Dow fell 370 (session lows), decliners over advancers 5-1 & NAZ pulled back 245. The MLP index slid fractionally lower & the REIT index dropped a big 11+ to the 347s on higher interest rates. Junk bond funds were little changed & Treasuries continued to see selling which increased yields. Oil ended pennies lower, below early highs, & gold sank 26 to 1949 (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)
House Speaker Kevin McCarthy failed a crucial test of his ability to unite his fractured Rep caucus as he tries to rally support to pass a spending bill aimed at avoiding a gov shutdown at the end of the month. The House failed to pass a measure that would have set the rules for debate on a Pentagon funding bill, which had been expected to come to the House floor for a final vote later today. A rules vote typically serves as a dress rehearsal for final votes, giving leadership a sense of where support stands. Pentagon funding bills are traditionally approved by wide margins. More importantly, passing the Defense rules package would have rallied House Reps around a shared cause & built momentum for a much more difficult vote in the coming days: passing a gov spending bill in time to avert a potentially damaging gov shutdown set to begin Oct 1. After the failed vote, McCarthy said, “It’s frustrating in the sense that I don’t understand why anybody votes against bringing the idea up and having the debate and then you got all the amendments if you don’t like the bill.” Yesterday, 2 Reps who had formerly opposed the rules bill signaled they would switch sides to support it, raising hopes that it could pass. But 2 conservative hardliners, Rep Marjorie Taylor Greene & Rep. Eli Crane., who had supported an identical bill just days ago, surprised everyone when they voted “no.” McCarthy vented his frustration with them after the vote. “This is a whole new concept of individuals that just want to burn the whole place down. That doesn’t work,” he said. “I know it’s an obstacle but I find it as a challenge. We’re gonna solve it,” McCarthy added. Once it was clear the vote would fail, House Rules Committee Chair Rep Tom Cole, also changed his vote to “no,” making it easier for him to bring it up again in the future. Across the Capitol Reps in both the House & Senate held their breath to see what the California lawmaker & his lieutenants would do next.
McCarthy fails key House stress test as he seeks government shutdown stopgap
With a deadline for expanded strikes by the United Auto Workers against the Detroit automakers closing in, the “serious progress” called for by the union seems all too elusive. The UAW, General Motors (GM) & Stellantis (STLA) are holding their ground on demands & it appears likely the union will strike additional plants at some, if not all, of the automakers at noon tomorrow, as it promised. While talks are ongoing, there has been little movement in proposals since the strikes were initiated on Sep 15 at assembly plants in Michigan, Ohio & Missouri. Sources familiar with the talks describe a “big” gap between the sides & say the parties are “far apart.” Headline economic issues & benefits such as hourly pay, retirement benefits, cost-of-living adjustments, wage progression & work-life balance remain central to the discussions. All issues play into one another & can change based on demand priorities. Each automaker has its own unique issues, but overall the companies want to avoid fixed costs & what they’ve called “uncompetitive practices” such as traditional pensions. The union, in contrast, is attempting to regain benefits lost during past talks & secure significant increases to pay & other benefits, while retaining platinum healthcare for members. In the end, it’s about how much a deal will cost the companies in total. Expectations are for record costs, though still below the $6-$8B in demands the union would like.
Where key issues stand as UAW closes in on extended strikes against GM, Ford and Stellantis
The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, but could rebound in the weeks ahead as a partial strike by the United Auto Workers (UAW) union forces automobile manufacturers to temporarily lay off workers because of shortages of some materials. Initial claims for state unemployment benefits dropped 20K to a seasonally adjusted 201K for last week, the Labor Dept said. The forecast called for 225K claims for the latest week. The labor market remains tight, with claims in the lower end of their 194-265K range for this year. The Federal Reserve held interest rates steady yesterday but stiffened its hawkish stance, with a further rate increase projected by the end of the year and monetary policy to be kept significantly tighter thru 2024 than previously expected. The continuing claims declined 21K to 1.66M during the latest week. Continuing claims remain historically low, a reminder that labor market conditions are still tight.
US weekly jobless claims unexpectedly fall -September 21, 2023
Gold closed lower as the $ rose to a 6-month high after the Federal Reserve indicated another interest-rate hike may come by year end while pushing out the horizon for easing rates. Gold for Dec closed down $27 to settle at $1939 per ounce. The drop comes after the Federal Reserve's policy committee ended its 2-day meeting by standing pat on interest rates but warning another 25-basis point hike is likely before the end of the year. It also warned rates will stay higher for longer than market hopes. The ICE dollar index eased after touching highest since Mar on the Fed outlook & was last seen up 0.09 points to 105.29. The $ moved higher following the hawkish surprise from the FOMC on the 2024 rate projections. Treasury yields were mixed following the Fed outlook. The US 2-year note was last seen paying 5.152%, down 3.8 basis points, while the yield on the 10-year note was up 5.3 basis points to 4.468% after earlier touching 4.494%, the highest since 2007.
Gold Falls as the Dollar Spikes Higher Following Hawkish Federal Reserve Outlook
Oil steadied as a broad, risk-off sentiment eroded gains driven by Russia's ban on gasoline & diesel exports, further tightening an already stressed global fuel market. The measures, designed to stabilize Russia's domestic fuel prices, will remove supplies from the worldwide diesel market at a time when refiners are struggling to meet demand. So far this year, Russia has been the world's single biggest seaborne exporter of the fuel. West Texas Intermediate settled below $90 a barrel, after earlier rallying close to $91. In broader markets, investors fled risky assets after the Federal Reserve flagged that borrowing costs would likely stay higher higher for longer. Russia's export ban comes after its shipments of the fuel already were down by a 3rd this month, which had helped push Europe's diesel benchmark near to $130 a barrel this month. WTI for Nov fell 3¢ to settle at $89.63 a barrel & Brent for Nov dropped 23¢ to close at $93.30.
Oil Little Changed as Risk-Off Mood Vies with Russia Export Ban
The Fed is still fighting inflation, which means high interest rates. As has been said times before, high interest can pinch the economy. This is a new to a lot of investors who have become to low interest rates. For what it's worth, so far the Dow has held up reasonably well (see below) all considered.Dow Jones Industrials
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