Dow finished up all of 4 (stayed near even for the entire session), advancers over decliners about 2-1 & NAZ added 5. The MLP index remained steady in the 287s & the REIT index was up 3+ to the 378s. Junk bond funds crawled higher & Treasuries continued to be sold, raising yields. Oil remained in the 86s & gold rose another 13 for a new record at 2359 (more on both below).
AMJ (Alerian MLP Index tracking fund)
Americans are bracing for high inflation to remain over the next few years, according to a key Federal Reserve Bank of New York survey. The median expectation is that the inflation rate will be up 3% one year from now, according to the New York Federal Reserve's Survey of Consumer Expectations, unchanged from the previous months. Consumers also anticipate that inflation will remain high in the coming years, projecting that it will hover around 2.9% 3 years from now, up from Feb's 2.7% & Jan's 2.4%. However, they expect that inflation will cool to 2.6% 5 years from now. That remains above the Fed's 2% target, indicating that sticky inflation could be here to stay. By comparison, central bank policymakers projected in their latest economic forecasts that inflation will fall to 2.1% by 2025 & eventually settle at around 2% in 2026. The survey, based on a rotating panel of 1300 households, plays a critical role in determining how Fed policymakers respond to the inflation crisis. That is because actual inflation depends, at least in part, on what consumers think it will be. It is sort of a self-fulfilling prophecy – if everyone expects prices to rise by 3% in the year, that signals to businesses that they can increase prices by at least 3%. Workers, in turn, will want a 3% pay raise to offset the rising costs. Fed Chair Jerome Powell has repeatedly stressed that policymakers are committed to bringing inflation back to the Fed's 2% target goal before they start to reduce interest rates. The mean perceived probability of losing one's job in the next 12 months jumped by 1.2 percentage points to 15.7%. That is above pre-pandemic levels & marks the highest reading since Sep 2020. Americans are also more pessimistic about the odds of finding a new job if they lose their current one. The mean perceived probability of finding a job tumbled for the 3rd straight month to 51.2% in Mar, from 52.5% in Feb, the lowest reading in nearly 3 years, well below the pre-pandemic reading of 58.7%. However, mean unemployment expectations, or the probability that US unemployment will be higher one year from now, fell by 1.1 percentage points to 36.1% in Feb, the lowest reading in 2 years.
Americans see inflation rising again in the long term, key NY Fed survey shows
Treasury Secretary Janet Yellen said she would not rule out any measures, including potential tariffs, on China's green energy exports. “I wouldn’t rule out anything out at this point. We need to keep everything on the table. We want to work with the Chinese to see if we can find a solution,” she said, when asked about the possibility of the US imposing tariffs if China does not adjust its approach to industry incentives. “I’m not thinking so much of export restrictions, as some shifts in their macroeconomic policy, and a reduction in the amount of, particularly local government subsidies, to firms,” Yellen said. She nevertheless stressed the need to create a level playing field in the green technology space. “We just want to make sure that we’re not driven out of business, and that our firms and workers have opportunities in these industries which will be important ones in our future,” she continued. Yellen is currently in Beijing & is due to leave China tomorrow. She arrived in Guangzhou last week to connect with Chinese officials as fractious economic relations between the 2 countries continue. The US has been increasingly voicing concerns about an oversupply of subsidized Chinese clean energy products — such as solar power, electric vehicles & lithium-ion batteries — that it can export to intl markets at discounted prices, which the White House says harms the competitiveness of domestic firms. DC's anxiety is shared by its allies including Japan & Europe, as a glut of cheap Chinese products, such as solar panels, has flooded their markets. “It’s fine for China’s firms to export in this industry, to develop it. But some of the techniques that they use — subsidizing their firms very heavily and then supporting them even when they’re losing money ... this is something that’s unacceptable from the U.S. point of view, and many of our allies feel the same way,” Yellen said.
Yellen says she won’t rule out possible tariffs on China’s green exports
US crude oil futures fell after Israel reduced its troop presence in Gaza. The West Texas Intermediate contract for May fell 76¢ (0.9%) to $86.15 a barrel & the Jun Brent contract lost $1 (1.1%) to $90.13 a barrel. Israel withdrew forces from the southern Gaza city of Khan Younis over the weekend, bringing its troop levels in the enclave to one of the lowest levels since the war with Hamas began last Oct. Negotiations on a ceasefire between Israel & Hamas are ongoing in Cairo. US crude &d Brent gained more than 4% last week as tensions mounted between Israel & Iran, raising renewed fears that a direct confrontation between the 2 would lead to regional conflict that disrupts crude supplies. A top Iranian military advisor warned Israel over the weekend that its embassies could be targeted. Tehran has blamed Israel for a missile strike last Mon against its consulate in Damascus, which killed top Iranian commander Mohammad Reza Zahedi. “None of the embassies of the (Israeli) regime are safe anymore,” said Gen Rahim Safavi, an advisor to Iran's supreme leader Ayatollah Ali Khamenei. Ukraine's campaign of drone attacks on Russian oil refineries also lifted crude prices, with global supplies already tightening due to robust economic growth & OPEC+ production cuts.
Oil prices fall after Israel reduces troop presence in Gaza
Gold prices hit a record high for a 7th straight session, fueled by central bank purchases & geopolitical tensions, while strong economic data failed to dull
bullion's allure. Spot gold firmed
0.3% to $2336 per ounce after
hitting a record high of $2353 earlier in the session. Gold
futures settled 0.2% higher at $2351. China's
central bank added 160K troy ounces of gold to its reserves in
Mar, it said. Turkey, India, Kazakhstan & some eastern European
countries have also been buying gold this year. The
market is pricing rate cuts by Jun despite strong economic data.
Central Bank Demand Propels Safe-Haven Gold to Record Peak
Oil futures declined, but settled above the session's lowest levels, as traders monitored risks to crude supplies in the Middle East. Israel said it was withdrawing more soldiers from southern Gaza, while news reports said both Israel & Hamas had sent delegations to Cairo for cease-fire talks - though some reports said there had been no progress. West Texas Intermediate crude for May fell 48¢ (0.6%) to settle at $86.43 a barrel after trading as low as $84.69. Jun Brent crude, the global benchmark, declined by 79¢ (0.9%) at $90.38 a barrel after after trading as low as $88.78. May gasoline shed 1.4% to $2.75 a gallon, while May heating oil lost 1.6% to $2.73 a gallon & natural gas for May settled at $1.84 per M British thermal units, up 3.3%. Geopolitics remain the primary influence on the oil market & news that Israel was withdrawing some troops from parts of Gaza was seen as a step towards de-escalation in the military conflict between Israel & Hamas.
Oil Prices Fall, but Settle Above Lows, as Traders Monitor Middle East Risks
News keeps coming in mixed. Some is bullish although the housing & auto markets, 2 very big ones, are only so-so. High demand from nervous investors & central banks allows gold to extend its impressive rally in record territory. At the same time, the long run for Dow (see below) looks to be tired. Q1 bank earnings reports should be released shortly.
Dow Jones Industrials
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