Dow declined 221, decliners over advancers 3-1 but NAZ went up 22. The MLP index fell 1+ to the 215s & the REIT index retreated 4+ to the 367s. Junk bond funds drifted lower & Treasuries remained in demand. Oil was off 1+ to the 71s & gold dropped 17 to 2019 (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)
The number of Americans filing for unemployment benefits last week jumped to the highest level since 2021, the latest sign the historically tight labor market is cooling off in the face of rising interest rates. Tthe Labor Dept figures show initial claims for last week surged by 22K to 264K, well above the 2019 pre-pandemic average of 218K claims, the steepest level for jobless claims since Oct 2021. Continuing claims, filed by Americans who are consecutively receiving unemployment benefits, rose slightly to 1.8M, an increase of 12K from the previous week. For months, the labor market remained a strong point in the slowing economy, despite an aggressive interest-rate hike campaign by the Federal Reserve. But there are signs it is beginning to cool. Layoffs are on the rise & job openings are declining. Although hiring rose faster than expected in Apr, jobless claims are also steadily ticking higher. Economists widely expect unemployment to climb higher as a result of steeper interest rates, with most recent projections from the Fed showing that officials expect unemployment to rise to 4.6% by the end of next year, up from the current rate of 3.5%. That would mean more than 1M Americans lose their jobs between now & the end of the year.
Jobless claims rise sharply to highest level since 2021
Shares of PacWest (PACW) were under pressure once again after the struggling regional
bank said that deposit outflows resumed in the first week of May. The
stock was down 23%, further extending its recent declines. Its shares had already fallen 40% this month & more than
70% for the year. The bank said in a securities filingtoday that its deposits declined 9.5% during the week of May 5 & the majority of those outflows came after media
reports that said the lender was exploring strategic options. The
bank also said that it was able to fund those withdrawals with available
liquidity. PACW now has $15B of available liquidity
compared with $5.2B in uninsured deposits. The update marks a change from May 4,
when PacWest said that it was not experiencing “out-of-the-ordinary
deposit flows” & that total deposits had increased since the end of
Mar. During Q1, total deposits declined
16.9% & the bank said it would use strategic asset sales to reshape
its balance sheet. Several analysts theorized that the most recent outflows were from venture capital customers. The stock sank 1.38 (23%).
If you would like to learn more about PACW, click on this link:
club.ino.com/trend/analysis/stock/PACW_aid=CD3289&a_bid=6aeoso5b6f7
PacWest shares tumble 20% after regional bank says deposits fell 9.5% last week
Federal Reserve Governor Christopher Waller cast doubt on the need for special focus on how banks are preparing for climate change risks. While acknowledging the risks that climate change poses, he said catastrophic events like hurricanes & floods don't generally reverberate across the US economy. Thus, he said that conducting special tests for how banks are preparing for such events probably shouldn't fall under the Fed's purview. “I don’t see a need for special treatment for climate-related risks in our financial stability monitoring and policies,” Waller said. “Based on what I’ve seen so far, I believe that placing an outsized focus on climate-related risks is not needed, and the Federal Reserve should focus on more near-term and material risks in keeping with our mandate.” Nevertheless, the Fed already has directed the nation's 6 largest banks to show plans for how they would respond to climate-related events. While separate from the stress tests the Fed conducts on systemically important institutions, the exercises bear similarities. The stress tests focus on how banks would respond to financial & economic crises. “Climate change is real, but I do not believe it poses a serious risk to the safety and soundness of large banks or the financial stability of the United States,” Waller said. “There is no need for us to focus on one set of risks in a way that crowds out our focus on others.” He noted that events such as forest fires & other climate-connected disasters are “devastating to local communities. But they are not material enough to pose an outsized risk to the overall U.S. economy.” Waller added that households & businesses, including banks, have shown the ability to adapt to changes. Bank performance, he said, is generally not affected by disasters in their regions.
Fed Governor Waller casts doubt on need to conduct climate change tests on banks
Gold prices ended lower, with prices stretching their losses into a 2nd straight session, pressured by strength in the $ as investors parsed this week's US inflation data. Prices for the precious metal had traded higher in early dealings, supported in part by concern about the debt ceiling debate in Congress, while silver & copper futures dropped sharply for the session on concerns about the prospects for metals demand from China. The Labor Dept reported that US producer prices rose 0.2% in Apr. That was below the 0.3% rise forecast. In the 12 months thru Apr, the PPI increased 2.3%. It follows a 2.7% gain in Mar, the lowest rate since Jan 2021. Against this backdrop, the $ strengthened against most major currencies, with the ICE US Dollar index up 0.6% at 102.09. Strength in the greenback can put pressure $-denominated prices of gold. The slowdown in producer-price inflation spurred a drop in bond yields as the stock market declined. Jun gold shed $16 (0.8%) to settle at $2020 an ounce.
Gold futures stretch losses into a second day as dollar strengthens
Oil futures finished lower for a 2nd straight session as traders continued to weigh the outlook for energy demand. US debt ceiling drama will eventually play a larger driver for oil prices, but now downside with prices appears to be limited. Oil looks like it is ready to consolidate. A lot of the bad news has been priced in so fresh monthly lows seem unlikely. Jun West Texas Intermediate crude fell $1.69 (2.3%) to settle at $70.87 a barrel.
Oil Futures Down a Second Session as Traders Eye Demand Prospects
Stocks started depressed & stayed depressed for entire session. There is a lot of negative thoughts in the air, making it difficult to resume a rally. For more than 6 months, Dow has remained in the 33-34K range.
Dow Jones Industrials
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