Dow soared 530, fewer than 200 stocks declined on NYSE today & NAZ jumped 324. The MLP index advanced 2+ to the 249s & the REIT index shot up 19+ to the 355s on the inflation news. Junk bond funds went along with the stocks market rally & Treasuries were heavily bought, causing Treasury yields to plunge. Oil rose another 1+ to the 79s & gold shot up 21 to 1971.
AMJ (Alerian MLP Index tracking fund)
The Labor Dept said that the consumer price index, a broad measure of the price for everyday goods including gasoline, groceries & rent, was unchanged in Oct from the previous month. Prices climbed 3.2% from the same time last year. Both figures are lower than the estimates. Other parts of the report pointed to cooling price pressures within the economy. Core prices, which exclude the more volatile measurements of food & energy, climbed 0.2% (4% annually). Both of those figures are lower than expected. "October is just one fight in a long war against inflation, but we can count it as a victory," said Robert Frick, corp economist with Navy Federal Credit Union. Still, the report indicates that while inflation has fallen considerably from a peak of 9.1%, it remains well above the Federal Reserve's 2% target. High inflation has created severe financial pressures for most US households, which are forced to pay more for everyday necessities like food & rent. The burden is disproportionately borne by low-income Americans, whose already-stretched paychecks are heavily affected by price fluctuations. Consumers continued to see some reprieve in Oct. The price of gasoline plunged 5% last month & is down 5.3% from the same time last year. The cost of used cars & trucks dropped 0.8% over the month & is down 7.2% compared with the same time one year ago. Airline tickets also fell 0.9% in Oct, following increases in both Sep & Aug. Other price gains proved persistent & stubbornly high in Oct. Shelter costs, which was the largest contributor to core inflation last month, rose 0.2% on a monthly basis & are up 6.7% over the past year. Food prices, a visceral reminder of inflation for many Americans, also inched higher in Oct. Grocery costs rose 0.3% in Oct, up from 0.1% in Sep, & are up 2.1% compared with the same time last year.
Inflation rises 3.2% in October, less than expected
Former St Louis Fed Pres Jim Bullard says the Federal Reserve still has “a ways to go” in fighting inflation & that there is still a risk that prices pick up once again. Between Mar 2022 & Jul 2023, the FOMC enacted a run of 11 rate hikes to take the Fed funds rate from 0.25-0.50% to 5.25-5.50% & inflation has since fallen substantially. Although markets now believe interest rates have peaked & have begun looking forward to cuts next year, Bullard, who stepped down as head of the St Louis Fed in Aug, suggested the central bank's work is far from over. “It’s been so far so good for the FOMC. Inflation has come down, core PCE inflation on a 12-month basis down from 5.5% to 3.7% — pretty good but that’s still only halfway back to the 2% target so you’ve still got a ways to go,” he said. “I think you have to watch the data carefully and it’s very possible that inflation will turn around and go the wrong way.” “That’s just one month’s number, but still I think the risk for the FOMC is that the nice disinflation that we’ve seen over the last 12 months won’t persist going forward and then they’ll have to do more,” Bullard added.
Former St. Louis Fed president says the FOMC still has 'a ways to go' on inflation
Treasury yields fell as key inflation figures showed a surprisingly soft change in prices last month. The 10-year Treasury yield fell nearly 18 basis points to about 4.45% & the 2-year Treasury yield fell more than 19 basis points to under 4.9%. Yields & prices move in opposite directions & 1 basis point equals 0.01%. The Oct consumer price index was flat month over month & up 0.2% when excluding food & energy for the core CPI reading, the Labor Dept said. The forecast expected a 0.1% monthly rise in CPI & 0.3% in core CPI. Core CPI was up 4.0% year over year, the lowest 12-month reading since Sep 2021, according to the report, a positive sign for the Federal Reserve's efforts to slow inflation with causing a recession. The report is a key data point for what could be on the horizon for interest rates. Questions around whether the central bank will hike rates further or prepare to cut them, & when that could happen have grown louder in recent weeks. After the report, the options market implied a 0% chance of a rate hike in Dec & a negligible 4.1% chance for a Jan hike, according to the CME FedWatch Tool.
10-year Treasury yield tumbles below 4.5% on cool October inflation report
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