Dow rose 156, advancers over decliners about 3-1 & NAZ was up 9. The MLP index was up 1+ to the 233s & the REIT index added 2+ to 378. Junk bond funds inched higher & Treasuries had only limited purchases. Oil went up 1+ to the 74s & gold added 4 to 1935.
AMJ (Alerian MLP Index tracking fund)
The rapid increase in interest rates over the past year could cause some collateral damage to the US gov's finances. That is because as interest rates rise, the federal gov's borrowing costs on its $32.5T in debt will also increase. Interest payments on the national debt are projected to be the fastest-growing part of the federal budget over the next 3 decades, according to the Committee for a Responsible Federal Budget (CRFB), a group that advocates for reducing the deficit. Payments are expected to triple from nearly $475B in fiscal year 2022 to a stunning $1.4T in 2032. By 2053, the interest payments are projected to surge to $5.4T. As a share of the economy, total interest on the national debt will hit a record 3.2% of GDP, which is the broadest measure of goods & services produced in the country, by 2030. That percentage will more than double to 6.7% by 2053. "By 2051, spending on interest will be the single largest line item in the federal budget, surpassing Social Security, Medicare, Medicaid, and all other mandatory and discretionary spending programs," the CRFB said. For years, the US has been able to borrow cheaply as interest rates have remained historically low. However, as the federal funds rate increases, so will short-term rates on Treasury securities, making federal borrowing more expensive. The CRFB projections show that interest payments could eventually take up almost 35% of all federal revenue by the end of the next 3 decades. The group called on Congress to work on reducing the national debt in order to better address fiscal challenges that may emerge in coming years. "High and rising national debt will mean that more of the budget will go towards servicing that debt with interest payments instead of going towards other priorities," the group said. "Importantly, a high interest burden also makes it more difficult for lawmakers to borrow more in times of emergency or during a war without significant consequences." The national debt hit $32T in Jun after a burst of spending by Pres Biden & Dem lawmakers. Biden signed into law a health care & climate change spending bill, dubbed the Inflation Reduction Act, in Aug 2022 that would spend an estimated $739B over the next decade. Most of that revenue stems from new revenue generated by higher taxes; about ½ is slated to go toward paying down the debt.
Interest costs on US national debt to exceed defense spending by 2028
Microsoft (MSFT), a Dow stock, said that it's eliminating additional jobs, a week after the start of its 2024 fiscal year. The cuts are in addition to the downsizing announced in Jan that resulted in 10K layoffs. The software maker also disclosed a small number of cuts this time last year. Other large technology companies have also scaled back this year
after adding headcount rapidly to meet rising demand during the Covid-19
pandemic. MSFT has said in recent months that clients are looking
for ways to save money on their cloud computing bill. It filed a notice yesterday saying it would cut 276 people in its home state of Washington (66 are virtual). Salespeople & customer success representatives posted messages on social networks to announce they lost their jobs. “Organizational
and workforce adjustments are a necessary and regular part of managing
our business,” a MSFT spokesperson said. “We will continue to
prioritize and invest in strategic growth areas for our future and in
support of our customers and partners.” The stock fell 2.26.
If you would like to learn more about MSFT, click on this link:
club.ino.com/trend/analysis/stock/MSFT_aid=CD3289&a_bid=6aeoso5b6f7
Microsoft cuts more jobs on top of 10,000 layoffs announced in January
Treasury yields declined as investors assessed what could be next for Federal Reserve monetary policy following remarks from central bank officials & ahead of key economic data. The yield on the 10-year Treasury was trading over 2 basis points lower at 3.982% & the 2-year Treasury yield was up by more than 2 basis points at 4.883%. Yields & prices have an inverted relationship & one basis point equals 0.01%. San Francisco Fed Pres Mary Daly said yesterday that she expects 2 further rate hikes to be announced this year to lower inflation. She suggested that this could, however, change & there's a possibility of both fewer or more rate hikes, depending on economic data. Her comments echoed the tone struck by a multitude of central bank officials, including Fed Chair Jerome Powell, since their last policy meeting at which rates were left unchanged. Markets are now pricing in a 94.9% chance of rates being hiked again later this month, according to CME’s FedWatch Tool, but the picture is less clear for the other 3 Fed meetings scheduled for later in the year. Investors are also looking out for several major economic data points scheduled for this week, including the latest consumer inflation figures tomorrow & wholesale inflation on Thurs.
Treasury yields fall as investors weigh economic, monetary policy outlook
The stock market is waiting for new developments. such as more comments from Fed officials. While growing interest payments on federal debt is not exciting, it is important because it will be a drag on future US economic growth.Dow Jones Industrials
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