Dow finished up 66, decliners over advancers about 5-4 & NAZ added 37. The MLP index drifted 1+ lower to the 281s & the REIT index was even in the 377s. Junk bond funds edged higher & Treasuries saw modest buying which lowered yields, but still at high levels. Oil stayed fractionally higher in the high 79s & gold fell 15 to 2423 (more on both below).
AMJ (Alerian MLP Index tracking fund)
The Biden administration will release 1M barrels of gasoline from reserves held in the Northeast to reduce prices at the pump ahead of the Fourth of July holiday & summer driving season. “By strategically releasing this reserve in between Memorial Day and July 4th, we are ensuring sufficient supply flows to the tri-state [region] and northeast at a time hardworking Americans need it the most,” Energy Secretary Jennifer Granholm said. Gasoline futures have rallied 19% this year as oil prices have risen due to OPEC cutting production & fears the Israel-Hamas war could spark a broader Middle East conflict that disrupts supplies. Rising energy prices stirred speculation in Apr that the Biden administration might tap the Strategic Petroleum Reserve in Texas & Louisiana ahead of the Nov presidential election. White House National Economic Advisor Lael Brainard said last month that the administration would “make sure gas prices remain affordable.” But gas prices have eased in recent weeks as oil has pulled back from Apr highs hit when traders bid up crude futures on fears that Israel & OPEC member Iran were on the brink of war. Prices at the pump averaged $3.59 per gallon nationwide today, about 4¢ higher than the year-ago average but lower than last month, according to the motorist association AAA. Though gasoline prices have come down over the past month, broader inflation has remained stubborn, irking consumers. Retailers & terminals will receive the gasoline no later than Jun 30, according to the Dept of Energy. The supply will be released in quantities of 100K barrels to ensure a competitive bidding process that maximizes the impact on prices at the pump, according to the DOE. The barrels will be sold from storage sites in New Jersey & Maine that are part of the Northeast Gasoline Supply Reserve, which was established after Superstorm Sandy knocked out refineries in 2012. The gasoline sale comes as the separate Strategic Petroleum Reserve has fallen to the lowest level in decades. The Biden administration released 180M barrels from the SPR in 2022 as energy prices spiked in the wake of Russia's invasion of Ukraine.
Biden to sell 1 million barrels of gasoline to reduce prices at the pump ahead of July 4
Pres Biden & other Dem lawmakers have frequently blamed
corp price gouging for chronic inflation that has Americans paying
more for everyday necessities. But new research published by the Federal Reserve Bank of San Francisco suggests that corp greed is not a primary driver of the inflation spike that began in early 2021. Although
some companies jacked up prices after the COVID-19 pandemic, markups
surged for things like gasoline & cars in 2021, for instance, the
researchers found the overall markup rate has generally remained flat,
consistent with previous economic recoveries over the past 3
decades. "These patterns suggest that markup fluctuations have
not been a main driver of the ups and downs of inflation during the
post-pandemic recovery," wrote Sylvain Leduc, Huiyu Li & Zheng Liu in
the bank's weekly Economic Letter. The findings run counter to a recent push by Biden to blame "shrinkflation"
– when companies reduce the package size & portions of their foods
while also raising the price or holding it steady – & corp greed
for still-elevated prices. At the end of Feb, the White
House launched a new task force that is intended to take on "unfair and
illegal" corp pricing, which Biden has blamed for the frustratingly
high price of groceries. "Too many corporations raise their prices to pad their profits, charging
you more and more for less and less," Biden said in his State of the
Union address earlier this year. "That’s why we’re cracking down on
corporations that engage in price gouging or deceptive pricing from food
to health care to housing." While corp profits did rise after the pandemic, the San
Francisco Fed researchers said they are "typically volatile" &
frequently rise in the early stages of economic recoveries. Data for the
current recovery shows that the increase in corp profits is "not
particularly pronounced compared with previous recoveries," which did
not experience high inflation. "Overall, our analysis suggests
that fluctuations in markups were not a main driver of the post-pandemic
surge in inflation, nor of the recent disinflation that started in
mid-2022," the researchers wrote. Prices
for everything including groceries, new cars & health insurance
surged in 2021 & 2022 as the result of rampant inflation that many
economists, including the San Francisco Fed, agree was caused by supply chain disruptions, an extremely tight
labor market & increased consumer demand fueled by trillions in
stimulus money. While inflation has fallen considerably from a
peak of 9.1%, it remains well above the Fed's 2% goal. When compared
with Jan 2021, shortly before the inflation crisis began, prices are up a stunning 19.4%.
Corporate greed is not to blame for high inflation, SF Fed says
Long-expected layoffs are hitting Pixar Animation Studios. Pixar will lay off about 175 employees, or around 14% of the studio’s workforce, a spokesperson for parent company Walt Disney (DIS), a Dow stock. The cuts come as CEO Bob Iger works toward his overarching
mandate to focus on the quality of its content, not the quantity. Layoffs
hit other DIS businesses last year, but Pixar's cuts were delayed
because of production schedules. Initially, it was reported that 20% of
the animation studio's employees would be laid off. Iger, who
returned to the mantle of CEO in late 2022, has been working to reverse
the company's box office woes, spurred both by the company's content
decisions & pandemic shutdowns. While DIS has seen mixed box office
success with several franchises, including the Marvel Cinematic
Universe, the company has found it challenging to get its animated
features to resonate with audiences. No DIS animated feature from Pixar or Walt Disney Animation has
generated more than $480M at the global box office since 2019. For comparison, just before the pandemic, “Coco” generated $796M
globally, while “Incredibles 2″ tallied $1.24B globally & “Toy
Story 4” snared $1.07B globally. With Iger back at the helm, Pixar will refocus on theatrical releases & move away from short-form series for Disney+. The stock was off 5¢.
Pixar is laying off 14% of its workforce as Disney scales back content
Gold prices cooled near a record peak hit in the previous session as the $ held ground, but stayed afloat at the $2400 level on support from safe-haven interest & prospects of US interest rates easing this year. Spot gold fell slightly to $2420 per ounce as the $ index, opens new tab edged up, making bullion more expensive for other currency holders. US gold futures settled 0.5% lower to $2425. As gold scaled a record high of $2449 yesterday, the general picture has not really changed since Mar. Concerns about the rapidly rising US gov debt as the Federal Reserve tries to make for a soft landing are drivers for some investors. Investors will keep a tab on minutes of the Fed's last policy meeting due tomorrow.
Gold Prices Cool Near Record Peak as Dollar Holds Footing
Oil prices settled 1% lower as lingering US inflation poised to keep interest rates higher for longer & likely weighed on consumer demand at the pump, while little support came from geopolitical risk. Brent crude futures settled down 83¢ (1%) to $82.88 a barrel & US West Texas Intermediate crude (WTI) futures for Jun , which expire today, slipped by 54¢ (0.7%) to $79.26. The more active Jul contract settled down 64¢ at $78.66. Higher borrowing costs tie up funds in a blow to economic growth & demand for crude, as well as pressuring consumer demand at the pump. Despite the run up to this weekend's Memorial Day holiday, which kicks off the US. peak summer driving season, retail gasoline prices fell for the 4th consecutive week to $3.58 per gallon yesterday, the Energy Information Administration (EIA) said. However, in a bid to ensure sufficient supply flows to the northeast, the US will sell the nearly 1M barrels of gasoline in a reserve in northeastern states, with bids due on May 28, the Dept of Energy said.
Oil Falls 1% as US Inflation Persists, Dampened Geopolitical Risk Premium
Dow had a little buying in the AM, but that did not last. Stocks continue to drift aimlessly. The minutes from the last Fed meeting may provide some excitement in the stock market tomorrow.
Dow Jones Industrials
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