Dow fell 243, decliners over advancers 3-1 & NAZ was off 114. The MLP index added 1+ to the 255s & the REIT index dropped 6+ to the 392s on concerns about higher interest rates. Junk bond funds retreat & Treasuries are sold & rates climb. Oil rose 2+ to the 72s & gold sank 30 to 2042.
AMJ (Alerian MLP Index tracking fund)
US job openings dropped in Nov to the lowest level in more than 2 years, the latest evidence that the Federal Reserve's interest-rate hike campaign is continuing to cool the labor market. The Labor Dept said there were 8.79M job openings in Nov, a decrease from the upward revised 8.85M openings reported the previous month. The forecast expected a reading of 8.85M. It marked the lowest level for job openings since Mar 2021. The Federal Reserve closely watches these figures as it tries to gauge labor market tightness & wrestle inflation under control.
Job openings fall in November to fresh 2-year low
Richmond Federal Reserve Pres Thomas Barkin expressed confidence that the economy is on its way to a soft landing, but obstacles remain that will require caution from him & his fellow policymakers. While noting progress made on inflation as economic growth has stayed afloat, he said interest rate hikes remain “on the table” even though Fed officials at their most recent meeting in Dec indicated that this round of policy tightening is probably over. “We’re making real progress,” Barkin, a voting member this year on the rate-setting Federal Open Market Committee, said in prepared remarks for a speech. “Now, everyone is talking about the potential for a soft landing, where inflation completes its journey back to normal levels while the economy stays healthy. And you can see the case for that.” Inflation by the Fed's preferred measure of personal consumption expenditures prices rose 2.6% in Nov from a year ago & was up 3.2% excluding food & energy. That's well below its mid-2022 peak but still above the Fed's 2% target. However, Barkin noted that PCE inflation on a 6-month basis is at 1.9%. He compared the Fed's job to a pilot bringing an airplane in for a landing, and noted 4 risks ahead: The economy could “run out of fuel” & growth could reverse; “unexpected & turbulence” such as geopolitical events or the banking shock that hit in Mar 2023; the possibility of “approaching the wrong airport,” where inflation holds above the Fed's 2% target; & a “delayed landing,” where demand holds unexpectedly high, boosting inflation. “The airport is on the horizon. But landing a plane isn’t easy, especially when the outlook is foggy, and headwinds and tailwinds can affect your course,” Barkin added. “It’s easy to oversteer and do too much or understeer and do too little.” Barkin didn't indicate where his “dot” was on the Fed's closely followed dot-plot matrix of individual members rate hikes. However, he noted risks that the central bank's job bringing down inflation may not be over. “Longer-term rates have dropped recently, which could stimulate demand in interest-sensitive sectors like housing,” he said. “While you might think this would be a first-class problem, strong demand isn’t the solution to above-target inflation. That’s why the potential for additional rate hikes remains on the table.”
Fed’s Barkin sees likely soft landing ahead but notes rate hikes still a possibility
The US national debt topped $34T for the first time ever, crossing a critical milestone at a time when gov spending is already under scrutiny. The national debt, which measures what the US owes its creditors, hit $34T on Fri, according to new data published by the Treasury Dept. By comparison, just 4 decades ago, the national debt hovered around $907B. "We are beginning a new year, but our national debt remains on the same damaging and unsustainable path," said Michael Peterson, CEO of the Peter G. Peterson Foundation, which advocates for fiscal sustainability. The historic debt level comes as Congress races to finalize critical funding bills in order to prevent a gov shutdown. The national debt is expected to nearly double in size over the next 3 decades, according to the latest findings from the Congressional Budget Office. At the end of 2022, the national debt grew to about 97% of GDP. Under current law, that figure is expected to skyrocket to 181% at the end of 2053, a debt burden that will far exceed any previous level. "Though our level of debt is dangerous for both our economy and for national security, America just cannot stop borrowing," said Maya MacGuineas, pres of the Committee for a Responsible Federal Budget. Even more worrisome is that the spike in interest rates over the past 1½ years has made the cost of servicing the national debt more expensive. That is because as interest rates rise, the federal gov's borrowing costs on its debt will also increase. In fact, interest payments on the national debt are projected to be the fastest-growing part of the federal budget over the next 3 decades, according to the CRFB. Payments are expected to triple from nearly $475B in fiscal year 2022 to a stunning $1.4T in 2032. By 2053, the interest payments are projected to surge to $5.4T. To put that into perspective, that will be more than the US spends on Social Security, Medicare, Medicaid & all other mandatory & discretionary spending programs.
US national debt tops $34T for first time in history
Stocks are being sold again on worries about higher interest rates. Additionally the markets are vastly overbought & some traders are taking their profits in the new year.Dow Jones Industrials
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