Dow rebounded 247 which followed early selling, advancers over decliners 2-1 & NAZ gained 126. The MLP index was up 1+ to the 237s & the REIT index added 1+ to the 162s. Junk bond funds rallied along with stocks & Treasuries had a tiny bit of selling, keeping yields near multi year highs. Oil rose about 1 to just below 80 & gold fell 5 to 1941 (more on both below).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
Federal Reserve Chair Jerome Powell called for more vigilance in the fight against inflation, warning that additional interest rate increases could be yet to come. While acknowledging that progress has been made & saying the Fed will be careful in where it goes from here, the central bank leader said inflation is still above where policymakers feel comfortable. He noted that the Fed will remain flexible as it contemplates further moves, but gave little indication that it’s ready to start easing anytime soon. “Although inflation has moved down from its peak — a welcome development — it remains too high,” Powell said in prepared remarks for his keynote address at the Kansas City Fed's annual retreat in Jackson Hole, Wyoming. “We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective.” The speech resembled remarks Powell made last year at Jackson Hole, during which he warned that “some pain” was likely as the Fed continues its efforts to pull runaway inflation back down to its 2% goal. But inflation was running well ahead of its current pace back then. Regardless, Powell indicated it's too soon to declare victory, even with data this summer running largely in the Fed's favor. Jun & Jul both saw easing in the pace of price increases, with core inflation up 0.2% for each month, according to the Bureau of Labor Statistics. “The lower monthly readings for core inflation in June and July were welcome, but two months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal,” he added. Powell acknowledged that risks are 2-sided, with dangers of doing both too much & too little. “Doing too little could allow above-target inflation to become entrenched and ultimately require monetary policy to wring more persistent inflation from the economy at a high cost to employment,” he said. “Doing too much could also do unnecessary harm to the economy.” “As is often the case, we are navigating by the stars under cloudy skies,” he added.
Fed Chair Powell calls inflation ‘too high’ and warns that ‘we are prepared to raise rates further’
By some measures, Americans have never been more in the red. In Q2, total credit card debt surpassed $1T for the first time, which helped bring total household debt to $17.06T, also a fresh record, according to the New York Federal Reserve. But adjusted for inflation, credit card debt was higher when the economy bottomed out in 2008, according to a recent analysis by WalletHub. “Inflation is masking the fact that people are actually managing their debt better than they have in the past,” said Odysseas Papadimitriou, WalletHub's CEO. “When you account for the massive impact inflation has on balances, as well as the fact that debt-to-deposit levels are roughly 50% below the peak, U.S. households are actually in a lot better shape financially than it seems at first glance,” Papadimitriou said. In this case, deposits include checking & savings accounts, as well as certificates of deposit & money market accounts. Even with some signals that credit card spending growth is slowing, Americans continue to buy more & save less. The San Francisco Fed recently estimated that the excess savings consumers accumulated from gov transfer payments will run out in a few months. “More than the level of credit card debt, it is the trajectory I find most troubling,” said Greg McBride, chief financial analyst at Bankrate. Not only are balances higher, but more cardholders are also carrying debt from month to month, according to a Bankrate report. Of those carrying card balances, 60% have been in debt for at least a year. “And all this despite some of the lowest levels of unemployment in more than 50 years,” McBride said. “We also can’t discount the importance of higher interest rates on the costs of borrowing for households,” said John Sedunov, associate professor of finance at Villanova University's School of Business. “Not only are goods and services more expensive, but so is money.” The average credit card rate is now more than 20% on average, another all-time high.
Household debt is at an all-time high, but 2008 was still worse, report finds
The United Auto Workers Union (UAW) announced its strike authorization vote passed with "near universal approval" from its 150K members at Ford (G), General Motors (GM) & Stellantis (STLA). "Final votes are still being tabulated, but the current combined average across the Big Three was 97% in favor of strike authorization," it said. "The vote does not guarantee a strike will be called, only that the union has the right to call a strike if the Big Three refuse to reach a fair deal." The UAW is currently negotiating new contracts with the automakers, with its current ones expiring on Sep 14. "Our union’s membership is clearly fed up with living paycheck-to-paycheck while the corporate elite and billionaire class continue to make out like bandits," UAW Pres Shawn Fain said. "The Big Three have been breaking the bank while we have been breaking our backs." The massive labor union says its demands "include the elimination of tiered wages and benefits, wage increases to offset inflation and match the generous salary increases of company executives over the last four years, the re-establishment of cost-of-living allowances and defined benefit pensions and retiree healthcare, the right to strike over plant closures, significant increases to current retiree benefits, and more paid time off to be with family." "Our members' expectations are high because Big Three profits are so high. The Big Three made a combined $21 billion in profits in just the first six months of this year. That’s on top of the quarter-trillion dollars in North American profits they made over the last decade," Fain added. "While Big Three executives and shareholders got rich, UAW members got left behind. Our message to the Big Three is simple: record profits mean record contracts." The UAW says the strike authorization vote at GM passed at 96%, while at Ford, it was 98% for hourly represented workers & 99% for salaried represented workers. At STLA, the vote passed by 95%.
UAW votes to authorize Ford, GM, Stellantis strike after contract expires
Gold closed lower as the $ firmed & treasury yields stayed near 17-year highs after Federal Reserve chair Jerome Powell spoke at the central bank's Economic Policy Symposium & gave no indication interest rates will soon be moving lower anytime soon. Gold for Dec closed down 7 to settle at 1939 per ounce. In his speech, Powell said the US economy is not cooling as expected & interest rates may need to rise should inflation continuing running above the Fed's 2% target. "We are attentive to signs that the economy may not be cooling as expected. So far this year, GDP growth has come in above expectations and above its longer-run trend, and recent readings on consumer spending have been especially robust. In addition, after decelerating sharply over the past 18 months, the housing sector is showing signs of picking back up. Additional evidence of persistently above-trend growth could put further progress on inflation at risk and could warrant further tightening of monetary policy," Powell said.
Gold Closes Lower as the Dollar Firms and Yields Rise Following Powell Speech
West Texas Intermediate (WTI) crude oil rose even as Federal Reserve chair Jerome Powell said further interest-rate hikes could be coming if the US economy remains running hot. WTI crude for Oct closed up 78¢ to settle at 79.83 per barrel, while Oct Brent crude, the global benchmark, was last seen up 1.16 to 84.52. In his highly anticipated speech, Powell said the US economy is not cooling as expected & interest rates may need to rise should inflation continuing running above the Fed's 2% target.
WTI Crude Oil Rises Following Powell Speech to the Federal Reserve's Jackson Hole Conference
Powell's comments that the Fed is prepared to raise rates further sounded good to analysts. The speech was like a Rorschach test. His remarks inspired both hawkish & dovish predictions about what comes next & this balanced approach to the inflation problem was accepted. Of course, a possible strike against the big 3 automakers would pinch the economic recovery. For the week, Dow dropped 154.Dow Jones Industrials
No comments:
Post a Comment