Dow slid back 84 (ending its 8 day winning streak), advancers over decliners about 5-4 & NAZ went up 42. The MLP index fell 2 to the 278s & the REIT index added 1+ to the 371s. Junk bond funds were weak & Treasuries still had modest buying which brought lower yields. Oil was still almost 1 higher into the 89s & gold sold off 32 to 2342 (more on both below).
AMJ (Alerian MLP Index tracking fund)
Americans are bracing for high inflation to stick around over the next few years, according to a key Federal Reserve Bank of New York survey. The median expectation is that the inflation rate will be up 3.3% one year from now, according to the New York Federal Reserve's Survey of Consumer Expectations, an increase from the 3% rate recorded the previous month. Consumers also anticipate that inflation will remain abnormally high in the coming years, projecting that it will hover around 2.8% 3 years from now & remain there 5 years from now – an increase from Mar's 2.6%. That remains above the Fed's 2% target, indicating that sticky inflation could be here to stay. By comparison, central bank policymakers projected in their latest economic forecasts that inflation will fall to 2.1% by 2025 & eventually settle at around 2% in 2026. Americans expect the cost of gasoline, food, medical care, college & rent to rise in the year ahead. They also anticipate that median home price growth will rise to 3.3%, the highest reading in the series since Jul 2022. The survey, based on a rotating panel of 1300 households, plays a critical role in determining how Fed policymakers respond to the inflation crisis. That is because actual inflation depends, at least in part, on what consumers think it will be. It is sort of a self-fulfilling prophecy – if everyone expects prices to rise by 3% in the year, that signals to businesses that they can increase prices by at least 3%. Workers, in turn, will want a 3% pay raise to offset the rising costs. Fed Chair Jerome Powell has repeatedly stressed that policymakers are committed to wrangling inflation back to the Fed's 2% target goal before they start to reduce interest rates. "We've stated that we do not expect that it will be appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably toward 2%," Powell said earlier in May. The survey also pointed to mixed sentiments about the labor market. The mean perceived probability of losing one's job in the next 12 months jumped by 0.6 percentage points to 15.1%. But mean unemployment expectations, the probability that US unemployment will be higher one year from now, rose by 1 percentage point to 37.2% in Mar. At the same time, Americans were more downbeat about their ability to find a job if they were to lose their existing one. The mean perceived probability of finding a job if one's current job was lost fell for the 4th straight month, to 50.9% in Mar.
Americans expect high inflation to stick around in latest NY Fed survey
Shares of Novavax (NVAX) jumped after the company's new multibillion-dollar deal with French drugmaker Sanofi that sparked a dramatic turnaround for the struggling vaccine maker. NVAX's stock almost doubled on Fri after it announced the licensing agreement with Sanofi. NVAX said the deal allows the company to remove its “going
concern” warning, which it first issued in Feb 2023 due to major doubts about its ability to stay afloat. “It
really does help our business. It keeps us well capitalized, it takes
the going concern off, it gives us the chance to pivot our strategy more
towards what we’re best at — to bring additional value to all of our
stakeholders, including our shareholders,” NVAX CEO John Jacobs said. Under the agreement, Sanofi will take a
less than 5% stake in NVAX. The deal also entitles NVAX to an
upfront cash payment of $500M future payments contingent on
certain milestones, as well as royalties. Sanofi, one of the
world's largest vaccine makers, will co-market NVAX's Covid vaccine
in most countries starting in 2025. The deal also allows Sanofi to use
NVAX's Covid shot & flagship vaccine technology, Matrix-M adjuvant,
to develop new vaccine products. The shots include combination jabs targeting Covid & the flu. NVAX stock jumped a massive 4.23 (48%).
Novavax stock jumps 50% as Sanofi vaccine deal kicks off a turnaround
Disney (DIS), a Dow stock, is asking guests to "drop on in" this summer after officially
announcing the opening date of Tiana's Bayou Adventure at Walt Disney
World. The ride, which was formerly Splash Mountain, will begin taking guests on a "musical adventure" at Orlando's Magic Kingdom on Jun 28, DIS said. The
new attraction features "dozens of Audio-Animatronics figures, a
foot-tapping soundtrack, & a celebration where everyone's welcome." Princess Tiana from the 2009
"Princess and the Frog" movie will be joined by characters Mama Odie,
Louis & "adorable critters" playing musical instruments. "Their spirited stylings will turn the bayou into a party with
Zydeco, Rara & Afro-Cuban music authentic to the region of New
Orleans," DIS said. The famed water ride, which features a steep drop, came under fire on
social media because it features characters & music from "Song of the
South," a 1946 animated film that has been accused of employing racist
tropes about the post-Civil War South. Despite backlash, the ride that opened in 1992 was one of DIS's most recognized landmarks for decades. The stock was off 4¢.
Disney unveils woke replacement for 'canceled' landmark ride
Gold traded lower even as the $ & yields dipped, as the price of the metal fluctuates amid a correction after setting a record high last month. Gold for Jun was last seen down $20 to $2354 per ounce. The drop comes even as the $ & treasury yields weakened ahead of US inflation data coming this week. The US will release its Apr producer price index tomorrow, with the core rate expected to rise of 0.2% from Mar. The Mar consumer price index comes a day later, with the core rate expected to ease to 3.6% annualized from 3.8% in Mar, still well ahead of the Federal Reserve's 2% target. Gold rose to a record $2413 per ounce on Apr 19 but has mostly moved lower since then despite Middle East violence as hopes for a near-term cut to interest rates by the Federal Reserve dim. This week's inflation data will undeniably serve as a beacon on the possible Fed action, but the current sentiment is anything but sanguine. Lowering of the borrowing costs is more likely to occur in the UK & in Europe ahead of the US. The $ eased despite the dimming outlook for rate cuts from the Federal Reserve. The ICE dollar index was last seen down 0.18 points to 105.12. Treasury yields also weakened, bullish for gold since it offers no interest. The 2 year note was last seen paying 4.84%, down 3.2 basis points, while the yield on the 10-year note was down 2.9 basis points to 4.473%.
Gold Trading Lower Even as the Dollar and Yields Ease Ahead of Coming US Inflation Data
West Texas Intermediate (WTI) crude oil closed with a gain on expectations stimulus measures from China will support the country's economy despite a debt crisis in its real-estate sector, while the market awaits US Apr inflation data coming this week & next month's OPEC+ meeting. WTI crude oil closed up 86¢ to settle at $79.12 per barrel, while Jul Brent crude, the global benchmark, was last seen up 52¢ to $83.31. The United States will release its Apr producer price index tomorrow, with the core rate expected to remain flat at a rise of 0.2% from Mar. The Mar consumer price index comes Wed with the core rate expected to ease to 3.6% annualized from 3.8% in Mar, still well ahead of the Federal Reserve's 2% target. China on Fri said it is issuing $138B of long-dated bonds to support infrastructure spending, as the country's gov tries to reach its target for a 5% rise in GDP this year.
WTI Crude Oil Closes Higher as China Takes Steps to Stimulate its Economy; US Inflation Data Awaited
Stocks have come back strong in May on the back of better-than-expected earnings & a revival of optimism for a Federal Reserve easing in monetary policy. The Dow recorded its 8th straight daily win streak in a row on Fri, though a shortage of economic releases likely played a part. After recent hot inflation data, markets have been more skittish as investors are pricing in doubts about rate cuts this year.
Dow Jones Industrials
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