Dow went up 58 , advancers over decliners better than 3-1 & NAZ rose 54. The MLP index added 1+ to the 255s & the REIT index advanced 3+ to 364. Junk bond funds crawled higher & Treasuries saw more buying which reduced yields (more below). Oil was steady in the 76s before tomorrow's important OPEC+ meeting to set production levels (more below) & gold added 3 to 2063, edging closer to its record at 2078.
AMJ (Alerian MLP Index tracking fund)
The US economy grew at a faster pace in the 3rd qtr than previously reported, underscoring its resilience even in the face of still-high inflation & steep interest rates. Gross domestic product, the broadest measure of goods & services produced across the economy, grew by 5.2% on an annualized basis in the 3-month period from Jul-Sep, the Commerce Dept said in its 2nd reading of the data. That compares with the previously reported 4.9% increase. It marks the fastest pace of growth in nearly 2 years. The change largely stemmed from upward revisions to both gov & business spending. However, the report also included a downward revision to consumer spending, which was lowered to a 3.6% rate. Despite the surprising show of strength, there are other signs the economy is beginning to slow. Job growth is moderating; the housing market – which is vulnerable to higher interest rates – is trapped in a prolonged downturn; & consumer spending has shown signs of cooling off. Many economists expect to see further cooling in coming months as higher interest rates continue to work their way thru the economy. Steeper borrowing costs tend to create higher rates on consumer & business loans, which slows the economy by forcing employers to cut back on spending.
US economy grew faster than previously reported in the third quarter
The influential Organization of Petroleum Exporting Countries & its allies, collectively known as OPEC+, convene to decide next production policy steps tomorrow, in a postponed virtual meeting overshadowed by conflict in the Middle East, internal disgruntlement & the imminent expiry of a key Saudi supply cut. All eyes have turned on whether the OPEC subset of the group — steered by heavyweight Saudi Arabia — will have mended its differences, after sources said that Angola & Nigeria objected to lower baselines for next year. Baselines, levels off which cuts & quotas are decided, have been a bone of contention within OPEC+, stalling talks amid UAE pushback in the summer of 2021. Angola & Nigeria have struggled with declining output amid underfunding, spare capacity depletion & infrastructural sabotage. But accepting lower baselines would pose risks in the event of future output recoveries. The 2 countries' baselines for 2024, & implicitly their production quotas, were due to be studied following assessment from 3 independent data providers. 2 OPEC+ delegates said that a compromise had yet to be reached, as the clock ticks toward key meetings between OPEC, OPEC+ and their technical committee. The gatherings were initially scheduled as in-person meetings last weekend in Vienna, before a last-minute downgrade to virtual conferences. Their new date overlaps with the first day of the 2023 United Nations Climate Change Conference (COP28) hosted by key OPEC member the UAE, which is trying to raise its profile as a champion of the green transition. Beyond internal strife, OPEC+ has been contending with a perceived disconnect between prices & supply-demand fundamentals, which has frustrated the group, including Saudi Energy Minister Prince Abdulaziz bin Salman, who warned market speculators they should “watch out” in May. OPEC+ members already have a 2M barrels-per-day production cut in place, compounded by 1.66M-barrels-per-day voluntary declines from some members. Both were agreed until the end of 2024. Topping this, Saudi Arabia & Russia instituted respective supply drops of 1M barrels per day & 300K barrels per day until the end of this year. These drops fleetingly boosted prices that languished amid high interest rates & banking turmoil in the first ½ of the year, but gains have since retreated, given a fragile recovery in China & political uncertainty in the Middle East.
OPEC+ oil producers head into meeting with quota unease and geopolitical risks casting a shadow
Treasury yields fell as investors considered the outlook
for interest rates & awaited fresh data that could provide hints
about the state of the economy. The yield on the 10-year Treasury was 4 basis points lower at 4.296%. That marks the first time since Sep that the benchmark rate trades below 4.3% & the 2-year Treasury yield was last down by more than 3 basis points at 4.703%. The yield on
the 2-year note had hit a low of 4.666%, marking the lowest level since
Jul 18 when it yielded as low as 4.660%. Yields & prices move in opposite directions & 1 basis point is equivalent to 0.01%. Investors assessed the outlook for interest rates as they digested
comments from Federal Reserve Governor Christopher Waller & looked to
upcoming economic data. Waller yesterday said that monetary
policy was “well positioned” to achieve the Fed's goals of slowing the
economy & lowering inflation. Many investors took this as a sign that
the central bank could be done hiking rates. Uncertainty about the
path ahead for monetary policy & especially around how long rates are
set to stay elevated & when they may be cut have grown louder among
investors in recent weeks. One last Fed meeting is scheduled for this
year on Dec 12-13. Markets are expecting the central bank to keep rates
unchanged then & are hoping for hints about when policymakers believe
rates could come back down. Concerns about the state of the
economy & whether higher rates will lead to a recession have also
continued. Data today suggests that consumers still expect economic contraction, however their overall confidence in the economic outlook rose in Nov.
10-year Treasury yield falls below 4.3% for the first time since September
Dow Jones Industrials
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