Dow is down 61 after a strong opening, advancers over decliners 3-2 & NAZ gained 101. The MLP index fell 1 to the 215s & the REIT index was up 2 to 370. Junk bond funds edged higher & Treasuries saw significant buying which reduced yields (more below). Oil was lower in the 73s but gold was off 11 to 2031.
AMJ (Alerian MLP Index tracking fund)
Inflation rose again in Apr despite an aggressive interest-rate hike campaign by the Federal Reserve, indicating that strong underlying price pressures are still bubbling beneath the surface of the economy – & continuing to burden Ms of Americans. The Labor Dept said that the consumer price index, a broad measure of the price for everyday goods including gasoline, groceries & rents, rose 0.4% in Apr from the previous month, much faster than the 0.1% increase recorded in Mar. Prices climbed 4.9% on an annual basis, slightly below the 5% increase forecast. Although inflation has cooled from a peak of 9.1%, it remains about more than double the pre-pandemic average & well above the Fed's 2% target rate. Other parts of the report also pointed to a slow retreat for inflation, a worrisome sign for the Federal Reserve. Core prices, which exclude the more volatile measurements of food & energy, climbed 0.4%, or 5.5% annually. That is a slight drop from the 5.5% increase in Mar, but it marked the 5th straight month that core prices climbed 0.4% or more. "Inflation has moved beyond sticky at this point and after three months of core CPI hanging above 5%, it’s become tenacious," said Robert Frick, corp economist with Navy Federal Credit Union. "Given the biggest contributor to high CPI once again was shelter, and home sales prices have hit their own plateau, we may not see significant drops in CPI until this fall." Fed policymakers are closely watching the report for evidence inflation is finally subsiding as policymakers try to cool the economy with a series of rapid interest rate hikes. Officials approved a 10th consecutive rate increase last week, lifting the benchmark federal funds rate to 5.00-5.25%, the highest since 2007. But central bankers also opened the door to a long-awaited pause in the tightening cycle, although they stressed that it hinged on upcoming economic data.
Inflation jumped in April as prices remain stubbornly high
Top congressional leaders left a high-stakes meeting with Pres Biden showing few signs they had moved closer to resolving a debt ceiling impasse and removing the looming threat of a default. The officials plan to meet again Fri as the guys in DC scrambles to lift the debt ceiling with less than a month before the federal gov is set to run out of money. Biden met with House Speaker Kevin McCarthy & Minority Leader Hakeem Jeffries along with Senate Majority Leader Chuck Schumer & Minority Leader Mitch McConnell. Speaking after the meeting, Biden told reporters the leaders' staffs agreed to continue meeting beginning Tues night & daily thru Fri. "Everyone in the meeting understood the risk of default," Biden said. "I made clear during our meeting that default is not an option." McCarthy told reporters he did not see "any new movement" in negotiating positions over the debt limit during the meeting. "Everybody in this meeting reiterated the positions they were at," before the meeting, McCarthy said. "I asked [Biden] numerous times if there were places we could find savings," in the federal budget, said McCarthy. "He wouldn't give me any." Every leader present except for McCarthy agreed to remove the threat of default when asked by Biden, according to Dem leaders at the meeting. "We explicitly asked Speaker McCarthy, 'Would he take default off the table?' He refused," said Schumer. "Instead of him giving us a plan to remove default he gave us a plan to take default hostage. And that is a shame, because it makes things more complicated." Biden said "I don't know" what McCarthy thinks. "I think he knows better," the pres said. "I think he knows that default would be disastrous and I think he knows what he's passed could not possibly pass anywhere in the Congress — it's dead on arrival." Asked about the mood in the room, Biden said 3 of the 4 leaders were sensible throughout the discussions. "The tenor of the meeting was with three of the four participants very measured and low key. Occasionally there would be a little bit of an assertion that maybe was a little over the top from the speaker," Biden said.
Debt ceiling deal appears no closer after high-stakes meeting, but leaders will huddle again Friday
Treasury yields fell after the latest CPI report showed inflation rose in Apr, albeit slightly less than expected. The yield on the 2-year Treasury yield fell 7 basis points to 3.958%, the 10-year Treasury was down by 6 basis points to 3.463% & the yield on the 30-year Treasury was trading lower by 4 basis points at 3.803%. Yields & prices move in opposite directions & one basis point is equivalent to 0.01%. The consumer price index, which measures the cost of a broad swath of goods & services, increased 0.4% for the month, in line with estimates. However, that equated to an annual increase of 4.9%, just below the estimate of 5%. The CPI reading will be followed by Apr's wholesale inflation report tomorrow. The figures could inform future Federal Reserve monetary policy decisions, especially regarding interest rates. After its rate-setting meeting last week, which saw the announcement of another 25 basis point rate hike, the Fed indicated that it may stop increasing rates soon. Yesterday, however, New York Fed Pres John Williams suggested that rates could go higher still if inflationary pressures do not ease. “We haven’t said we’re done raising rates,” he said. That comes as concerns about elevated rates leading to an economic downturn spread among investors.
Treasury yields tumble after April’s CPI increase is less than feared
The inflation data brought out buyers at the opening, but that enthusiasm faded. Meanwhile nervous investors are buying Treasuries.Dow Jones Industrials
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