Dow rose 273, advancers over decliners a modest 4-3 & NAZ shot up 222. The MLP index was flattish near 279 & the REIT index barely budged at 390. Junk bond funds fluctuated & Treasuries were sold, bringing higher yields. Oil edged up to the 78s & gold dropped 21 to 2166 after its recent rally to the high 2100s.
AMJ (Alerian MLP Index tracking fund)
Inflation unexpectedly ticked higher in Feb thanks to a jump in the cost of gasoline & rent, underscoring the challenge of taming price pressures within the economy. The Labor Dept said that the consumer price index, a broad measure of the price of everyday goods including gasoline, groceries & rent, rose 0.4% in Feb from the previous month. Prices climbed 3.2% from the same time last year. Both of those figures came in higher than the 0.3% monthly increase & 3.1% headline gain recorded in Jan. Other parts of the report also indicated that inflation has been slow to retreat. Core prices, which exclude the more volatile measurements of food & energy, climbed 0.4%, as they did in Jan & it rose 3.8% annually. Both of those figures are slightly higher than estimates. Altogether, the report indicates that while inflation has fallen considerably from a peak of 9.1%, it remains 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. Housing & gasoline costs were the biggest drivers of inflation last month, accounting for more than 60% of the total monthly increase. Rent costs rose 0.4% for the month & are up 5.8% from the same time last year. Rising rents are concerning because higher housing costs most directly & acutely affect household budgets. Gasoline prices, meanwhile, surged 3.8% over the course of Feb. However, they remain down 3.9% when compared with the previous year. Other price gains also proved persistent in Jan. Food prices, a visceral reminder of inflation for many Americans, were unchanged over the course of the month. However, grocery prices are up 1% from the same time last year.
No relief for Americans as inflation comes in hotter than expected for second month in a row
Consumer spending bounced back in Feb from a Jan dip, with a little help from leap day. But sales still registered good gains even after correcting for that extra spending day. The CNBC/NRF Retail Monitor, derived from actual credit card spending data from Affinity Solutions, rose 1.06% in Feb, when excluding autos & gas. It increased 0.95% when taking out restaurants as well, the Retail Monitor’s core measure. Removing the effect of the leap day, sales rose 0.4%, or less than ½ of the unadjusted gain, but they were still up from the 0.2% decline in Jan. Taking out restaurants, the Retail Monitor adjusted for the leap day was up 0.3%, compared with a 0.04% gain in Jan. “While the future direction of interest rates and inflation remains uncertain, it’s clear that a strong job market and increases in real wages are continuing to support spending,” said Matt Shay, pres of the National Retail Federation. Looking at individual sectors, not adjusted for the leap day:
- Online & other nonstore sales were up 0.8% month over month seasonally adjusted & up 18.08% year over year.
- Sporting goods, hobby, music & bookstores were up 2.29% month over month seasonally adjusted & up 13.67% year over year.
- Health & personal-care stores were up 0.96% month over month seasonally adjusted & up 11.18% year over year.
- Clothing & accessories stores were up 0.51% month over month & up 8.05% year over year unadjusted.
The sector data was also impacted by the leap day & the index overall could differ more sharply this month from the Census Bureau retail data than it normally does.
Consumer spending rebounded in February, according to the CNBC/NRF Retail Monitor
The US led the world in oil production for the 6th consecutive year in 2023, according to a new report from the Energy Information Administration (EIA). Crude oil production in the US, including condensate, averaged 12.9M barrels per day (b/d) in 2023, a level which surpassed the American & global record of 12.3M b/d that the US set in 2019. Average monthly US crude oil production also reached a record high in Dec 2023 at more than 13.3M b/d. "The United States produced more crude oil than any nation at any time, according to our International Energy Statistics, for the past six years in a row," the EIA wrote. The US, Russia & Saudi Arabia combined to account for about 40% of global oil production last year, having totaled 32.8M b/d. The 3 countries have produced more oil than any others since 1971, including production in the Russian Federation of the Soviet Union prior to the dissolution of the USSR in 1991. The next 3 largest producing countries — Canada, Iraq & China — combined to produce 13.1M b/d in 2023, slightly more than what was produced in the US alone. US crude oil production has reached record-setting levels in recent years, less than 2 decades after production hit a low of 5.0M b/d in 2008 after decades of decline dating back to the previous high of 9.6M b/d in 1970. The uptick in US production began in 2009 as producers increasingly used hydraulic fracturing & horizontal drilling techniques. The upward trend has had 2 exceptions since 2009: in 2020 & 2021 when prices fell amid low demand for oil due to the economic impacts of the COVID-19 pandemic. Production in the Permian Basin, which covers western Texas & eastern New Mexico, drove the increases in total crude oil & natural gas production the US has seen in recent years.
A slight increase in the CPI along with strong retail sales in Feb should make the Fed more cautious about interest rate cuts. Let's see if this rally lasts in the PM.
Dow Jones Industrials
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