Dow went up 30, decliners over advancers about 3-2 & NAZ added 11. The MLP index was even near 229 & the REIT index was up 1 to 374. Junk bond funds were little changed & Treasuries had selling, raising yields (more below). Oil rose to go over 71 & gold added 3 to 1974.
AMJ (Alerian MLP Index tracking fund)
Inflation has come down significantly, the stock market is more ebullient than it has been in a year & the latest monthly national retail sales report came in stronger than expected, but retailers don't expect that to change what is shaping up to be a downbeat holiday spending season in 2023. An early read of peak season order activity shows retailers ordering less & expecting the consumer to be on the lookout for discounts & freebies to entice them to buy more, according to the latest CNBC Supply Chain Survey. Last summer, big box retailers surprised the market when they revealed huge inventory builds that led to a period of steep markdowns. Many retailers are still drawing down inventories now as peak season for orders begins. The big box leaders described during recent Q1 earnings reports a consumer who is spending less, & other new retail surveying indicates that the consumer situation continues to deteriorate. The unseasonable items clogging warehouse shelves have been a problem of varying degrees for all respondents. “Cleary, inventory and inflation concerns remain top of mind for apparel and footwear executives as we enter peak shipping season,” said Stephen Lamar, Pres & CEO, of the American Apparel & Footwear Association (AAFA). The largest grouping of respondents expect a lower peak season compared to last year, with 21% of those surveyed expecting the level of orders to be the same. The American Footwear & Apparel Association, National Retail Federation, Council of Supply Chain Management Professionals (CSCMP) & United National Consumer Suppliers (UNCS) were among respondents to the survey, which was conducted May 24-Jun 11 among 147 respondents. The survey was in the field during a period of time that coincided with West Coast port labor slowdowns that increased fears about potential inflationary impacts of supply chain congestion, before a tentative deal was reached between port management and the labor union on Wed. Even with inflation down from over 9% last summer to 4% in the most recent CPI reading for May, 71% of those taking the survey said they are concerned the consumer will cut back on holiday spending in response to inflation. Based on the concerns about cutbacks by consumers, 77% of all items being ordered this holiday season are middle-price point items, including jackets.
Retailers are preparing for a discount heavy, down holiday season: CNBC surveyThe average balance in employer-sponsored retirement contribution plans plunged more than 20% last year, according to new data from Vanguard Group. Vanguard, which tracks about 5M retirement accounts, found the average account balance for 401(k)s & 403(b)s was $112,572 in 2022 – down nearly $30K from the previous year. "Vanguard participants’ average account balances decreased by 20% since year-end 2021, driven primarily by the decrease in equity and bond markets over the year," the report said. 1/3 of account holders actually had a balance of less than $10K & about ¼ held more than $100K. Just 12% had a balance of $250K or higher. At the same time, a growing number of Americans tapped their retirement accounts to cover a financial emergency as high inflation raged. About 2.8% of workers participating in employer-sponsored 401(k) plans made a "hardship" withdrawal in 2022. That marks a major increase from the 2% rate recorded before the pandemic began & is also up from the 2.1% reading in 2021. Hardship withdrawals allow workers to tap their 401(k) for an "immediate and heavy financial need." The increase in workers tapping their 401(k)s for emergency purposes comes as they confront high inflation that has rapidly eroded their purchasing power. The gov reported this week that the Consumer Price Index, a key measure of inflation, rose 4% in May from the previous year, the smallest increase in more than 2 years. While that is down from a peak of 9.1% hit last summer, it remains about twice the Fed's target 2% rate. Other parts of the report also pointed to a slower retreat for inflation. Core prices, which exclude the more volatile measurements of food & energy, climbed 0.4%, or 5.3% annually.
Average 401(k) account balances tumbled last year, Vanguard research shows
Shorter-term Treasury yields rose as investors considered the path ahead for interest rates & awaited data that could provide hints about the state of the economy. The 2-year Treasury yield traded about 4.1 basis points higher at 4.686%. Meanwhile, the benchmark 10-year rate was flat on the day at 3.728%. Yields & prices move in opposite directions & one basis point equals 0.01%. Investors considered what could be next for interest rates & the economy after the Federal Reserve decided against another rate hike earlier this month, but indicated rates could still go higher later this year. In comments published alongside the rate decision, the central bank indicated that it would use the break in its rate-hiking campaign to assess the effectiveness of its previous 10 consecutive increases. The Fed began tightening monetary policy in early 2022 with the goal of bringing down inflation. Attention also turned to key reports reflecting the state of the economy. Before this month's Fed policy meeting, many investors had been hoping for rate hikes to be halted as concerns about elevated rates dragging the US economy into a recession had spread.
2-year Treasury yield climbs as investors assess interest rate outlook
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