Dow declined 345 (going below 34K), decliners over advancers 3-1 & NAZ pulled back a big 273. The MLP index gained 4+ to 187 & the REIT index went up 5+ to the 429s. Junk bond funds fell & Treasuries were heavily sold (more below). Oil jumped 1+ to the 66s & gold dropped 11 to 1815.
AMJ (Alerian MLP index tracking fund)
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Inflation in Apr accelerated at its fastest pace in more than 12 years as the US economic recovery kicked into gear & energy prices jumped higher, the Labor Dept reported. The Consumer Price Index, which measures a basket of goods as well as energy & housing costs, rose 4.2% from a year earlier. The forecast was for a 3.6% increase. The month-to-month gain was 0.8%, against the expected 0.2%. Excluding volatile food & energy prices, the core CPI increased 3% from the same period in 2020 & 0.9% on a monthly basis. The respective estimates were 2.3% & 0.3%. The increase in the headline CPI rate was the fastest since 2008. Energy prices overall jumped 25% from a year earlier, including a 49.6% increase for gasoline & 37.3% for fuel oil . That came even though most energy categories saw a decline in Apr. Prices at the pump, which fell 1.4% in Apr, have resumed their climb in May, with the national average eclipsing $3 a gallon for the first time since 2014. Further rises are likely from Fri's cyberattack that shut down Colonial Pipeline's main transmission line from Houston to New Jersey. Used car & truck prices, which are seen as a key inflation indicator, surged 21%, including a 10% increase in Apr alone. Shelter, another key CPI component, was up 2.1% year over year & 0.4% for the month. In addition to rising prices, one of the main reasons for the big annual gain was because of base effects, meaning inflation was very low at this time in 2020 as the Covid pandemic caused a widespread shutdown of the US economy. Year-over-year comparisons are going to be distorted for a few months because of the pandemic's impact. For that reason, Federal Reserve policymakers & many economists are dismissing the current round of numbers as transitory, with the expectation that inflation settles down later this year around the 2% range targeted by the central bank. Fed officials repeatedly have said they will not raise interest rates or pull back on monthly bond purchases until inflation averages around 2% over an extended period.
Inflation speeds up in April as consumer prices leap 4.2%, fastest since 2008
The national average for a gallon of gas jumped above $3 for the first time since 2014, as much of the crucial Colonial Pipeline remains offline. Amid fears of a supply shortage, consumers in Southeastern states are heading to the pump, creating long lines & in some cases wiping fuel stations dry. On average, Americans are now paying $3.008 for a gallon of gas, up from $2.985 yesterday & $2.927 one week ago. In some Southeastern states, the jump in prices is much larger. Georgians are now paying $2.951 per gallon, up from $2.715 one week ago. In North Carolina the average now sits at $2.850, compared with $2.689 a week ago. In Virginia, meanwhile, prices have jumped from $2.741 to $2.871. Spot shortages across the most impacted states are rising. According to the latest data from GasBuddy, 15.4% of Georgia fuel stations are out of supplies, while almost 60% of stations in the metro Atlanta area are empty. In North Carolina & South Carolina, 24.8% & 13.4% of stations are empty, respectively. In Virginia, 15% of stations are without fuel.
National average for gasoline tops $3 a gallon amid pipeline shutdown, rush to buy in Southeast
Treasury yields moved higher after key inflation report showed a faster-than-expected rise in prices. The yield on the benchmark 10-year Treasury note rose to 1.668%, a gain of more than 4 basis points. The yield on the 30-year Treasury bond rose slightly to 2.367%. Yields move inversely to prices. A basis point is equal to 0.01 percentage points. The Apr Consumer Price Index rose 4.2%, a faster-than-expected rise in prices & the biggest year-over-year increase since 2008. The forecast called for a rise of 3.6%. The report represents an acceleration from the previous month, when
the CPI rose 0.6% in Mar from the previous month & 2.6% from a year
ago. Rising inflation has
been a growing concern for investors, though Federal Reserve Chair Jerome Powell has said any increase in prices should be transitory.
10-year Treasury yield jumps after hotter-than-expected inflation report
These are gloomy times for investors, between the pipeline problems & ugly inflation data. On the rise for gas at the pump, West Texas Intermediate (the US price of petroleum) is up a good 25% from the start of the year & other factors are in play. In addition, prices for many products (starting with lumber) are up sharply. Consumers will need to get smarter when shopping & look for bargains. Increased fighting in Israel is making matters worse. Currently the Dow is up only 100 in May & the bears are taking control of the stock market.
Dow Jones Industrials
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