Dow dropped 208, decliners over advancers better than 3-1 & NAZ declinied 71. The MLP index fell 2+ to the 224s & the REIT index was off 2+ to the 367s. Junk bond funds were weak & Treasuries had more buying which lowered yields. Oil was down pennies after yesterday's big rise to over 80 & gold vaulted 36 to 2036.
AMJ (Alerian MLP Index tracking fund)
Treasury Secretary Janet Yellen said that the unexpected oil production cut announced by OPEC+ is an "unconstructive act" that will create more uncertainty for the global economy & complicate efforts to bring down inflation. "I think it’s a regrettable action that OPEC decided to take. I’m not sure yet just what the price impact will be," Yellen said. "I think we need to wait a little longer for, you know, to really assess that." A group of OPEC+ countries led by Saudi Arabia, Iraq & the UAE announced a surprise oil production cut on that will reduce the energy bloc's output by 1.15M barrels per day from May thru the end of this year. The latest cuts are in addition to the 2M barrels per day output cuts OPEC+ announced in Oct. 5 members of the Organization of the Petroleum Exporting Countries (OPEC) — Saudi Arabia, Iraq, UAE, Kuwait & Algeria – were joined by a pair of OPEC+ countries, Kazakhstan & Oman, in announcing the reductions. Oil prices surged when markets opened yesterday in the wake of the announcement as markets reacted to the prospect of tighter energy supplies. Prices for West Texas Intermediate crude spiked to more than $80.45 per barrel, an increase of over 6% after it had closed around $75.50 on Fri. "Clearly, it’s not a positive for global growth," Yellen said. "And it adds to uncertainty and burdens at a time when inflation is already high."
Yellen reacts to surprise OPEC+ oil production cut
Job openings fell below 10M in Feb for the first time in nearly 2 years, in a sign that the Federal Reserve's efforts to slow the labor market may be having some impact. Available positions totaled 9.9M, a drop of 632K from Jan's downwardly revised number, the Labor Dept reported in its monthly Job Openings & Labor Turnover Survey. The forecast had been looking for 10.4M. It was the first time vacancies fell below 10M since May 2021. The Fed has targeted the red-hot labor market in its quest to bring down inflation, which had been running at a 41-year high in the summer of 2022. The central bank has raised benchmark interest rates 9 times since Mar 2022, but those moves had been appearing to have little impact on the jobs situation. Prior to the Feb data, job openings had been outnumbering available workers by nearly 2 to 1. The latest figures bring that ratio down to less than 1.7 to 1. Treasury yields fell following the release as the data could help dissuade the Fed from further rate hikes. Stocks moved lower.
Job openings tumbled below 10 million in February for the first time in nearly two years
The stress on the financial sector caused by 2 bank failures in the
US last month is still a threat & should be addressed by a
reimagining of the regulatory process, according to JPMorgan Chase (JPM), a Dow stock, CEO Jamie Dimon. “As
I write this letter, the current crisis is not yet over, and even when
it is behind us, there will be repercussions from it for years to come,”
the longtime CEO said in his annual letter to shareholders. “But importantly, recent events are nothing like what occurred during the 2008 global financial crisis,” he added. The recent banking issues in the US began with the collapse of Silicon Valley Bank (SVB), which was closed by regulators on Mar 10 as depositors pulled tens of Bs of $s from the bank. The smaller Signature Bank was closed 2 days later. And in Europe, Swiss regulators brokered a purchase of Credit Suisse by UBS. JPM & other large banks stepped in to make $30B of deposits at First Republic, another regional lender that investors feared could become the next SVB. The
stress on the regional banks has led investors & analysts to suggest
that the “too big to fail” institutions would be a beneficiary of the
crisis, but Dimon said JPM wants to strengthen the smaller banks
for the benefit of the whole financial system. “Any crisis that damages Americans’ trust in their
banks damages all banks – a fact that was known even before this
crisis. While it is true that this bank crisis ‘benefited’ larger banks
due to the inflow of deposits they received from smaller institutions,
the notion that this meltdown was good for them in any way is absurd,”
Dimon wrote. Dimon
also cautioned against knee-jerk changes to the regulatory system. He
wrote that most of the risks, including the potential losses from
held-to-maturity bonds, were “hiding in plain sight.” The interconnected
network of SVB's deposit base was the unknown variable, he said. “The
recent failures of Silicon Valley Bank (SVB) in the US &
Credit Suisse in Europe, & the related stress in the banking system,
underscore that simply satisfying regulatory requirements is not
sufficient. Risks are abundant, and managing those risks requires
constant and vigilant scrutiny as the world evolves,” Dimon continued. He instead called for more forward-looking regulation &
pointed out that the held-to-maturity bonds that have become problems
for many banks are actually highly rated gov debt that scores
well under current rules, & that recent stress tests did not game out a
rapid rise in interest rates. “This is not to absolve bank
management – it’s just to make clear that this wasn't the finest hour
for many players. All of these colliding factors became critically
important when the marketplace, rating agencies and depositors focused
on them,” Dimon wrote. He said that regulation should be “less
academic, more collaborative” & that policymakers should be more wary
of potentially pushing some financial services to nonbanks & so-called
shadow banks.
Jamie Dimon says the banking crisis is not over and will cause ‘repercussions for years to come’
The economy is slowing . That's good news on the inflation front but not good news on the jobs front, among other things. Meanwhile gold is approaching record highs due to demand from nervous investors.
Dow Jones Industrials
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