Dow went up 24 (but off early highs), decliners over advancers 3-2 & NAZ gained 27. The MLP index stayed in the 227s & the REIT index was off 1+ to 380. Junk bond funds hardly budged & Treasuries were flattish keeping yields about even. Oil recovered almost 1 to the 77s & gold jumped 13 to 1832.
AMJ (Alerian MLP Index tracking fund)
Following a year marked by record inflation, rising interest rates & a volatile stock market, many Americans found themselves in a worse financial situation at the start of 2023. In fact, 50% of Americans said they are worse off than they were a year ago, according to a Gallup poll conducted in Jan, only the 2nd time since the poll launched in 1976 that 50% or more Americans gave that response. The first was during the last recession in 2008-2009. Only 35% of respondents said they are financially better off than they were a year ago, according to the latest Gallup poll. But prior to the COVID-19 pandemic in 2020, "Americans were almost three times as likely to say they were better off (59%) as worse off (20%)," Gallup noted. That indicated one of the highest ratings for those who said they were better off. The latest news comes as many Americans fear a period of continued high inflation & a possible recession. Even though inflation spikes have been slowing down in recent months, many Americans are feeling the burden of higher prices & are concerned about inflation levels in 2023. More than ½ (67%) of Americans expect inflation to rise in H1-2023, according to Gallup's Mood of the Nation poll conducted in Jan. The Consumer Price Index (CPI), a measure of inflation, increased 6.4% annually in Jan. That follows a 6.5% increase in Dec. Despite the cooling off, inflation remains not far from its Jun peak of 9.1% & considerably far from the Federal Reserve's target of 2%.
Half of Americans say they're financially worse than last year: survey
Hawkish comments by Federal Reserve Chair Jerome Powell about efforts to tame inflation have deepened the inversion of the bond yield curve for Treasury securities, which many analysts have come to view as a leading indicator of an upcoming recession. Powell delivered the Fed's semi-annual update to Congress on monetary policy this week & told lawmakers that the central bank will need to raise interest rates higher than previously expected because inflation has remained persistently high despite a series of rate hikes amid strong economic growth. One of the most closely watched spreads on the yield curve is that between the 2-year & 10-year Treasury notes, which is referred to as the "2/10 spread" as shorthand. The 2/10 spread has been inverted in Jul 2022 – just f4 months after the Fed began to raise rates last Mar. The 2/10 spread reached negative 103.1 basis points on Tues, the largest inversion between those securities since 1981 when the economy was in a recession as the Fed was raising interest rates to tamp down rampant inflation, widened to about 107 basis points yesterday. For context, the 2/10 spread averaged about 84 basis points in recent decades. The 2/10 spread was at its steepest in 2010 when it reached 280 basis points as the economy began to slowly recover from the financial crisis. The deepest inversion of the 2/10 yield curve occurred in 1980 when it reached negative 199 basis points. Rising interest rates on Treasuries mean that rates for auto loans, credit cards and mortgages will all tend to rise as well, raising costs for borrowers & consumers. They also create an incentive for investors to move out of equity markets & into Treasuries as they offer more attractive interest rates.
Treasury bond yield inversion signals economic pain
Pres Biden will make a renewed push to overhaul the nation's tax code & dramatically raise the rates paid by corps & wealthy Americans. The
pres is expected to lay out the tax hikes today as part of his
budget blueprint for federal spending in fiscal 2024, which begins in
Oct. The higher taxes would likely be borne by a sliver of US households. Biden previewed some proposals during his State of the Union address
in Feb, when he called for steeper taxes on billionaires &
floated quadrupling the current 1% levy on the billionaire's tax would impose a 20% rate on both
income & unrealized capital gains, including stock & property of
US households worth more than $100M (about 0.01% of
Americans). Households that were already paying 20% will not be required
to pay an additional tax. The rate may ultimately be even higher at 25%, according to a White House official familiar with the plan. On
top of that, the White House introduced a plan this week to raise
payroll taxes from 3.8% to 5% on Americans earning more than $400K in
a bid to keep Medicare solvent for at least another qtr-century. Another aspect of the plan would apply to business income, in addition
to investment, wages & self-employment income, representing a change
from the initial surtax levied when applied under the Affordable Care
Act. Under
Biden's envisioned budget, the nation's deficit would shrink by more
than $2T over the next decade. In fiscal year 2022, the federal
deficit climbed to nearly $1.4T, according to the Congressional
Budget Office, while the national debt ballooned past $31T for
the first time. While that marked a decline from the previous year, it
was still the 4th-largest annual deficit in American history. None of the tax hike proposals are likely to garner much support in the
House, now under Rep control following the 2022 midterm
elections. Reps have already indicated Biden's budget will be dead on arrival after it is formally introduced today.
Why Biden's budget blueprint is expected to be dead on arrival
Everbody is waiting for the jobs number tomorrow, so today is pretty much a vacation day in the stock market.
Dow Jones Industrials
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