Dow was down 9 after being in the red for most of the session, decliners slightly ahead of advancers & NAZ fell 16. The MLP index bounced back 1+ to the 239s & the REIT index crawled up 1+ to the 331s. Junk bond funds remained weak & Treasuries saw modest buying which lowered yields slightly. Oil dropped almost 2 to the 82s & gold was about even at 1834 (more on both below).
AMJ (Alerian MLP Index tracking fund)
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San Francisco Federal Reserve Bank Pres Mary Daly said that with US monetary policy “well into” restrictive territory, a lot of progress toward 2% inflation, & the recent rise in Treasury yields, the Fed may not need to raise rates any more. “If we continue to see a cooling labor market and inflation heading back to our target, we can hold interest rates steady and let the effects of policy continue to work,” Daly said. And with the rise in long-term rates in recent weeks, she said, “the need for us to take further action is diminished because financial markets are already moving into that direction and they’ve done the work.” Still, she added, “there are real risks” to inflation's march downward. “If the deceleration of growth and inflation stall, activity begins to reaccelerate, or financial conditions reverse some of this tightening and loosen too much, well we can react to those data and raise rates further until we are confident that monetary policy is sufficiently restrictive to complete the job.” “We need to keep an open mind, and have optionality,” Daly noted.
Fed’s Daly: Rise in bond yields may mean Fed can stay on hold
Tens of thousands of Kaiser Permanente workers remained on strike for a 2nd day over a short-staffing crisis at health facilities. A spokesperson for the Coalition of Kaiser Permanente Unions said that the strike, which it called the largest health-care worker walkout in US history, will continue until Sat morning at the latest as the group waits for “a meaningful response from Kaiser executives” to its demands. There are currently no bargaining sessions scheduled with Kaiser. More than 75K workers went on strike yesterday at hundreds of Kaiser Permanente health facilities in California, Colorado, the District of Columbia, Oregon, Virginia & Washington state. Nearly 60K of those workers are in California. Kaiser Permanente workers in DC & Virginia went on strike for one day & returned to work today, but the strike will continue in the other 4 states through Sat morning “barring any dramatic action from Kaiser executives to address the short staffing crisis,” Lucas said. Operations, chemotherapy treatments & other “non-urgent” procedures were postponed yesterday due to the strike. Kaiser Permanente has said all hospitals & emergency departments will remain open during the work stoppage, but elective procedures may have to be postponed.
Kaiser Permanente workers strike for second day after negotiations fail to reach labor contract
Structural reforms in Germany are needed given the current global economic headwinds, Intl Monetary Fund Managing Director Kristalina Georgieva said. “If you look at the policy decisions Germany is taking, they are around stimulating structural change. And of course, like any other country, structural reforms are a must in this more uncertain world with low gross growth prospects,” Georgieva added. The comments come amid discussions about whether Europe’s biggest economy is once again the “sick man of Europe,” with Germany anticipated to be the only major economy to contract in 2023. The auto industry should be a particular focus for reform in Germany if the country wants to increase productivity, according to Georgieva. “For Germany, this is very visible in the need to restructure the automobile sector for this economy of tomorrow,” she continued. The remarks echo those made by Hans-Werner Sinn, pres emeritus at the Ifo Institute in Italy in Sep. He said Germany regaining the “sick man” title “has to do with the automobile industry, which is the heart of the German industry and many things hinge on that.” Autos & auto parts were Germany's biggest export last year, accounting for 15.6% of the value of goods sold abroad. However, the sector is having a tough time, with both car production & exports weakening as consumers rein in spending amid soaring interest rates on borrowing, high inflation, & recession fears. The IMF predicts a “mild recession” for the German economy this year, according to Georgieva, but is “fairly confident” it will come out of it as the energy price shock & inflation wane. “Those are both one-off[s], they’re going to go away,” she said. Preliminary figures for Germany showed that price rises slowed more than expected in Sep, with inflation, harmonized so it can be compared to other EU countries, rising 4.3% from a year before. The number was the lowest monthly figure since Russia's full-scale invasion of Ukraine.
German structural reforms ‘are a must,’ IMF chief insists
Gold closed lower for a 9th-straight session as investors continue to shun the metal as the $ & yields rise. Gold for Dec closed down $3 to $1831 per ounce, the lowest since Mar 8. Investors have preferred the $ & treasuries as a safe haven ahead of another expected interest-rate increase from the Federal Reserve. Today's price drop comes even as the $ & fall back, normally bullish for the metal. Weak labor market data is also failing to attract investors to gold. The ICE dollar index was last seen down 0.37 points to 106.43, while the yield on the 2-year note was down 2.5 basis points to 5.046% & the 10-year note was paying 4.71%, down 2.6 basis points.
Gold Drops for a Ninth Day, Falls to a Seven-Month Low on Weak Investor Interest
US crude futures fell 2.3% to finish at a 5-week-low $82.31 a barrel & have now fallen by 7.8% over the past 2 trading days, one of the largest 2-day declines of the year. Brent crude also falls again, ending at around $84. This oil market reversal must be frustrating the Saudis. Brent crude has fallen over $10 since the end of last month as surging global bond yields have crippled the global growth outlook. It's hard to estimate where prices could find support, but if China's outlook continues to improve, there could be a return back to the $90 level.
WTI Oil Ends at Lowest Since Aug. 30
Among the many problems, there are worries that the US could lose its AAA ratings as political chaos fuels gov shutdown. That's in addition to major strikes, high interest rates that may be around for a long time & a possible recession. WTI oil's recent decline from its latest peak at the end of Sep comes on worries about demand destruction in global economies. Tomorrow's employment may not help in understanding the US economy.
Dow Jones Industrials
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