Dow rise 126, advancers over decliners 2-1 & NAZ climbed 122. The MLP index added 1+ to the 279s & the REIT index gained 3 to the 274s. Junk bond funds inched higher & Treasuries continued in demand, bringing lower yields. Oil was up 1 to 78 & gold advanced 19 to 2362 (more on both below).
AMJ (Alerian MLP Index tracking fund)
Federal Reserve Chair Jerome Powell reiterated that inflation is falling more slowly than expected & will keep the central bank on hold for an extended period. The central bank leader noted that the rapid disinflation that happened in 2023 has slowed considerably this year & caused a rethink of where policy is headed. “We did not expect this to be a smooth road. But these [inflation readings] were higher than I think anybody expected,” Powell said. “What that has told us is that we’ll need to be patient and let restrictive policy do its work.” While he expects inflation to come down thru the year, he noted that hasn't happened so far. “I do think it’s really a question of keeping policy at the current rate for longer than had been thought,” he added. However, Powell also repeated that he does not expect the Fed to be raising rates. The Fed has been holding its key overnight borrowing rate in a targeted range of 5.25%-5.50%. Though the rate has been there since Jul, it is the highest level in some 23 years. “I don’t think that it’s likely, based on the data that we have, that the next move that we make would be a rate hike,” he said. “I think it’s more likely that we’ll be at a place where we hold the policy rate where it is.” Powell's comments mirrored sentiments he expressed during his May 1 news conference after the most recent Federal Open Market Committee meeting. The committee unanimously voted to hold the line on rates while also expressing that it had seen a “lack of further progress” on getting inflation back to the Fed’s 2% target, despite a series of 11 interest rate increases. Today brought a fresh round of discouraging inflation data, when the Labor Dept's producer price index, a proxy for wholesale costs, rose a higher-than-expected 0.5% in Apr on the back of a surge in services prices. Though the index on its surface indicated further price pressures, Powell called the report “mixed” as some of the components showed easing movement. “Is inflation going to be more persistent going forward? ... I don’t think we know that yet. I think we need more than a quarter’s worth of data to really make a judgement on that,” he continued.
Fed Chair Powell says inflation has been higher than thought, expects rates to hold steady
Google (GOOG) is using its annual developer conference to showcase what the company
is calling its lightest & most efficient artificial intelligence
models. The company announced Gemini 1.5 Flash, the newest addition to the Gemini model series. “We
heard from developers that they wanted something faster and even more
cost effective,” said Demis Hassabis, CEO of Google DeepMind. The unveiling comes as tech companies increasingly
refocus their product development & rollouts around generative AI,
which is of particular importance to GOOG because the new tools give
consumers more advanced & creative ways to access online information
compared to traditional web search. OpenAI launched a new AI model & desktop version of ChatGPT, along with a new user
interface. The new model, GPT-4o, is twice as fast as GPT-4 Turbo & ½ the cost. Google (GOOG) is using its annual developer conference to showcase what the company
is calling its lightest & most efficient artificial intelligence
models. The company announced Gemini 1.5 Flash, the newest addition to the Gemini model series. “We
heard from developers that they wanted something faster and even more
cost effective,” said Demis Hassabis, CEO of Google DeepMind. The unveiling comes as tech companies increasingly
refocus their product development & rollouts around generative AI,
which is of particular importance to GOOG because the new tools give
consumers more advanced & creative ways to access online information
compared to traditional web search. OpenAI launched a new AI model & desktop version of ChatGPT, along with a new user
interface. The new model, GPT-4o, is twice as fast as GPT-4 Turbo & ½ the cost. GOOG also announced an improved Gemini 1.5 Pro
model, which has the ability to make sense of multiple large documents,
1500-pages total, or summarize 100 emails, according to a VP working on Gemini. Gemini 1.5 Pro will soon be able to handle an hour of video content, or codebases with more than 30K lines, Hsiao said. With 35 languages, Gemini 1.5 Pro has a 2M token
window, which measures context & indicates how much information the
model is able to process at once. The new model has improved local
reasoning, planning & image understanding, company execs said. “You
can quickly get answers and insights about dense documents, like
figuring out the details of the pet policy in your rental agreement or
comparing key arguments of multiple long research papers,” Hsiao said. GOOG stock rose 1.03.
Google rolls out its most powerful AI models as competition from OpenAI heats up
Americans racked up more debt at the beginning of 2024 & a growing
number of households fell behind on payments for several types of loans,
according to a New York Federal Reserve report. In the first 3 months of 2024, total household debt surged to a
fresh record of $17.7T, an increase of $184B, or 1.1%
from the previous qtr. The increase mostly stemmed from a jump in
mortgage balances, which rose $190B from the previous qtr to
$12.4T at the end of Mar. Auto loan balances rose
slightly by $9B, continuing the upward climb seen since 2020 &
now stand at $1.62T. But credit card balances fell by $14B to $1.12T, near a record high, as consumers worked to
pay down their debt following the holiday shopping season. The report also showed a notable increase in the number of borrowers
who are struggling with credit card, student & auto loan payments. As
of Mar, about 3.2% of outstanding debt was in some stage of
delinquency, up from the 3.1% recorded the previous qtr but still
down from the average 4.7% rate seen before the COVID-19 pandemic
began. The transitions into delinquency, particularly serious
delinquency in which a balance is more than 90 days overdue, rose across
all debt types. "In the first quarter of 2024, credit card and
auto loan transition rates into serious delinquency continued to rise
across all age groups," said Joelle Scally, regional economic principal
within the Household & Public Policy Research Division at the New York
Fed. "An increasing number of borrowers missed credit card payments,
revealing worsening financial distress among some households." Credit
card delinquencies continued to rise from their pre-pandemic levels in
the first quarter. The percentage of credit card balances in
serious delinquency climbed to its highest level since 2012. The rise in debt is particularly concerning because interest rates
are astronomically high right now. The average credit card annual
percentage rate, or APR, is hovering around 20.66%, near a record high,
according to a Bankrate database that dates back to 1985. The previous
record was 19% in 1991.
Americans are carrying a record amount of household debt
Gold traded higher as the $ & treasury yields weakened even after another measure showed US inflation continued to run hot last month. Gold for Jun was last seen up $17 to $2360 per ounce. The Bureau of Labor Statistics reported the producer price index rose by 0.5% in Apr from Mar, up from a revised rise of 0.2% in Mar & ahead of the consensus estimate for a 0.3% monthly rise. Core PPI, which excludes volatile items like food & energy, rose 0.4%, up from 0.2% in Mar & above the 0.2% estimate. The report is the latest to show US prices continue to rise above the Federal Reserve's 2% target, again cutting into hopes the central bank will be able to lower interest rates from a 23-year high before year end. The Apr consumer price index will be released tomorrow, with the estimate calling for a rise of 3.4% annualized, down from 3.5% in Mar. The $ moved lower after briefly spiking following the data & the ICE dollar index was last seen down 0.18 points to 105.04. Treasury yields also moved lower after rising sharply following the PPI release, bullish for gold since it pays no interest. The US 2 year note was last seen paying 4.834%, down 4.2 basis points, while the yield on the 10-year note was down 3.3 basis points to 4.46%.
Gold Moves Higher as the Dollar and Yields Fall Even as a US Inflation Measure Rose More than Expected
West Texas Intermediate (WTI) crude oil closed at a 2-month low as a US inflation measure rose more than expected, further dimming hopes for the stimulus of a US interest-rate cut, while OPEC reiterated its optimistic 2024 demand forecast. WTI crude for Jun closed down $1.10 to settle at $78.02 per barrel, the lowest since Mar 12 & Jul Brent crude, the global benchmark, was last seen down $1.02 to $82.34. The Bureau of Labor Statistics reported the producer price index (PPI) rose by 0.5% in Apr from Mar, up from a rise of 0.3% in Mar & ahead of the estimate for a 0.3% monthly rise. Core PPI, which excludes volatile items like food & energy, rose 0.4%, up from 0.2% in Mar & above the 0.2% estimate. The report is the latest to show US prices continue to rise above the Federal Reserve's 2% target, again cutting into hopes the central bank will be able to lower interest rates from 23-year highs before year end. The US Apr consumer price index will be released tomorrow, with the estimate calling for a rise of 3.4% annualized, down from 3.5% in Mar.
WTI Oil Closes at a Two-Month Low as a US Inflation Measure Rose More Than Expected in April
Today was a sluggish day for stocks until the last 2 hours when the bulls returned & took the Dow higher. Dow is back hovering near its record reach a month ago while nervous investors seeking safe haven investments bought gold & Treasuries.Dow Jones Industrials
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