Friday, March 3, 2023

Markets higher while Treasury yields pull back from their recent rise

Dow rose 143, advancers over decliners 5-2 & NAZ gained 119.  The MLP index was up 1+ to the 228s & the REIT index added 3+ to 386.  Junk bond funds crawled higher & Treasuries were purchased, reducing yields after their latest surge (more below).  Oil edged up in 78s & gold added 10 to 1850.

AMJ (Alerian MLP Index tracking fund)


 

 




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Treasury yields fell as investors awaited a series of remarks from Federal Reserve speakers that could provide fresh hints about the central bank's interest rate policy plans.  The yield on the benchmark 10-year Treasury was trading at 3.987% after falling 8 basis points & the 2-year Treasury yield was down by more than 5 basis points at 4.848%.  During yesterday's trading session it had climbed to levels last seen in 2007.  Yields & prices move in opposite directions.  One basis point is equivalent to 0.01%.  Traders have been watching 4% as the key level on the 10-year that could trigger another down move in stocks.  At times this week when the 10-year rate rose above that point, stocks retreated.  The 10-year Treasury is a benchmark rate that influences mortgages & car loans so a breakout in the yield could ripple thru the economy.  A slew of Fed speakers is expected to speak today & investors will be scanning their comments for insights into whether the central bank will pursue tighter monetary policy for longer.  Throughout the week, several Fed officials indicated that interest rates could go higher still & uncertainty about whether the central bank could increase the pace of rate hikes again has spread.  On Wed, Minneapolis Fed Pres Neel Kashkari said he would consider a 50 basis point rate hike, while Atlanta Fed Pres Raphael Bostic yesterday advocated for continued 25 basis point increases.  Many investors had been hoping for the central bank to pause rate hikes this year as they fear elevated rates could cause the US economy to contract.

Treasury yields decline as investors look to Fed speakers for policy hints

Amazon (AMZN) is pausing construction of its 2nd headquarters, dubbed HQ2, in Virginia.  John Schoettler, AMZN's real estate head, said the company is pushing out the groundbreaking of PenPlace, the 2nd phase of the sprawling northern Virginia campus.  The first phase of the campus, known as Metropolitan Park, is expected to open on time this Jun & will be occupied by 8000 employees.  The move comes as CEO Andy Jassy has taken steps to curtail expenses across the company in the face of slowing revenue & a gloomy economic outlook.  That's led to the company announcing the largest layoffs in its history, totaling more than 18K employees, while also reevaluating its real estate portfolio & sunsetting some projects.  “We’re always evaluating space plans to make sure they fit our business needs and to create a great experience for employees, and since Met Park will have space to accommodate more than 14,000 employees, we’ve decided to shift the groundbreaking of PenPlace (the second phase of HQ2) out a bit,” Schoettler said.  “Our second headquarters has always been a multi-year project, and we remain committed to Arlington, Virginia, and the greater Capital Region.”  The stock rose 1.79.
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Amazon pauses construction of second headquarters in Virginia

Europe's top diplomat said the West needs to be vigilant when it comes to support for Russia from China, after US officials warned that Beijing could be about to send lethal weapons to Moscow.  China's role in intl politics in the wake of Russia’s invasion of Ukraine last year has been a particularly sensitive one for western nations.  The CIA Director Bill Burns said last week that he is confident China is considering providing lethal aid to Moscow.  This could spark a major escalation in the war, giving Russia's struggling military a significant boost.  “China has always told us they are not providing arms to Russia and they don’t plan to do it, very much explicitly,” Josep Borrell, the EU's High Representative for Foreign Affairs, said.  “But certainly, we have to remain vigilant.”  His comments came at the end of a G-20 foreign affairs meeting in India which was marked by a stark division of opinions toward Russia's invasion of Ukraine.  “There is a big divide, and Russia will continue the war,” he added.  Secretary of State Antony Blinken met his Russian counterpart briefly on the sidelines of the G-20 gathering, in what represented their first in-person contact since the invasion started more than a year ago.  Blinken had previously said that there is information that China is “strongly considering providing lethal assistance to Russia.”

The U.S. warned on China’s support for Russia. The EU says we need to be vigilant

Markets will continue to adjust to comments made by Fed officials.  Meanwhile, the economy is not robust.  So stocks are struggling.

Dow Jones Industrials

 






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