Dow declined 46, advancers slightly ahead of decliners & NAZ slid back 22. The MLP index slid 1+ to the 215s & the REIT index fell 1+ to 371. Junk bond funds were being sold & Treasuries had limited selling, raising interest rates (more below). Oil rebounded 1+ to the 73s as recession fears eased & gold gained 7 to 2031.
AMJ (Alerian MLP Index tracking fund)
Treasury yields were flat, following big gains on the back of better-than-expected nonfarm payrolls data in the previous session. The yield on the 2-year note yield fell slightly to 3.978% & the 10-year Treasury note yield slipped 3 basis point to 3.500%. Yields & prices move in opposite directions. One basis point equals 0.01%. Yields surged Fri as data from the Bureau of Labor Statistics showed stronger-than-expected jobs growth in Apr even as markets grappled with the banking fallout. The US added 253K nonfarm payrolls in Apr, surpassing the 180K expected. The unemployment rate came in at 3.4%, below an estimate of 3.6%. A strong job market will make it less likely that the Federal Reserve will halt its aggressive tightening campaign, a policy shift that many investors had been hoping for. Investor attention this week turns to Apr's consumer price index due out Wed, followed by the producer price index on Thurs.
U.S. Treasury yields are flat on April’s jobs report
Treasury Secretary Janet Yellen said that failure to raise
the debt ceiling will cause a “steep economic downturn” in the US &
she reiterated her warning that the Treasury Dept may run out of measures to pay its debt obligations by Jun. “Our current projection is that in early Jun,
a day will come when we’re unable to pay our bills unless Congress
raises the debt ceiling, and it’s something I strongly urge Congress to
do,” Yellen said. Yellen
said the US has already been using “extraordinary measures” to avoid
default, & it's not something the Treasury Dept can continue to
do. She said Congress needs to take action to avoid “economic calamity.” “It’s widely agreed that financial and economic chaos will ensue,” Yellen added. Lawmakers
have been trying to find a path forward to raise or suspend the debt
ceiling, which would enable the US to pay its bills on time. But
they're currently at an impasse, raising the prospect of default. Yellen has called for decisive action, & quickly. In a letter to House Speaker Kevin McCarth, Yellen said new data
on tax receipts forced the department to move up its estimate of when
the Treasury Dept “will be unable to continue to satisfy all of
the government’s obligations” to potentially as early as Jun 1. This
date is earlier than economists were expecting. On Monday, President Joe Biden called the “big four” congressional
leaders — Senate Majority Leader Chuck Schume., Senate Minority
Leader Mitch McConnell., McCarthy & House Dem Leader
Hakeem Jeffries. — to invite them to a May 9 meeting at the
White House to discuss the debt limit.
Yellen warns of ‘economic chaos’ unless Congress raises the debt ceiling
The recent slide in oil prices is starting to bottom out, according to analysts who predict that a more significant pickup in the coming qtrs is in the cards. Oil prices saw their 3rd consecutive weekly decline last week, marking the longest losing run this year. However, that may soon come to pass, according to some market watchers. “Now it definitely feels like they’re at the bottom — there are multiple signs of that,” said Citi's Global Head of Commodities Research Ed Morse. “Inventories built a lot during the first and second months of the year, and then they’ve come off. So that’s part of figuring that it’s at the bottom.” He added that markets are currently facing the impact of OPEC+'s recent production cuts & the world is moving into a higher demand season. Last month, the oil cartel announced it was slashing output by 1.16M barrels per day. The cuts came into effect in May & will run until the end of 2023. The production declines prompted some analysts to warn prices could surge to triple digits, which failed to materialize. “We’re looking more positively at the second and third quarter than what’s happened in the first quarter,” Morse added. Financial services company ANZ also believes that the oil slump could bottom out soon, with global oil demand set to grow by 2M barrels per day, keeping the market under-supplied throughout 2023. “OPEC+ output cuts and a rebound in China’s demand will likely offset slower demand elsewhere ... Therefore, we expect prices to bottom out soon,” the bank wrote in a research report dated May 8.
Oil’s sharp slide has surprised markets. But some traders now see a bottom for prices
Markets were mixed with important inflation due shortly & while the debt ceiling issue drags on. Stocks should remain volatile.
Dow Jones Industrials
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