Dow dropped 279 (above early lows), decliners over advancers 3-1 & NAZ slid back 7. The MLP index was off 1+ to the 214s & the REIT index declined 4+ to the 367s. Junk bond funds were mixed & Treasuries continued to be in demand, bringing lower yields (more below). Oil was off 1+ to the 71s & gold sank 16 to 2020.
AMJ (Alerian MLP Index tracking fund)
Inflation at the wholesale level rose less than expected in Apr, the
latest sign that painfully high consumer prices are beginning to loosen
their stranglehold on the US economy one year after the Federal Reserve began rapidly raising interest rates. The Labor Dept said that its producer price index, which measures inflation at the wholesale level before it reaches consumers, climbed 0.2% in Apr from the previous month. On an annual basis, prices are up 2.3%. Those figures are both lower than the 2.4% headline increase & 0.3% monthly figure forecast. There are still signs of inflationary pressures in the economy, however. Excluding the more volatile measurements of food & energy,
core inflation rose 0.2% for the month — up from the 0%
reading in Mar. The figure was up 3.2% on a 12-month basis, down
slightly from the previous month. And the services index climbed
0.3%, the biggest jump since Nov 2022, the Labor Dept said in
the report. More than a 3rd of that increase can be traced to a
4.1% rise in prices for portfolio management, which measures the prices
for investment advice. Gasoline prices, meanwhile, surged 8.4%. The data comes a day after the Labor Dept reported that the consumer price index,
which measures the prices paid directly by consumers, jumped 0.4% in
Apr. The annual inflation rate came in slightly lower than expected at
4.9%, although it remains well above the Fed's 2% target. Both releases are considered to be important measurements of inflation,
with the PPI is believed to be a leading indicator of inflationary
pressures as costs work their way down to consumers. The different
gauges point to inflation that is still running well above the Fed's
preferred 2% target, a troubling sign as the central bank has already
raised interest rates 10 straight times.
Wholesale inflation eases in April, lowest level in two years
Pres Biden blasted Reps over the debt limit at an event in New York, less than 24 hours after a bipartisan meeting on the subject yielded no movement on the issue as lawmakers look to prevent a first-ever default on the national debt. "They’re literally, not figuratively, holding the economy hostage by threatening to default on our nation’s debt that we’ve already incurred, we’ve already incurred over the last couple hundred years, unless we give in to their threats and demands as to what they think we should be doing with regard to the budget," Biden said. The event comes after Biden met Tues with bipartisan congressional leaders, including House Speaker Kevin McCarthy who is taking the lead in negotiations with the White House. The federal gov is facing a fast-approaching deadline that may arrive as early as Jun 1 to raise the US debt limit above $31.4T & the Treasury Dept's extraordinary measures may not be sufficient to meet the nation's financial obligations deeper into the summer. Dems & the Biden administration thus far have refused to negotiate over spending reforms as part of a package to raise the debt limit. They insist on a "clean" debt ceiling bill that contains no cuts to federal spending levels. In late Apr, House Reps narrowly passed legislation known as the Limit, Save, Grow Act to raise the debt limit by $1.5T or thru Mar 2024 — whichever benchmark is first reached. The bill also capped discretionary spending, which excludes items like Social Security & Medicare, at fiscal year 2022 levels & limited spending increases to 1% for the next decade. However, the White House has threatened to veto the bill & the Dem majority in the Senate is also opposed to the measure. Biden reiterated his opposition to the Reps' spending plan in his remarks. "Not only do they rule out any new revenue, they’re still determined to make permanent the $2 trillion tax cuts which [are] due to expire, the Trump tax cuts, without paying a penny of it," Biden said. "Now, here, look, here’s what that leaves us with. This is basic sort of math. It leaves us with the requirement to cut 22% of everything else in the budget in order to meet the requirements." Following the bipartisan meeting in the Oval Office, McCarthy said there had been little movement from either side on the issue.
Biden says Republicans are 'holding the economy hostage' in wake of debt limit meeting
Treasury yields fell again as a report on wholesale prices confirmed inflation was slowing. The yield on the 10-year Treasury lost 7 basis points at 3.36% & the 2-year Treasury traded 7 basis points lower at 3.83%. Apr producer prices increased by 0.2%, below the estimate of 0.3%. The report follows Apr's CPI reading, which came in slightly lighter than expected. Consumer prices rose 4.9% from a year ago, just below the 5% estimate. Weekly jobless claims increased by 22K to 264K, pointing to a slowing economy & helping to give a lift to bond prices. The latest economic data is likely to affect the Fed’s next policy moves & comes at a time when many investors are concerned about elevated interest rates dragging the US economy into a recession. The central bank indicated at its most recent rate-setting meeting last week, where it also hiked interest rates by 25 basis points, that it may halt its rate-hiking campaign soon . But New York Fed Pres John Williams suggested Tues that further rate increase are not off the table.
Treasury yields tumble further as another report shows cooling inflation
Stocks opened with a sharp decline, but the bulls are returning to the market. Regional bank concerns are weighing heavily on the market. Gold was sold & new money is going into Treasuries. Lower yields complicate the Fed's desire to raise interest rates. Raising the debt ceiling continues to be stuck in the mud.Dow Jones Industrials
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