Dow finished up 65, advancers over decliners 4-3 & NAZ was up 96. The MLP index added 1+ to 248 & the REIT index jumped 5+ to the 343s as interest rates declined. Junk bond funds remained in demand & Treasuries continued in demand, lowering yields. Oil retreated 2+ to the 83s & gold went up 10 to 1885 (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 at their Sep meeting differed on whether any additional interest rate increases would be needed, though the balance indicated that one more hike would be likely, minutes released showed. While there were conflicting opinions on the need for more policy tightening, there was unanimity on one point – that rates would need to stay elevated until policymakers are convinced inflation is heading back to 2%. “A majority of participants judged that one more increase in the target federal funds rate at a future meeting would likely be appropriate, while some judged it likely that no further increases would be warranted,” the summary of the meeting stated. The document noted that all members of the rate-setting Federal Open Market Committee (FOMC) agreed they could “proceed carefully” on future decisions, which would be based on incoming data rather than any preset path. Another point of complete agreement was the belief “that policy should remain restrictive for some time until the Committee is confident that inflation is moving down sustainably toward its objective.” The meeting culminated with the FOMC deciding against a rate hike. However, in the dot plot of individual members’ expectations, 2/3 of the committee indicated that one more increase would be needed before the end of the year. The FOMC since Mar 2022 has raised its key interest rate 11 times, taking it to 5.25-5.50%, the highest level in 22 years. At the same time, a handful of central bank officials, including Vice Chair Philip Jefferson & regional Pres's Raphael Bostic of Atlanta, Lorie Logan of Dallas & Mary Daly of San Francisco, have indicated that the tightening in financial conditions may negate the need for further hikes. Of the group, Logan & Jefferson have votes this year on the FOMC.
Fed officials see ‘restrictive’ policy staying in place until inflation eases
Treasury Secretary Janet Yellen said the US is not ruling out new sanctions against Iran if evidence emerges that the country was involved in the unprecedented attack on Israel by Hamas militants. The Biden administration freed up roughly $6B in Iranian oil sale revenue as part of a prisoner swap between DC & Tehran that took place in Sep. Rep lawmakers have heavily criticized the move amid the recent eruption of violence in the Middle East & have called on the White House to re-freeze the money. Yellen said the money has not been spent & could be re-frozen. "These are funds that are sitting in Qatar that were made available purely for humanitarian purposes, the funds have not been touched," she added. "I wouldn’t take anything off the table in terms of future possible actions, but I certainly don’t want to get ahead of where we are on that." Yellen also pushed back against the belief that the US has loosened its sanctions on Iran in recent years. "We have not in any way relaxed our sanctions on Iranian oil," she said. "We have sanctions on Hamas, on Hezbollah. This is something we have been constantly looking at, and using information that comes available to tighten sanctions. We will continue to do that."
Yellen warns Iran nothing 'off the table' as US weighs new sanctions
The Biden administration's drawdowns of the Strategic Petroleum Reserve (SPR), which serves as America's emergency stockpile of petroleum, & high market prices delaying efforts to replenish it have left the reserve near its lowest level since 1983 as the war in the Middle East that could destabilize global oil supplies. Data from the Energy Information Administration (EIA) indicates that the SPR had about 351M barrels of oil stockpiled as of the week ending Sep 29 – a slight increase from the lows of 347M barrels in Jul & Aug. The last time SPR was at or below 350M barrels for an extended period of time was the fall of 1983, when it was still in the process of being filled & the reserve had over 650M barrels stockpiled for most of the last decade. A 2021 estimate from the EIA puts US oil consumption at about 20M barrels of oil per day. This means that if the US was forced to rely solely on oil in the SPR without access to new domestic production or imports, the US would deplete the SPR in about 17 days, about ½ the historical average of 33 days dating back to 1990. The SPR contained 638M barrels of oil the week of Biden's inauguration, but drawdowns aimed at curbing high gas prices, as well as those announced following Russia’s invasion of Ukraine, have dropped the reserves to their current level. While the Biden administration is planning to replenish the SPR when oil prices are around $75 a barrel, an uptick in prices to above $80 a barrel in recent months led to the cancellation of a planned purchase of 6M barrels in Aug. "Obviously, they can’t fill it back up, it’s too late – the horse has left the barn," said Phil Flynn, analyst at Price Futures Group. "So now, you have to find ways to strategically maybe limit supplies and if things get really hot, we might have to limit exports to Europe which we don’t want to do because they’re counting on us to make up for Russian supply." After Pres Biden took office, he announced plans to release up to 260M barrels of oil from the SPR from Oct 2021 to Oct 2022. At the end of Sep 2021, oil stocks in the SPR were about 618M barrels. To help preserve what was left of the SPR, the Biden administration & Congress agreed to cancel the sale of about 140M barrels that had been mandated by previously enacted legislation.
Strategic Petroleum Reserve near historic lows as war breaks out in Middle East
Gold rose for a 3rd-straight session as safe-buying
continues following Sat's terror attacks on Israel by Hamas
Islamists, while the $ rose as the US producer price index
increased more than expected last month. Gold for Dec closed up $12 to settle at $1887
per ounce, the highest in 2 weeks. The metal has resumed its role as safe haven amid turmoil following the
weekend attacks by Hamas which killed hundreds of civilians. Israel has
declared war on Hamas & laid siege to Gaza while carrying out missile
strikes as it prepares to invade the territory. Mixed treasury yields is also offering support though the $ rose as
the US reported the
Sep producer price index rose a more than expected 0.5% from
Aug, ahead of expectation for a 0.3% monthly rise. However core PPI, excluding food & energy, eased to 0.2%
month over month, matching expectations & down from 0.3% in Aug. The
ICE dollar index was last seen down 0.15 points to 105.97, while the
yield on the US 2-year note was up 5.5 basis points to 5.029%, while
the 10-year note was paying 4.618%, down 4.6 basis points.
Gold Rises Again on Safe-Haven Demand
Oil futures ended lower for a 2nd straight session. Traders continued to monitor developments tied to the Israel-Gaza war & whether the conflict involved other countries in the oil-rich Middle East region. The risk to the world's crude oil supply is low for now, however, there is a small chance for prices to rise because the US is looking closely at Iran's connection with Hamas. If the US decides to impose stricter limits on Iran's crude oil exports, it could affect how the market behaves. Nov West Texas Intermediate crude fell $2.48 (2.9%) to settle at $83.49 a barrel.
Oil settles lower as traders continue to assess the Israel-Gaza war’s impact on supplies
The Fed minutes had the usual fuzzy comments which leave all options open for raising interest rates. More important to investors is how long interest rates will be elevated & that looks like a long time. As a result, stocks gave back early gains with the markets meandering. Tomorrow the consumer price index will be released.Dow Jones Industrials
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