Dow went up 71, advancers over decliners about 3-2 & NAZ gained 23. The MLP index was steady at 229 & the REIT index slid lower to the 404s. Junk bond funds inched higher & Treasuries had buying, bringing lower yields. Oil retreated 1+ to the 77s following yesterday's advance & gold lost 5 to 1885.
AMJ (Alerian MLP Index tracking fund)
A chorus of Federal Reserve officials are laying the need for additional interest rate hikes in coming months, including the possibility of a higher-than-expected peak, amid signs of underlying inflationary pressures in the US economy. In separate speeches & interviews this week, several policymakers hammered home a hawkish message: While they welcome recent declines in inflation, they warn that the Fed still has a ways to go in its fight to wrangle prices under control. "We have farther to go," Fed Governor Christopher Waller said. "And it might be a long fight, with interest rates higher for longer than some are currently expecting. But I will not hesitate to do what is needed to get my job done." The Fed last week voted to raise its benchmark interest rate another qtr percentage point to 4.5-4.75% & signaled that a "couple more" increases are on the table this year. But the astonishingly strong Jan jobs report has prompted some traders to reexamine their rate-hike expectations for the year, with some investors betting the Fed could raise rates as high as 6% by the end of 2023. That's because the hiring surge in Jan has complicated the Fed's fight to lower prices & tame inflation, some of which stems from the imbalanced labor market. Employers added a whopping 517K new jobs last month – nearly triple what was expected, while the unemployment rate dropped to 3.4%, a rate not seen since 1969. The Labor Dept also revised the job figures in Nov & Dec higher, suggesting the economy entered the new year with more momentum than initially thought. Minneapolis Fed Pres Neel Kashkari said Tues that the blowout jobs report is evidence the Fed needs to do more to combat inflation. A voting member of the Federal Open Market Committee (FOMC) this year, Kashkari sees rates rising to 5.4% this year.
Fed officials signal interest rates may need to go higher than expected
½ of Americans say they are financially worse off now than they were a year ago, the highest since 2009, according to a Gallup survey. An even greater share of lower-income respondents said they are losing ground, according to the Jan. 2-22 survey. Roughly 61% of those with household incomes below $40K report that their financial situation has deteriorated over the past year. Just 26% indicated that it has improved. By comparison, about 49% & 43% of respective middle- & high-income households said their financial situation worsened last year. Stubbornly high inflation has created severe financial pressures for most US households, which are forced to pay more for everyday necessities like food & rent. The burden is disproportionately borne by low-income Americans, whose already-stretched paychecks are heavily impacted by price fluctuations. The Labor Dept reported last month that the consumer price index, a broad measure of the price for everyday goods including gasoline, groceries, & rents, fell 0.1% in Dec but climbed 6.5% on an annual basis. The number marked the slowest annual inflation rate since Oct 2021 & the slowest monthly rate since Apr 2020, at the height of the COVID-19 lockdowns. Still, inflation remains about 3 times higher than the pre-pandemic average, underscoring the persistent financial burden placed on Ms of households by high prices. "High inflation, rising interest rates, and declining stock values in 2022 all likely took their toll on Americans’ financial situations, with half saying their situation got worse in the past year," the Gallup survey said. "Lower-income Americans, who have consistently been most likely to report that higher prices are causing them financial hardship, are particularly inclined to say they are financially worse off." Still, despite the overall pessimism, Americans remain optimistic about their financial health in the year ahead. About 60% of respondents said they expect to be better off a year from now, while just 28% predict they will be worse off. "If this optimism holds and consumers act accordingly, it may help to minimize or avert an economic recession," the survey found.
Highest number of Americans say they are financially worse off since 2009
PepsiCo (PEP), a Dividend Aristocrat, reported earnings & revenue that beat expectations, fueled by higher prices for its snacks & drinks. But
the company saw volume fall 2% across its food business worldwide as
those price hikes hurt consumer demand. Still, PEP plans to sharpen
its “revenue management,” which typically means raising prices, based on
projections that inflationary pressure will persist in 2023. Q4 EPS was 37¢, down from 95¢ a year earlier. PEP wrote down some of its
brands, including SodaStream & Pioneer Foods, due to higher interest
rates. Excluding those impairment charges, gains from selling its
juice business, write-downs of its Russian assets & other items, EPS was $1.67. Net sales rose 10.9% to $28B. Organic revenue, which strips out the impact of acquisitions & divestitures, climbed 14.6% in the qtr. But
demand for PEP products actually shrank during the qtr. Volume,
which excludes pricing & currency fluctuations, fell 7% at Quaker
Foods North America & 2% at its North American beverage division. Looking to 2023, PEP is projecting a 6% increase in organic revenue & 8% growth in its core constant currency EPS. Expectations are for net sales growth of 3.5% & EPS
growth of 7.3%. “Would we expect volumes to be down? Perhaps
they’ll be down little bit,” CFO Hugh Johnston said. He added that there may be a “mild” recession in the US & some developed markets in H2. The stock rose 1.99.
If you would like to learn more about PEP, click on this link:
club.ino.com/trend/analysis/stock/PEP_aid=CD3289&a_bid=6ae5b6f7
PepsiCo earnings beat expectations as price hikes boost snack and beverage sales
Fed officials keep talking about more rate hikes which makes investors nervous. While the inflation numbers are declining, consumers have to work with higher costs just about everywhere. Gold remains a popular option for some investors.
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