Dow dropped 85, decliners over advancers 3-2 & NAZ was off 25. The MLP index remained in the 226s & the REIT index recovered 1 to the 387s. Junk bond funds crawled higher & Treasuries were little changed in price. Oil rebounded 1+ to the 75s & gold slipped back 18 to 1823.
AMJ (Alerian MLP Index tracking fund)
Despite the Federal Reserve's best efforts, high inflation is sticking around & putting the US economy on a "collision" course, according to former Treasury Secretary Larry Summers. Summers, a Harvard University professor who served in both the Clinton & Obama administrations, said that recent evidence of strong underlying inflationary pressures in the economy suggests that the Fed's tighter monetary policy is having a limited impact. "The Fed’s been trying to put the brakes on, and it doesn’t look like the brakes are getting much traction," he said. In the span of just a year, the Fed has voted to raise its benchmark interest rate from zero to 4.5-4.75%. At their last meeting, policymakers signaled that a "couple more" increases are on the table this year. Despite the aggressive interest-rate hike campaign, inflation remains uncomfortably hot. The Labor Dept reported last week that the consumer price index rose 0.5% in Jan, the most in 3 months. The annual inflation rate also surprised to the upside at 6.4%, underscoring the stickiness of high consumer prices that have broadened throughout the economy. That raises the risk that the Fed hikes interest rates much higher than previously forecast — & keeps them elevated for longer, according to Summers. He projected that the central bank will take longer to get to its peak policy rate or that it will once again pick up the pace of hikes. "The risk is that we're going to hit the brakes very, very hard," he said. "And then when we hit the brakes very, very hard, that's going to kick in at the same time that some of those negative cyclical dynamics about rising savings and excess inventory and so forth are kicking in." He warned that the central bank needs to move carefully, given the lagged effect of higher interest rates. "When your brakes don't get much traction, two things happen. You can be moving too fast, that's the inflation pressure, & you can be setting yourself up for some kind of collision or crash down the road," Summers added. "Both of those things, I think, are real risks in this environment."
US economy is on a 'collision' course, Larry Summers warns
Month after month of stubbornly high inflation has squeezed Americans' budgets to the point that many are relying on credit or dipping into their savings in order to make ends meet. Now, the percentage of US adults with more credit card debt than emergency savings has reached a new high. In survey results from Bankrate, 36%, of US adults reported that their credit card debt outweighs their emergency savings. That is the highest level recorded since the poll launched 12 years ago & it is a marked increase from 22% in 2022 & 27% in 2022. Nearly ½ of respondents, 49%, said they have either less money in emergency savings or none at all compared to a year ago, according to the findings. 26% reported that they have more savings than in 2022 & ¼ said their savings are at roughly the same point they were 12 months earlier. "It’s clear that the less-than-optimal economy, including historically high inflation coupled with rising interest rates, has taken a double-edged toll on Americans," said Bankrate senior economic analyst Mark Hamrick. "Many have resorted to tapping their emergency savings, if they have it, or have taken on credit card debt or some combination," Hamrick continued. "Adding to the challenge is the record high level of credit card interest rates, punitive for those who fail to pay off their balances immediately." Bankrate reported earlier this month that the average credit card APR, or annual percentage rate, set a new record of 19.14%, the highest since tracking began in 1985. The previous record was 19% set in 1991. The New York Federal Reserve Bank reported last week that US household debt climbed to a record $16.9T in the last qtr of 2022, with credit card balances alone reaching $989B.
Credit card debt soars as inflation continues to grip Americans
Treasury Secretary Janet Yellen said the US would resume economic talks with China “at an appropriate time” as Beijing continues to sell its vast stock of Treasuries & as the US warns against possible sanctions violation in relation to Russia. “I don’t have a specific timeframe in mind for doing that,” Yellen said ahead of a G-20 financial leaders meeting in Bengaluru, India. “But I believe it’s important to do so and I’m certainly open to having those conversations,” she added. Yellen said there are “many areas” where the US & China need to work together to address global challenges, including food security, debt & climate change. Good communication between the 2 countries is key for the macroeconomic & financial situations domestically & within the global economy more widely, Yellen said. The Treasury Secretary met with the Vice Premier of the People's Republic of China, Liu He, on Jan 18, to discuss economic policy — a meeting Yellen described as “constructive.” Pres Biden & Chinese Pres Xi Jinping both called for more cooperation when they met virtually in Nov. Yellen's comments come ahead of an expected meeting between Pres Xi & Russian Pres Vladimir Putin this spring as Russia looks to deepen its ties with China. China's hoard of US gov bonds stood at $862B, which was the lowest level since 2010. Over the course of 2022, Beijing’s holdings reportedly shrank by $174B.
U.S. will resume economic talks with China ‘at an appropriate time,’ Yellen says
Stocks began trading with higher prices, but enthusiasm has faded in the last hour. There is a serious shortage of favorable news stories to inspire buying by the bulls.Dow Jones Industrials
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