur in fiscal years
2024 - 2027.
Biden to sell 26M barrels of oil despite lowest levels in decades
Coca-Cola (KO), a Dow stock & Dividend Aristocrat, quarterly revenue that beat expectations, driven by higher prices on its drinks. But
those higher prices have hurt demand for products like Simply
Orange Juice & Fairlife Milk. Unit case volume, which
strips out the impact of currency & price changes, fell 1% in Q4. Q4 EPS was 47¢, down from 56¢ a year earlier. Excluding an impairment charge tied to its Russian business & other items, EPS was 45¢. Net sales rose 7% to $10.1B, driven by 12% growth in pricing & a more expensive mix of drinks sold. Unit
case volume was flat in North America & slipped 5% in its Europe,
Middle East & Africa segment. CEO James Quincey said last qtr that
European consumers were changing their behavior in response to soaring
inflation. “It looks like the European economy is going to avoid a
technical recession, but clearly consumer demand is softening, and I
think that’s likely to continue into the rest of the year,” he added. He also said that its US. business is still performing well & the reopening of China will likely boost sales this year. For 2023, KO projects comparable revenue growth of 3-5% &
comparable EPS growth of 4-5%. The
forecast for revenue growth is 3.9% & EPS growth of 3%
for the year. “Inflation is likely to moderate as we go through
the year, and therefore we expect the rate in which prices are going to
increase will start to moderate and become more normal by the end of the year,” James said. The stock fell 74¢.
If you would like to learn more about KO, click on this link:
club.ino.com/trend/analysis/stock/KO_aid=CD3289&a_bid=6ae5b6f7
Coca-Cola revenue rises in fourth quarter, fueled by higher prices
Traders were disappointed with the CPI reading & they are selling. Bigger picture, the trend of lower inflation rates remain intact although there are monthly variations. Producer price data is coming on Thurs which will give signals about inflation in the coming weeks & months. Dow continues its sideways trend near 34K.Dow Jones Industrials
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