Dow gained 182, advancers over decliners better than 3-1 & NAZ was up 104. The MLP index rose 1+ to the 226s & the REIT index added 1+ to 370. Junk bond funds were mixed & Treasuries had a little selling, bringing slightly higher yields. Oil rebounded 2+ to the 69s on hopes for increased demand from China & gold was off 4 to 1965.
AMJ (Alerian MLP Index tracking fund)
Inflation showed welcome signs of cooling in May, but core prices
pointed to strong underlying price pressures that are still bubbling
beneath the surface & continuing to burden Ms of Americans. The
Labor Dept said that the consumer price index, a broad
measure of the price for everyday goods including gasoline, groceries & rents, rose just 0.1% in May from the previous month, far lower than
the 0.4% increase recorded in Apr. Prices climbed 4% on an annual basis, slightly below the 4.1% increase forecast, marking the slowest pace of inflation since Mar 2021. Although
inflation has cooled from a peak of 9.1%, it remains about more than
double the pre-pandemic average & well above the Federal Reserve's 2%
target rate. Other parts of the report also pointed to a slower retreat for inflation, a worrisome sign for the Federal Reserve. Core prices, which exclude the more volatile measurements of food & energy, climbed 0.4% or 5.3% annually. The
report is the last before the Fed's policy-setting meeting this week & will have major implications for the central bank, which has raised interest rates 10 straight times over the past 15 months in a bid to crush out-of-control inflation. The slowdown in inflation likely gives policymakers additional fodder to
forgo another interest rate increase at the conclusion of their 2-day meeting tomorrow. An overwhelming percentage of traders,
more than 94%, now anticipate the Fed will pause the tightening cycle, a
notable shift from just one day ago. Consumers continued to see some reprieve in May in the form of lower
energy costs, which fell 3.6% over the course of the month & are down
11.7% compared to the same time last year. Other price gains
proved persistent & stubbornly high in May. Shelter costs, which
account for about 40% of the core inflation increase, rose 0.6% for the
month & are up 8% over the past year. Used vehicle prices, meanwhile,
increased 4.4% last month, the same as in Apr.
Inflation cools sharply to slowest pace in two years
Treasury yields were higher after a key inflation report showed price increases slowing, potentially bolstering the case for the Federal Reserve to skip a rate hike this week. The 10-year Treasury yield added 2 basis points to 3.782% & the 2-year Treasury yield was trading higher by less than 1 basis point at 4.603%. Yields & prices have an inverted relationship & one basis point equals 0.01%. The CPI results (above) were in line with the estimates. The data comes just as the Fed is starting a 2-day policy meeting. Traders expect the central bank to hold rates steady after hiking rates for more than a year. Traders were pricing in more than a 90% chance of no rate hike this week after the CPI report, according to CME Group’s FedWatch tool.
Treasury yields climb after CPI report shows slowing inflation ahead of Fed decision
UK short-term borrowing costs shoot past ‘mini-budget’ crisis levels on strong labor data
While the inflation data was generally favorable, more work will be needed for continued improvement. Tomorrow the producer price index will be released which will give a glimpse of upcoming inflation.
Dow Jones Industrials
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