Dow went up 185 after GDP data surprised, advancers over decliners about 2-1 & NAZ gained 19. The MLP index rose 1+ to the 228s & the REIT index slid back to the 367s. Junk bond funds inched higher & Treasuries saw heavy selling with the yield on the 10 year Treasury jumping 12 basis points to 3.84% (more below). Oil climbed to go over 70 & gold was off 2 to 1919.
AMJ (Alerian MLP Index tracking fund)
The US economy showed much stronger-than-expected growth in Q1 than previously thought, according to a big upward revision from the Commerce Dept. GDP increased at a 2% annualized pace for the Jan-thru-Mar period, up from the previous estimate of 1.3% & ahead of the 1.4% forecast. This was the 3rd & final estimate for Q1 GDP. The growth rate was 2.6% in the 4th qtr. The upward revision helps undercut widespread expectations that the US is heading toward a recession. According to a summary from the Bureau of Economic Analysis, the change came in large part because both consumer expenditures & exports were stronger than previously thought. Consumer spending, as gauged by personal consumption expenditures, rose 4.2%, the highest quarterly pace since Q2-2021. At the same time, exports rose 7.8% after falling 3.7% in Q4-2022. An 8.7% boost in the Social Security cost-of-living adjustment may have boosted the consumer spending numbers. There also was some good news on the inflation front. Core PCE prices, which exclude food & energy, rose 4.9% in the period, a downward revision of 0.1 percentage point. The all-times price index increased 3.8%, unchanged from the last estimate.
First-quarter economic growth was actually 2%, up from 1.3% first reported in major GDP revision
All 23 of the US banks included in the Federal Reserve's annual stress test weathered a severe recession scenario while continuing to lend to consumers & corps, the regulator said. The banks were able to maintain minimum capital levels, despite $541B in projected losses for the group, while continuing to provide credit to the economy in the hypothetical recession, the Fed said. Begun in the aftermath of the 2008 financial crisis, which was caused in part by irresponsible banks, the Fed's annual stress test dictates how much capital the industry can return to shareholders via buybacks and divs. In this year's exam, the banks underwent a “severe global recession” with unemployment surging to 10%, a 40% decline in commercial real estate values & a 38% drop in housing prices. Banks are the focus of heightened scrutiny in the weeks following the collapse of 3 midsized banks earlier this year. But smaller banks avoid the Fed's test entirely, which examines the giants. As a result, clearing the stress test hurdle isn't the “all clear” signal its been in previous years. Still expected in coming months are increased regulations on regional banks because of the recent failures, as well as tighter intl standards likely to boost capital requirements for the country's largest banks. “Today’s results confirm that the banking system remains strong and resilient,” Michael Barr, vice chair for supervision at the Fed, said in the release. “At the same time, this stress test is only one way to measure that strength. We should remain humble about how risks can arise and continue our work to ensure that banks are resilient to a range of economic scenarios, market shocks, and other stresses.” The group of banks saw their total capital levels drop from 12.4% to 10.1% during the hypothetical recession. But that average obscured larger hits to capital, which provides a cushion for loan losses, seen at banks that have greater exposure to commercial real estate & credit-card loans. As a result, regional banks had the lowest capital levels in the exam, hovering between 6% & 8%.
Federal Reserve says 23 biggest banks weathered severe recession scenario in annual stress test
Treasury yields climbed after the gov said GDP grew more than expected in the first qtr, signaling that the US economy may be farther from a recession than previously feared. The yield on the 10-year Treasury was last up by over 11 basis points to 3.829%, while the 2-year Treasury jumped 16 basis points to 4.884%. Yields & prices move in opposite directions & 1 basis point equals 0.01%. Revised data showed GDP increase at a 2% annualized rate in Q1, up from a previous estimate of 1.3% & the figure was also ahead of the 1.4% forecast. Weekly jobless claims offered another hint of good news for the state of the economy. Claims fell to 239K, the lowest level since May, & below the 264K expected. Elsewhere, investors weighed the outlook for interest rates after Fed Chair Powell said yesterday that policymakers are expecting further restriction. His recent remarks suggested that inflation is still running too high & rates needed to go higher in order for it to come back down. Powell also said that he expects it to take ‘a good while’ for low inflation to return & price increases to revert to the Fed’s 2% target.
Treasury yields jump after major GDP upward revision, strong jobs data
Dow Jones Industrials
No comments:
Post a Comment