Dow slid back 180 (very near session lows), decliners over advancers 5-2? & NAZ retreated 156. The MLP index stayed in the 234s & the REIT index dropped 3+ to 361 on rising yields. Junk bond funds continued weak & Treasuries saw more selling, driving yields higher. Oil was off 1+ to the 79s & gold retreated 10 to 1925 (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 officials expressed concern at their most recent meeting about the pace of inflation & said more rate hikes could be necessary in the future unless conditions change, minutes from the last session indicated. That discussion during Jul meeting resulted in a qtr percentage point rate hike that markets generally expect to be the last one of this cycle. However, discussions showed that most members worry that the inflation fight is far from over & could require additional tightening action from the rate-setting FOMC. “With inflation still well above the Committee’s longer-run goal and the labor market remaining tight, most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy,” the meeting summary stated. That latest increase brought the Fed's key borrowing level to 5.25-5.50%, the highest level in more than 22 years. While some members have said since the meeting that they think the further rate hikes could be unnecessary, the minutes suggested caution. Officials noted pressure from a number of variables & stressed that future decisions will be based on incoming data. “In discussing the policy outlook, participants continued to judge that it was critical that the stance of monetary policy be sufficiently restrictive to return inflation to the Committee’s 2 percent objective over time,” the document added. While there was agreement that inflation is “unacceptably high,” there also was indication “that a number of tentative signs that inflation pressures could be abating.” “Almost all” the meeting participants, which includes nonvoting members, were in favor of the rate increase. However, those opposed said they thought the committee could skip a hike & watch how previous increases are impacting economic conditions. “Participants generally noted a high degree of uncertainty regarding the cumulative effects on the economy of past monetary policy tightening,” the minutes said. The minutes noted that the economy was expected to slow & unemployment likely will rise somewhat. However, staff economists retracted an earlier forecast that troubles in the banking industry could lead to a mild recession this year. Officials cited “risks associated with a potential sharp decline in CRE valuations that could adversely affect some banks and other financial institutions, such as insurance companies, that are heavily exposed to CRE. Several participants noted the susceptibility of some nonbank financial institutions” such as money market funds & the like. For the future of policy, members emphasized 2-sided risks of loosening policy too quickly 2 risking higher inflation against tightening too much & sending the economy into contraction.
Fed officials see ‘upside risks’ to inflation possibly leading to more rate hikes, minutes show
The Global Wealth Report issued by Credit Suisse & UBS found total private wealth declined by 2.4% to $454T & wealth per adult fell 3.6% to $85K by the end of 2022. The analysis determined much of the decline was due to appreciation of the $ against several other currencies & noted the losses were heavily concentrated in wealthier regions, such as North America & Europe, which together made up most of the decline at $10.9 T combined. "Much of the decline in wealth in 2022 was driven by high inflation and the appreciation of the U.S. dollar against many other currencies," said economist Anthony Shorrocks, author of the report. "Financial assets contributed most to wealth declines while non-financial assets — mostly real estate — stayed resilient, despite rapidly rising interest rates," Shorrocks said. "But the relative contributions of financial and non-financial assets may reverse in 2023 if house prices decline in response to higher interest rates." In market terms, the US showed the greatest losses, followed by Japan, China, Canada & Australia. The report said Russia saw the greatest gains last year, followed by Mexico, India & Brazil. The worldwide wealth decline of 2022 followed a boom from the year before. "Wealth evolution proved resilient during the COVID-19 era and grew at a record pace during 2021," said Nannette Hechler-Fayd’herb, global head of economics & research at Credit Suisse. "But inflation, rising interest rates and currency depreciation caused a reversal in 2022." Despite reporting the first global wealth decline since the last recession, the Global Wealth Report gave an optimistic outlook for the future, predicting global wealth will surge by 38% over the next 5 years.
Global wealth drops for first time since 2008
Intel
(INTC), a Dow stock, is reversing course on a $5.4B deal to acquire Israeli
contract chipmaker Tower Semiconductor after their merger agreement
expired without China giving regulatory approval. INTC
decided to purchase Tower in 2022 & will now pay a $353M
termination fee instead. "After
careful consideration and thorough discussions and having received no
indications regarding certain required regulatory approval, both parties
have agreed to terminate their merger agreement having passed the Aug.
15, 2023 outside date," Tower Semiconductor said. The decision comes amid a strained relationship between the US & China over conflicts around trade, intellectual property & the future of Taiwan. CEO Pat Gelsinger said he has been trying to get the deal approved by
Chinese regulators after meeting with gov officials there in
Jul. At the same time, Gelsinger said the company was also
investing in its foundry business, which makes chips for other
companies. INTC's foundry business reported Q2 revenue of
$232M, up from $57M in 2022. Chip demand for Intel has been down after 2 years of growth powered by
remote work during the pandemic. It has committed to trimming $3B in costs this year, with an aim of saving $8-10B by the end of 2025. The stock fell 1.24.
If you would like to learn more about INTC, click on this link:
club.ino.com/trend/analysis/stock/INTC_aid=CD3289&a_bid=6aeoso5b6f7
Intel drops multibillion-dollar deal to buy Israeli chipmaker
Gold prices fell for 8th consecutive session, settling at their lowest levels since Jul 6, as higher Treasury yields & a firm $ kept the pressure on the yellow metal. Gold futures for Dec were down by $6 (0.4%) to settle at $1928 per ounce. The yellow metal booked its longest losing streak since the 9-day streak ending Mar 2017. Gold prices have fallen for 8 straight sessions with the benchmark 10-year US Treasury note yield seeing the highest levels since 2008 this week. Rising crude-oil prices & stronger-than-expected US. economic growth are stoking fears that inflation could re-accelerate, potentially forcing the Federal Reserve & other central banks to continue raising interest rates which could weigh on gold prices. In the commodity arena, gold has been drifting lower this month, stuck below a short-term downtrend line as the forceful rally in real yields & the $'s revival have taken the shine out of the precious metal. One could argue that gold being just 8.5% away from record highs despite the sharp spike in real yields is encouraging in itself, but equally, it's difficult to envision what will slingshot bullion back higher in the absence of a recession. The ICE US $ Index DXY, a gauge of the greenback's strength against a basket of rivals, was nearly flat at 103.17. However, it has risen 3.2% over the past month.
Gold settles lower for 8 straight sessions, suffers worst losing streak in more than 6 years
Oil hit a 3-week low as light summer trading left the commodity at the mercy of broader markets. West Texas Intermediate Futures (WTI) are down 4.6% this week, on pace to snap a 7-week streak of gains. Equities, rattled by China's stock market woes, dragged oil lower, while signs that further interest rate hikes are likely didn't boost confidence in demand. Even a steep decline in US crude stockpiles & signs of tightening supplies in the Middle East & North Sea failed to lift prices. Reflecting that underlying positivity. WTI for Sep fell $1.61 to settle at $79.38 a barrel & Brent for Oct slid $1.44 to $83.45 a barrel.
Oil Hits Three-Week Low as Equity Woes Overshadow Tight Supplies
Minutes from the last Fed meeting said officials still see upside risks to inflation. That was discouraging for traders given interest rates are already at high levels. improved growth data suggests the Fed has more work to do raising interest rates. Nervous investors sold stocks & commodities.
Dow Jones Industrials
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