Dow dropped 67, decliners over advancers about 3-1 & NAZ sank 180. The MLP index was off 1+ to the 256s & the REIT index slid another 2+ to the 385s on concerns about higher interest rates. Junk bond funds fluctuated & Treasuries had more selling which raised yields. Oil fell 1 to the low 71s & gold retreated 16 to 2014.
AMJ (Alerian MLP Index tracking fund)
Retail sales, a measure of how much consumers spent on a number of everyday goods including cars, food & gasoline, rose 0.6% in Dec, the Commerce Dept reported. That is above both the 0.4% gain projected & the revised 0.3% increase recorded in Nov. Excluding the more volatile measurements of gasoline & autos, sales still climbed 0.6% last month. The Dec advance is not adjusted for inflation, meaning that consumers may be spending the same but getting less bang for their buck. Consumers continued to spend money at car dealers, grocery stores, building material & garden supply stores, & clothing stores. They also continued to open their wallets when online shopping, with spending at non-store retailers jumping 1.5% from the previous month. However, Americans pulled back their spending at gas stations, health & personal care stores, electronics & appliance stores & furniture stores. Spending was flat at bars & restaurants, a bellwether of discretionary spending. Sales rose in 8 of 13 retail categories last month. A solid job market & big wage increases have helped to buoy consumer spending in recent months, despite high inflation. However, many economists have been predicting that consumers will grow more cautious as student loan payments resume & high interest rates continue to work their way thru the economy. On top of that, more Americans are relying on their credit cards to cover necessities. Credit card debt surged to a new record in the 3rd qtr, while delinquencies are also on the rise. "Consumer spending was remarkably strong during the holidays, continuing a year-long trend," said Ted Rossman, senior industry analyst at Bankrate. "I do worry, however, how people are paying for all of this stuff… this could be a nasty holiday debt hangover, especially with the average credit card rate a record-high 20.74%."
Retail sales rise faster than expected in December during key holiday season
Treasury yields rose, with the 10-year yield touching 4.1% as investors focused on stronger-than-expected Dec retail sales & the latest remarks from Federal Reserve members. The yield on the 10-year Treasury note was recently up 4 basis points at 4.108% after briefly getting to 4.117%, the highest since Dec 13. The 2-year Treasury yield rose by around 11 basis points to trade at 4.335%. Yields & prices move in opposite direction & 1 basis point equals 0.01%. Yields jumped after comments from Federal Reserve Governor Christopher Waller, who suggested that while the central bank will likely cut rates this year, it may take its time. At the World Economic Forum in Davos, more European Central Bank members indicated that markets were getting ahead of themselves on rate cut projections. The pres of the Dutch central bank, Klaas Knot, said that the euro zone's central bank looked at overall financial conditions, & that “the more easing the market has already done for us, the less likely we will cut rates.” Knot was referring to the fact that higher stock & bond prices in the 4th qtr of last year acted as the equivalent of easier interest rate policy, while lower prices act as the equivalent of tighter policy.
10-year Treasury yield surges to 5-week high above 4.11% after strong Dec. retail sales
Chevron CEO Michael Wirth said the ongoing attacks by Houthi rebels on shipping vessels in the Red Sea poses "very real" risks to oil flows & prices. "It's a very serious situation and seems to be getting worse," Wirth said at the World Economic Forum. He noted that CVX, a giant in the industry, has ships that transport oil thru the Arabian Gulf & the Red Sea regularly. The company has been following the Houthi attacks "very closely" to monitor the safety of its employees. "We coordinate every vessel movement with U.S. and other military authorities that are in the region, but it’s a very serious situation. It seems to be getting worse," Wirth added. Asked about US oil prices, Wirth said he was surprised to see crude oil trading below $73 a barrel because the "risks are very real." "So much of the world’s oil flows through that region that were it to be cut off, I think you could see things change very rapidly," he continued. Shell (SHEL) has suspended all shipments thru the Red Sea indefinitely amid the ongoing Houthi attacks from Yemen, BP paused shipments thru the Red Sea last week & Qatar Energy followed suit this week with its shipments of liquefied-natural-gas-exports. An exec from the port & freight operator DP World predicted that the prices of consumer goods will be "significantly higher" as a result of the Houthi attacks, specifically impacting Europeans' pocketbooks. The Houthi attacks provoked a US military response, with Pres Biden ordering airstrikes on military targets in Yemen. The Biden administration is currently considering whether to reverse a 2021 decision to remove the foreign terrorist organization (FTO) label imposed on the Houthis by the Trump administration. "Nothing to update yet on the FTO designation," White House National Security Council spokesman John Kirby said. "We're still in the process of reviewing it."
Oil giant CEO sounds alarm over price risks after Houthi Red Sea attacks
Retail sales data was mixed. The 6% increase includes was helped by inflation & more of the purchases are being financed using credit cards. In addition, reduced shipping thru the Red Sea will harm global trade.Dow Jones Industrials
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