Dow jumped 244, advancers over decliners 5-2 & NAZ went up 200. The MLP index added another 1+ to 230 & the REIT index fell 2 to the 369s. Junk bond funds edged higher & Treasuries had modest buying, lowing yields (more below). Oil rose 1 to almost 71 & gold gained 5 to 1923.
AMJ (Alerian MLP Index tracking fund)
Inflation pressures eased slightly in May as consumer spending slowed considerably, according to a Commerce Dept report. The personal consumption expenditures price index, a number closely watched by the Federal Reserve, increased 0.3% for the month when excluding food & energy, a number that was in line with the estimate. Core PCE increased 4.6% from a year ago, 0.1 percentage point less than expected. In Apr, the index rose 0.4% for the month & 4.7% from a year ago. When including the volatile food & energy components, inflation was considerably softer, up just 0.1% on the month & 3.8% from a year ago. Those were down respectively from the 0.4% & 4.3% increases reported for Apr. The headline year-over-year number was the lowest since Apr 2021 while the core was the lowest since Oct 2021. While inflation pulled back a bit, spending rose just 0.1% for the month, below the 0.2% estimate & a sharp drop from the 0.6% increase in Apr. That deceleration came even though personal income accelerated 0.4%, ahead of the 0.3% estimate. Though Fri's data showed inflation moving gradually in the right direction, it is still well above the Fed's 2% longer-term target. Central bank Chair Jerome Powell said this week that level isn't likely to be achieved for a few years yet. At their meeting earlier in June, Fed officials indicated they expect at least 2 more qtr-point interest rate hikes before the end of the year. Even Atlanta Fed Pres Raphael Bostic, who is not in favor of further increases, said yesterday he doesn't see any cuts coming either this year or in 2024. Traders are pricing in about an 87% chance that the Fed approves a qtr-point increase at the Jul meeting, odds that were little changed following today's data release, according to CME Group calculations.
Key Fed inflation measure shows prices rose just 0.3% in May
Treasury yields traded little changed as investors assessed
the latest batch of inflation data & its implications for the Federal
Reserve's next interest rate policy moves. The 10-year Treasury yield was last down a basis points at 3.846% & the 2-year Treasury yield traded flat at 4.887%. Yields & prices move in opposite directions & 1 basis point equals 0.01%. The latest personal consumption expenditure
price index data showed signs of easing inflation, rising 0.3% in May & inline with estimates excluding food & energy. Year over year, the
figure rose 4.6%, slightly below the 4.7% rise predicted. Including
the volatile food & energy components, inflation was considerably
softer, up just 0.1% on the month & 3.8% from a year ago. Those were
down respectively from the 0.4% & 4.3% increases reported for Apr. Earlier this week, Fed Chair Jerome Powell again indicated that rates would likely go higher
still as he believes further restriction is necessary to lower
inflation. The process of bringing inflation closer to the central
bank’s 2% target range is also expected to take “a good while,” Powell added yesterday. This comes as concerns about elevated interest rates leading to a
recession have spread among investors. Yesterday, Powell
said an economic downturn was a possibility, but not the most likely scenario.
Treasury yields are flat as Wall Street assesses latest inflation report
The majority of investors believe stocks have entered a new bull market & the US economy will skirt a recession in 2023, according to the new CNBC Delivering Alpha investor survey. About 400 chief investment officers, equity strategists, portfolio managers & CNBC contributors who manage money were polled about where they stood on the markets for Q3 & forward. The survey was conducted last week. 61% of respondents believe the market has entered a new bull run, while 39% think this is a bear market rally. Technically speaking, some have already declared a brand new bull market after the S&P 500 met the most simplistic standard by closing up 20% from its Oct bear-market low. However, many investors do not consider it the end of a bear market until the S&P 500 reaches a new high. The all-time closing high for the broader benchmark is 4796 & the S&P 500 closed yesterday at 4396. The market has managed to climb a wall of worries so far this year, including rate hikes, debt ceiling debate & a series of bank failures. The S&P 500 is about to end H1 with flying colors, up nearly 15% after 4 straight winning months in a row. The performance of the tech-heavy Nasdaq Composite is even more impressive, up 30% this year, amid investor's obsession with artificial intelligence. The majority of the investors believe the economy will avoid a severe downturn at least for this year despite the Fed's aggressive rate increases. In terms of where investors are putting money to work for the rest of 2023, they believe the best returns can be found in short term Treasuries, the S&P 500 as well as foreign stock markets like Japan, China & Europe.
Most investors believe we are in a new bull market
Dow Jones Industrials
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