Dow retreated 55, decliners a little ahead of advancers & NAZ was up 21. The MLP index fell 1+ to the 215s & the REIT index was off 2 to 370. Junk bond funds remained weak & Treasuries continued to be sold, bringing higher yields. Oil remained higher, up 1+ to the 73s, & gold rose 4 to 2029 (more on both below).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
Chicago Federal Reserve Bank Pres Austan Goolsbee said it is "way too premature" to suggest that stronger-than-expected job gains in Apr mean the central bank will need to raise interest rates again when it meets again in Jun. "We know that credit conditions like the ones we are seeing now in the past have been correlated with recessions, credit crunches," Goolsbee said. "It's way too premature to know what to do with monetary policy." Goolsbee voted with all other Fed policymakers to raise the Fed's policy rate by a qtr point to 5.00-5.25%. Fed Chair Jerome Powell said interest rates are now close to, or maybe at the point of, being high enough to bring down inflation & that the central bank would make "meeting-by-meeting" decisions on policy based on its read of incoming economic data. Goolsbee said he is paying particular attention to credit conditions, given the recent failure of First Republic Bank & the troubles of other regional banks. "It has to give you some pause" about raising rates, he said, because tighter credit conditions are likely to slow the economy. "Whatever tightening that you are going to need to do has got to take into account of ... the banking system's impact," Goolsbee said.
Fed's Goolsbee: 'Way Too Premature' to Expect June Rate Hike
Americans are bracing for higher inflation over the next few years even as they anticipate a drop in consumer prices over the short term, according to a key Federal Reserve Bank of New York survey. The median expectation is that the inflation rate will be up 4.4% one year from now, according to the New York Federal Reserve's Survey of Consumer Expectations, down from 4.7% in Mar. But consumers anticipate that inflation will remain sticky in coming years, according to the survey, estimating that inflation will hover around 2.9% 3 years from now & 2.6% 5 years from now. By comparison, central bank policymakers projected in their latest economic forecasts that inflation will fall to 2.5% next year. Americans expect the cost of homes & gasoline to climb over the next year, but they projected declines in the price of college tuition & food. The survey, which is based on a rotating panel of 1300 households, plays a critical role in determining how Fed policymakers respond to the inflation crisis. That is because actual inflation depends, at least in part, on what consumers think it will be. It is sort of a self-fulfilling prophecy – if everyone expects prices to rise by 3% in the year, that signals to businesses that they can increase prices by at least 3%. Workers, in turn, will want a 3% pay raise to offset the rising costs. Chair Jerome Powell has repeatedly stressed that policymakers are committed to wrangling inflation back to the Fed's 2% target goal. "Ultimately, we're not looking to get to 3% and then drop our tools," Powell told reporters last week. "We have a goal of getting to 2%. We think it's going to take some time. We don't think it will be a smooth process. I think we're going to need to stay at this for a while."
Americans bracing for higher inflation in the long term, NY Fed survey shows
PacWest Bancorp (PWB) gave back most of an early rally today as the rebound for regional bank stocks appeared to lose some steam. Shares of PacWest rose about 5% today, adding to a near 82% pop on Fri. The company on late Fri evening announced a div cut to just 1¢ from 25¢ in the previous qtr. CEO Paul Taylor reassured investors that the bank's businesses remains “fundamentally sound.” “Given current economic uncertainty, recent volatility in the banking sector and potential changes in regulatory capital requirements, we view reducing the dividend as a prudent step to accelerate our plans to build capital,” Taylor said. The stock opened up nearly 30%, but the gains faded in early trading. Other regional banks also coughed up early gains. Worries about regional banks lingered after regulators took possession of First Republic last week, resulting in the 3rd failure of an American bank since the start of Mar. A rapid increase in interest rates has weighed on banks with long-term bond assets, causing a deposit flight. Institutions with a high proportion of uninsured deposits found themselves particularly vulnerable because customers feared losing savings in a bank run.
Regional bank rebound stalls on Monday as PacWest gives back much of its early trading gains
Gold futures posted a gain, their 4th in 5 sessions as prices recouped part of Fri's 1.5% decline. It is just a technical trade with buyers on dips. Investors awaited US inflation readings due out later this week for hints on the Federal Reserve's path for interest rates. With the London Metal Exchange closed for the coronation holiday, hedging demand by physical gold buyers is absent today. Gold for Jun settled at $2033 an ounce.
Gold Futures Mark 4th Gain in 5 Sessions
Crude futures extended their gains, rising almost 3% in today's session which added to Fri's 4% rally, as fewer headlines on the specter of a US recession spurred greater technical recovery & risk-taking in oil markets battered over the past 3 weeks by worries over the economy & a banking contagion. West Texas Intermediate (WTI) crude settled up $1.82 (2.6%) at $73.16 per barrel. That was on top of Fri's gain of $2.78. Despite the late rebound from last week, the US crude benchmark finished the week down 7%, after prior losses of 1.2% & 5.8%, respectively, for the weeks ended Apr 28 & Apr 21. London-traded Brent crude settled today’s trade up $1.7 (2.3%) at $77.01, after finishing Fri's session up $2.80. For all of last week though, Brent was down about 5%, after prior weekly losses of 2.6% & 4.9%.
Oil Extends Gains Amid Fewer Recession, Banking Contagion Headlines
With Apr inflation data due later this week, trading was muted today. Meanwhile action on raising the US debt ceiling is a ticking time bomb. Based on current estimates, action will be needed in the next few weeks. And the regional banking crisis has not gone away.
Dow Jones Industrials
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