VerySmartInvesting: Markets fall as interest rates keep climbing

Monday, February 6, 2023

Markets fall as interest rates keep climbing

Dow dropped 58, decliners over advancers 3-1 & NAZ was off 35. The MLP index fell 1+ to the 228s & the REIT index declined 3 to the 407s on higher interest rates. Junk bond funds were mixed & Treasuries saw more selling bringing higher yields. Oil slid lower in the 73s & gold added 4 to 1881.

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Dell Tech (DELL) will eliminate about 6650 jobs because of a drop in demand for the company's personal computers. The 6650 jobs cut is about 5% of its global workforce. Co-Chief Operating Officer Jeff Clarke wrote to employees that the company is experiencing market conditions that "continue to erode with an uncertain future." Clarke explained that previous cost-cutting initiatives, which included a pause on hiring & limits on travel, are no longer sufficient. A spokesperson for Dell said that department reorganizations & job cuts are an opportunity to drive efficiency. Other companies have recently slashed thousands of jobs to make up for a decline in demand, as consumer & corp spending dips due to soaring inflation & heightened interest rates. In Jan, layoffs in the US were the highest in 2 years as technology companies reportedly cut jobs at the 2nd-highest pace on record in preparation for a potential recession. The stock fell 1.47.
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Dell to cut 6,650 jobs amid diminishing demand for company's computers

Treasury yields climbed as investors assessed the economic outlook & awaited a series of data releases & Federal Reserve speaker remarks slated for the week. The yield on the 10-year Treasury was up by nearly 9 basis points at 3.619%. The 2-year Treasury yield was trading at 4.431% after climbing around 13 basis points. Yields & prices have an inverted relationship & one basis point is equivalent to 0.01%. Investors considered the outlook for the US. economy, including inflation developments & whether a deep recession could be avoided. Investors are hoping for fresh insights about the state of the economy, with balance of trade figures due tomorrow & the preliminary Michigan consumer sentiment report expected Fri. A series of Fed speakers are also due to make remarks, including Chair Jerome Powell tomorrow. Investors will be looking to central bank officials for further clues about monetary policy plans & their expectations for the economy. On Fri, Jan's nonfarms payroll report showed that the economy added 517K jobs during the month, far above the 187K expected.

Treasury yields rise as investors assess economic outlook

The EU's ban on Russian diesel imports & other refined petroleum products went into effect yesterday, the latest attempt by the 27-nation bloc to defund Russian Pres Vladimir Putin's war machine. The G7, which consists of the US, Canada, France, Germany, Italy, Japan & the UK, also agreed to aprice cap of $100-per-barrel on Russian diesel sales for non-Western countries. The cap is enforced by a requirement that shippers & insurers, which are largely based in the West, only handle oil products priced below the limit. A price cap of $60-a-barrel was previously placed on Russian crude oil shipments. "Today’s agreement builds on the price cap on Russian crude oil exports that we set in December and helps advance our goals of limiting Russia’s key revenue generator in funding its illegal war while promoting stable global energy markets," Treasury Secretary Janet Yellen said. Russian coal & most crude oil is already banned in Europe, while the Kremlin has cut Europe off from natural gas shipments. The cap is supposed to prevent a spike in diesel prices, which have already been elevated in the wake of Russia's invasion of Ukraine, contributing to inflation for everyday goods that are transported by diesel-powered trucks around the world. Europe will also have to look elsewhere for supplies of diesel, such as the US, the Middle East & India. Russia earned over $2B from diesel sales to Europe in Dec.