Dow gained 176, advancers over decliners 4-3 & NAZ went up 94 The MLP index remained steady in the 216s & the REIT index added 1+ to 422. Junk bond funds rose along with stocks & Treasuries were slightly higher in price. Oil bounced back 1+ to the 83s & gold was off 9 to 1718.
AMJ (Alerian MLP index tracking fund)
Federal Reserve Chair Jerome Powell today emphasized the importance of getting inflation down now before the public gets too used to higher prices & comes to expect them as the norm. In his latest comments underlining his commitment to the inflation fight, Powell said expectations play an important role & were critical to why inflation was so persistent in the 1970s & '80s. "History cautions strongly against prematurely loosening policy," he said in a Q&A. "I can assure you that my colleagues and I are strongly committed to this project and we will keep at it until the job is done." The event was Powell's last scheduled public appearance before the Fed's next meeting on Sep 20-21. Markets largely took the comments in stride, with major averages little changed in the early going on Wall Street. Treasury yields were mostly higher, with the 2-year note, the most sensitive to Fed rate hikes, rising by nearly 5 basis points to 3.49%. A basis point is 0.01 percentage points. The Fed has raised benchmark interest rates 4 times this year, with the fed funds rate now set at 2.25-2.50%. Markets widely expect the rate-setting FOMCto enact a 3rd consecutive 0.75 percentage point increase when it meets later this month. In fact, that probability rose to 86% during Powell’s remarks. One reason for acting aggressively is to make sure that inflation running around its highest rate in more than 40 years doesn't become ingrained in the public consciousness, Powell said. “The Fed has the responsibility for price stability, by which we mean 2% inflation over time,” he added. “The longer inflation remains well above target, the greater the risk the public does begin to see higher inflation as the norm, and that has the capacity to raise the costs of getting inflation down.”
Fed Chair Powell vows to raise rates to fight inflation 'until the job is done'
The ECB announced a 75 basis point interest rate rise, taking its benchmark deposit rate to 0.75%. “This major step frontloads the transition from the prevailing highly accommodative level of policy rates towards levels that will ensure the timely return of inflation to the ECB’s 2% medium-term target,” it said. It added it “expects to raise interest rates further, because inflation remains far too high and is likely to stay above target for an extended period.” It revised up its inflation expectations, forecasting an average 8.1% in 2022, 5.5% in 2023 & 2.3% in 2024. Markets had largely priced in a 75 basis point hike, with the € remaining flat against the £ rising slightly against the $ to 1.0005. On Mon the € dipped below 99¢ for the first time in 20 years. The ECB move follows a hike from -0.5% to zero at its Jul meeting. The central bank, which sets monetary policy for the 19 €-using nations, had kept rates in negative territory since 2014 in a bid to spur spending & combat low inflation.
European Central Bank raises rates by 75 basis points
The latest Verizon Business survey found a growing number of small business owners are worried
about their financial security with inflation cited as their biggest
headache. And a majority say business is not better than it was a year ago. The
annual State of Small Business poll conducted by Morning Consult shows rising prices remain decision-makers' prime
concern, with more than 82% of respondents expressing worries over
inflation. The survey also found that, of owners polled last month, 72%
said they are concerned about their own financial security, up from 66%
last year & 67% in Aug 2020. Supply chain woes remain a pain point too, particularly for certain industries. Keeping up inventory levels & fulfillment schedules was cited as a concern of 72% of respondents from the food & beverage industry, 69% of bars & restaurants & 62% of retailers. Concerns over cybersecurity
climbed markedly over the past year among small businesses as well,
with 55% citing viruses & cyber risk as a worry compared to 31% in
2021. In this tight labor market,
some 80% of small businesses said they have not laid off employees over
the past year, & 87% said they have not had to cut their employees'
wages.
Small business fears grow as owners say they're worse off now
After selling at the open, buyers have taken Dow 400 higher (above the early low). No special news has come although inflation data for Aug should be coming next week. And that news could be grim. Meanwhile small business is struggling to deal with high inflation.
Dow Jones Industrials
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