Dow dropped 366, decliners over advancers 3-1 & NAZ retreated 277. The MLP index added 1+ to the 201s & the REIT index was off 5+ to 456. Junk bond funds drifted lower & Treasuries saw more selling, taking to yield on the 10 year Treasury to about 2% (more below). Oil added 1+ to almost 110 & gold gained 13 to 2001.
AMJ (Alerian MLP index tracking fund)
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Inflation hit a fresh 40-year high in Feb, largely driven by higher gas prices. The
consumer price index climbed 7.9% on an annual basis, according to the Bureau of Labor
Statistics. Month-over-month, inflation rose 0.8%. The
year-over-year reading is in-line with estimates & compares with an
annual 7.5% jump in Jan, marking the fastest increase since 1982, when inflation hit 7.6%. Gas jumped 6.6% in Feb & accounted for almost a 3rd of price hikes. Food rose by 1%. The Feb data does not include the Russia, Ukraine conflict which
have pushed prices at the pump to $4.31 per AAA as of today, a record
high.
American wallets punched with record-high inflation… again
Treasury yields climbed as inflation data came in slightly hotter than expected. The yield on the benchmark 10-year Treasury note rose 4 basis points to 1.98% & the yield on the 30-year Treasury bond climbed 6 basis points to 2.36%. Yields move inversely to prices & 1 basis point is equal to 0.01%. The ECB announced it will wind down asset purchases faster than planned, before adding that it stands ready to revisit this decision if the outlook changes. Investors remained concerned about the recent spike in commodity prices because of the Russia-Ukraine war. The fear has been that higher commodity prices could push headline inflation higher, while slowing economic growth, also known as “stagflation.”
10-year Treasury yield climbs after data shows inflation rises 7.9%
The ECB announced it will wind down asset purchases faster than planned as it assesses the economic fallout from Russia's invasion of Ukraine. .The ECB said that it will end its bond-buying program in Q3, if economic data allows it. The central bank added that it stands ready to revisit this decision if the outlook changes. The surprise move comes amid growing concern that the euro zone economy could soon experience stagflation — the toxic mix of sluggish economic growth & high inflation. Consumer prices in the 19 countries that use the euro currency have climbed to record highs for 4 consecutive months, most recently hitting 5.8% in Feb. “If the incoming data support the expectation that the medium-term inflation outlook will not weaken even after the end of our net asset purchases, the Governing Council will conclude net purchases under the APP in the third quarter,” the bank said, referring to its asset purchase program. It added that monthly net purchases under the program would amount to €40B ($44.5B) in Apr, €30B in May & €20B in Jun. The central bank kept interest rates unchanged today, leaving the benchmark refinancing rate at 0%, the rate on its marginal lending facility at 0.25% & the rate on its deposit facility at -0.5%. Any adjustments in interest rates will take “some time” after asset purchases end, the bank said, adding that this would be “gradual.”
European Central Bank surprises markets with move to wind down stimulus sooner than planned
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