Dow rose 250, advancers over decliners better than 4-1 & NAZ went up 115. The MLP index added 1+ to the 241s & the REIT index advanced 5+ to the 364s. Junk bond funds were mixed & Treasuries had limited selling which raised yields slightly. Oil added 1+ to nearly 90 (more below) & gold was off 1 to 1930.
AMJ (Alerian MLP Index tracking fund)
Inflation at the wholesale level surged more than expected in Aug,
reversing previous declines as consumers continued to grapple with the
rising cost of everyday goods. The Labor Dept said that its producer price index, which measures inflation at the wholesale level before it reaches consumers, climbed 0.7% in Aug from the previous month. On an annual basis, prices are up 1.6%. Those figures are both higher than the 1.2% headline increase & 0.4% monthly figure forecast. However, excluding the more volatile measurements of food & energy,
core inflation rose 0.2% for the month, in line with
expectations & below the 0.3% reading in Jul. The figure was up 2.2%
on a 12-month basis. The
spike came largely as a result of higher gasoline prices. The gas index
surged 20% in Aug, contributing to a 10.5% increase in energy
prices. Altogether, the goods index climbed 2% in Aug, the biggest
one-month advance since Jun 2022, the Labor Dept. The services index, meanwhile, climbed just 0.2%
following a 0.5% reading the previous month. Leading the increase was a
1.4% jump in the cost of transportation & warehousing services. The data comes a day after the Labor Dept reported that the consumer price index,
which measures the prices paid directly by consumers, rose 0.6% in
Aug from the previous month, the fastest monthly increase this year. Prices jumped 3.7% from the same time last year, faster than expected. The back-to-back inflation reports will have major implications for the
Fed, which is tightening rates at the fastest pace in decades as it
tries to cool the economy. The central bank has approved 11 rate hikes
over the course of 16 months, lifting the federal funds rate to the
highest level since 2001.
Americans grapple with soaring cost of everyday goods as wholesale prices surge
The federal gov's budget deficit widened by roughly $600B through the first 11 months of the fiscal year, according to new data released by the Congressional Budget Office (CBO). The CBO's monthly budget update found that preliminary data indicates the federal budget deficit was over $1.5T with one month remaining in fiscal year 2023, which began in Oct 2022. That's an increase of $577B compared to a similar period in FY2022, when the federal deficit amounted to $946B, although the CBO notes the deficit for the current fiscal year to date would be $641B if not for timing shifts affecting federal spending. "The deficit is on track to be double what it was last year after excluding the effects of the president’s overturned student debt cancellation plan," Maya MacGuineas, pres of the Committee for a Responsible Federal Budget, said. "That is doubly disturbing given that the economy is growing and unemployment remains low; usually the deficit shrinks, not grows, during economic expansion. It’s just another sign of the deteriorating fiscal conditions of the federal budget and the immense challenges we face in turning the tide towards fiscal sustainability." The deficit widened in part due to a $141B increase in spending along with a $436B decline in the federal gov's tax receipts. Federal spending is up about 3% in FY2023 to date, compared to a year ago, with notable increases in spending on several programs:
- Interest payments on the national debt increased by $149B, or 30%, due to higher interest rates relative to last year.
- Social Security benefit payments rose by $123B, or 11%, mostly due to cost-of-living adjustments.
- Medicare spending increased by $116B, or 18%, due to decreased recoveries of advanced & accelerated payments made through a program implemented in response to the pandemic.
- Medicaid spending rose by $27B, or 5%, due to enrollment increases under provisions of relief measures enacted by Congress in the early stages of the COVID pandemic.
On the revenue side of the federal ledger, individual income tax receipts were down by 19%, or $448B, relative to last year. Other tax receipts, which include sources such as remittances from the Federal Reserve, customs duties, plus estate & gift taxes among others, declined by $121B, a 37% decline from last year. Those declines were partially offset by higher receipts of payroll & corp taxes, which are up by $128B & $5B, respectively.
Federal budget deficit up nearly $600 billion through August: CBO
Oil prices jumped, with US crude topping $90 a barrel, as expectations of a tighter supply grew. West Texas Intermediate crude (WTI) gained 1.6% to reach a high of $90.04 per barrel, touching its highest level since Nov 2022. & Brent crude was up 1.5%, at $93.23, reaching a 10-month high. WTI crude last traded at $89.91 a barrel. Saudi Arabia & Russia have extended their oil output cuts to the end of 2023, & the move could result in a substantial market deficit for the rest of 2023, the Intl Energy Agency said. “From September onwards, the loss of OPEC+ production... will drive a significant supply shortfall through the fourth quarter,” the agency said in its monthly report. Rising crude prices could mean higher gasoline prices at a time when the economy is trying to recover & solve the inflation problem. Inflation, measured by the Consumer Price Index, posted its biggest monthly increase this year in Aug as energy prices fed much of gain, rising 5.6%, an increase that included a 10.6% surge in gasoline. Earlier this week, the OPEC issued updated forecasts of solid demand & also pointed to a 2023 supply deficit if production cuts remain.
U.S. crude oil prices top $90 a barrel for the first time since November 2022
Investors were not disturbed by the gloomy inflation data, expanding budget deficit or a dramatic rise in oil prices. All can be a major drag on the economy going forward!!
Dow Jones Industrials
No comments:
Post a Comment