Dow sank 447, decliners over advancers a very big 7-1 & NAZ dropped 166. The MLP index stayed near 284 & the REIT index sank 14 (almost 4%) to the 369s. Junk bond funds were sold & Treasuries were very heavily sold, raising yields substantively. Oil slid back to the 84s & gold fell 13 to 2348.
AMJ (Alerian MLP Index tracking fund)
Inflation accelerated in Mar for the 3rd straight month, keeping prices painfully high for Ms of Americans & likely delaying any interest rate cuts by the Federal Reserve. 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 Mar from the previous month. Prices climbed 3.5% from the same time last year, above the 3.2% figure recorded in Feb. Both of those figures came in higher than the 0.3% monthly increase & 3.2% headline gain forecast. Other parts of the report also pointed to stubborn price pressures within the economy. Core prices, which exclude the more volatile measurements of food & energy, climbed 0.4%, as they did in Jan & Feb, for an annual gain of 3.8%. Those figures are also higher than estimates. Altogether, 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. Housing & gasoline costs were the biggest drivers of inflation last month, accounting for more than ½ of the total monthly increase. Rent costs rose 0.5% for the month & are up 5.7% from the same time last year. Rising rents are concerning because higher housing costs most directly & acutely affect household budgets. Gasoline prices, meanwhile, jumped 1.7% over the course of Mar. They are up 1.3% when compared with the same time last year. Other price gains also proved persistent in Mar. Food prices, a visceral reminder of inflation for many Americans, ticked up 0.1% over the course of the month. In total, the cost of groceries is up 1.2% from the same time last year & up a stunning 21% when compared with Jan 2021, shortly before the inflation crisis began.
Inflation rises more than expected for third straight month
The 10-year Treasury yield jumped back above 4.5% after Mar inflation data came in hotter than expected, adding to the likelihood of higher-for-longer interest rates from the Federal Reserve. The yield on the 10-year Treasury was last higher by more than 13 basis points at 4.501% & the yield on the 2-year Treasury was last at 4.943% after climbing more than 19 basis points. Yields & prices move in opposite directions & 1 basis point is equivalent to 0.01%. The Mar consumer price index showed a reacceleration of inflation from the prior month. CPI gained 0.4% from Feb & rose 3.5% on a yearly basis. The forecast called for a 0.3% gain & a 3.4% increase from the previous year. Core CPI, which excludes volatile food & energy prices, jumped 0.4% on a monthly basis while rising 3.8% from a year ago. That's compared to estimates for 0.3% & 3.7%, respectively. Stubborn inflation adds to expectations the Fed may not move to lower interest rates as soon as Jun after other recent data showed a robust economy that's stopping annual price gains from easing back to the central bank’s 2% target. The latest consumer inflation report comes ahead of the Mar producer price index set to be released tomorrow.
10-year Treasury yield jumps back above 4.5% after March inflation tops estimates
The Federal Reserve is in no rush to lower its benchmark rate. Earlier expectations that the central bank was planning multiple cuts before the end of the year seem less likely. On the heels of Fri's strong jobs report, today's consumer price index increased at a faster than expected pace in Mar. Both suggest that inflation is staying stubbornly higher, which experts say is likely keeping the Fed on the sidelines. Now markets are pricing in less than a 20% chance of a rate cut in Jun, according to the CME’s FedWatch measure of futures market pricing, down from nearly 80% one month ago. Since the start of 2024, higher-than-expected inflation data made top Fed officials less eager to ease policy. Chair Jerome Powell indicated last month that with the economy still growing at a healthy pace & unemployment below 4%, the Fed can take a more measured approach when it comes to cutting interest rates. “We are prepared to maintain the current target range for the federal funds rate for longer if appropriate,” said Powell at his post-meeting news conference last month.
Why the Fed is in no rush to cut rates: The ‘real danger’ is moving too fast, economist says
Treasuries & even gold had significant selling, so yields are in a rally mode. The first rate cut by the Fed is going to be delayed. Worse than that, prices are elevated & show no sign of improving (coming down). Higher oil prices for West Texas Intermediate add to pressure on controlling prices. Dow is back where it was at the end of Jan (see below).Dow Jones Industrials
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