Dow went up 161, decliners over advancers 5-4 & NAZ dropped 121. The MLP index rose 3+ to the 225s & the REIT index was off 1+ to the 371s. Junk bond funds edged higher & Treasuries were purchased, raising yields (more below). Oil jumped 4+ to 80 on OPEC's production cuts (more below) & gold advanced 17 to 1903.
AMJ (Alerian MLP Index tracking fund)
A group of OPEC+ member countries announced voluntary oil production cuts that will run from May thru the end of this year. The surprise move entails cuts of about 1.15M barrels per day (BPD) & was led by Saudi Arabia, Iraq, UAE & Kuwait. Saudi Arabia's Ministry of Energy said in the production cut "is a precautionary measure aimed at supporting the stability of the oil market." The move will likely cause oil prices to rise as output falls, which in turn would have a negative effect on consumers as gasoline prices increase. Average gas prices in the US have ticked up about 13¢ over the last month to $3.50 a gallon according to AAA. 5 members of the Organization of the Petroleum Exporting Countries (OPEC) – Saudi Arabia, Iraq, UAE, Kuwait & Algeria – were joined by 2 OPEC+ countries that aren't official oil cartel members but often participate in the group's actions. The 5 OPEC members will make the largest cuts to their oil production, with Saudi Arabia cutting 500K BPD, Iraq cutting 211K BPD, UAE cutting 14K BPD, Kuwait cutting 128K BPD & Algeria cutting 48K BPD. The 2 OPEC+ countries participating in the output reduction – Kazakhstan & Oman – will cut 78K BPD & 40K BPD, respectively. The latest oil production cuts come in addition to the 2M BPD output cuts OPEC+ announced in Oct. Russia previously announced a unilateral production cut of 500K BPD in Feb thru the end of the year after Western countries imposed a price cap of $60 per barrel on Russian oil as part of a sanctions package stemming from the invasion of Ukraine.
OPEC+ announces surprise cut to oil production that could raise prices
Treasury yields were higher as the bond market emerged from a wild first qtr. The yield on the benchmark 10-year Treasury note was up by around 9 basis points to trade at 3.498%, while the yield on the 30-year Treasury bond fell 7 basis points to 3.7%. The yield on the 2-year note rose by more than 3 basis points to 4.094%. Yields move inversely to prices. Bond markets endured a chaotic Q1 fueled by the collapse of Silicon Valley Bank & a mixed bag of investor expectations for the direction of monetary policy, as the Federal Reserve continues to grapple with high inflation. Much of the focus for the 2nd qtr will remain on the Fed's likely monetary policy trajectory, with the central bank having indicated that interest rate hikes may be nearing their end after a 25 basis point increase in late Mar.
Treasury yields climb to begin second quarter
Inflation has eased some in recent months after hitting a 4-decade high last year, but worries over rising costs are now at an all-time high for small businesses. The Chamber of Commerce's Q1 Small Business Index found a record 54% of owners cited inflation as their top concern for the first 3 months of the year, marking the 5th consecutive qtr respondents pointed to cost increases as the number one stressor. Respondents' confidence in the national economy also declined in Q1, with only one in 5 (20%) small business owners saying the economy was in good health. That's down from 27% in the previous qtr. The survey results indicate a greater reluctance among owners to expand in the short term. Only 38% said they plan to boost investment in their business over the next year, a drop from 47% in Q4-2022. Tom Sullivan, the VP of small business policy, says the data shows small business are resilient & bullish on their own operations, but see tough times ahead for the economy as a whole & do not want to end up overextended. Sullivan said small business owners are frustrated with leaders in DC because the actions that could bring inflation down are not being done. He listed priorities like bringing more legal workers into the US to fill open jobs, lowering domestic energy costs & streamlining permits to allow trucks to move & shovels to get into the ground to realize growth from the bipartisan infrastructure bill. Small business owners are looking at numerous factors beyond just price hikes on goods that are driving up their cost of doing business when they cite inflation as a concern, he explained. "We have the economist definition, but then we also have the small business definition," Sullivan said. "When it's harder to find and hire employees, and it's harder to keep your existing employees, the folks I talk with every day call that inflation if they have to raise their wages to their employees." "There's no real distinction," he added. "It's all part of this giant gumbo."
Small business owners reveal issue that stresses them out the most
Stocks are having a sluggish start as the new qtr begins. As can be expected, a production cut for oil will raise oil prices which affects all businesses that use oil. The survey results above are not sending a warm message from business owners.
Dow Jones Industrials
No comments:
Post a Comment