Dow dropped 55 after a 100 rise in the last ½ hour reduced the daly loss, decliners barely ahead of advancers & NAZ lost 50. The MLP index fell fractionally to the 167s & the REIT index rose 2+ to the 411s. Junk bond funds inched higher & Treasuries were weak. Oil crawled higher in the 59s & gold was off 13 to 1731 (more on both below).
AMJ (Alerian MLP Index tracking fund)
The US budget deficit skyrocketed in Mar after the gov approved a $1.9T coronavirus-relief package that included $1400 stimulus checks for most Americans. The budget gap more than doubled to $659B in Mar from Feb. It was the 3rd highest monthly deficit ever recorded. Federal spending surged to $927B last month, a number only exceeded by record increase in outlays last spring at the onset of the pandemic. The gov shelled out hundreds of Bs of $s in stimulus checks, higher unemployment benefits & other social-welfare policies to help Americans get thru the pandemic. The most recent bill was the 3rd federal package since last year. Tax revenues, meanwhile, totaled $267B in Mar. They rose 13% from the same month a year earlier, pointing to an ongoing recovery in the economy. The deficit in the first 6 months of the current fiscal year of 2021 climbed to $1.7T. Before the pandemic struck in 2020, the US never ran an annual deficit that reached that high. The US is likely to run huge deficits for at least the next few years as it copes with the fallout from the coronavirus. A Biden White House plan to spend $2.3T on infrastructure & other initiatives would add to the national debt.
Inflation is the #1 worry in the economy, but the picture about price pressure will be cloudy for most of this year, a top Federal Reserve official said. “We’re in a period of a lot of uncertainty around inflation. The dust has to settle a little bit before we’ll find out where inflation really is and that probably happens later this year,” St Louis Fed Pres James Bullard said. Bullard said there are anecdotal reports about supply chain bottlenecks & certain prices are rising fast. The Labor Dept will release its consumer price index for Mar tomorrow. Last week, the producer price index had the largest annual gain since 2011. The CPI is expected to see a large gain because any increase in inflation last month is compared with the drop in prices a year ago when the pandemic struck the economy. “It’s going to be hard to interpret it no matter how you cut it,” Bullard added. Fed Chair Jerome Powell has said any spike in inflation this year is likely to be “transitory.”
Gold ended lowe, with strength in Treasury yields dulling demand for the precious metal & helping to push prices to their lowest finish in a week. The US consumer-price index reading due tomorrow could spark a fresh move in gold, which is viewed as a hedge against rising prices. Jun gold fell $12 (0.7%) to settle at $1732 an ounce — the lowest finish for a most-active contract since Apr 5. Prices finished about 1% higher for the weekly period Fri. Analysts expect gold prices to trade in the $1650-1800 range over the 2nd qtr, with prices potentially correcting lower to a range of $1550-1650 by the end of the year. Gold investors also eyed news out of China. During a symposium last week, Chinese Premier Li Keqiang asked to strengthen market regulation of raw materials to ease the cost pressure of companies reported by the Xinhua News Agency.
Oil futures finished higher, as reports that Yemen's Iran-backed Houthi rebels attacked a Saudi oil facility lifted tensions in the oil-rich Middle East. The Houthi movement said that it fired drones & ballistic missiles at targets in Saudi Arabia, including some Saudi Aramco facilities, but there was no confirmation from the Saudis. Oil also saw support from sizable progress in European efforts to vaccinate against COVID-19 & optimism surrounding a recovery in the US economy, which offset some pressure from a global rise in cases of the virus. Upbeat comments on the economy from Federal Reserve Chair Jerome Powell, meanwhile, boosted prospects for a rise in US demand for energy. Powell described the US's current recovery from COVID as being at an “inflection point” & projected a strong rebound in coming months. Oil prices climbed, but settled below the day's best levels. West Texas Intermediate (WTI) crude for May rose 38¢ (0.6%) to settle at $59.70 a barrel. It had touched an intraday high of $60.77. Global benchmark Jun Brent crude climbed by 33¢ to reach $63.28 a barrel, a gain of 0.5%, the highest front-month settlement since Apr 1. Last week, WTI fell 3.5% & Brent marked a weekly loss of 2.9%. On Fri, oil prices fell amid concerns about growing supply & weakening appetite for energy, as global cases of COVID rose in Europe, Brazil & India in particular, prompting prices to post a loss for the week. India reported more than 168K new cases over a 24-hour period today, with that surge nudging the country past Brazil as the 2nd-worst country infected by COVID, according to public data. On top of that, Germany, Europe's largest economy, said it was preparing new legislation enabling the country to impose national COVID restrictions without regional gov approval.
There was significant buying in the last ½ hour of trading, but not enough to bring it back into the black. Just when it looks the fight against the virus is going well, it keeps popping up in other areas of the globe. The inflation data will get a lot of attention tomorrow & that will be followed by Q1 earnings. Meanwhile the popular stock averages remain at or very close to record highs.
Dow Jones Industrials