BlackMask Breaking News

The U.S. Federal Reserve on Wednesday decided to hold interest rates steady for September, indicating next year may see fewer rate cuts that analysts had earlier anticipated.  Still, amid inflation that remains elevated despite a fairly strong economy, the Fed has signaled there may be another rate hike later this year.  This is only the second time since March 2022 that the Fed meetings have concluded without another rate hike.   But oil could be what tips the Fed over the edge.

“Economic data reports continue to show a slowing economy. … If there is one thing that could potentially persuade the Fed to raise rates later this year, it’s oil,” CNN quoted JJ Kinahan, chief executive at IG Group North America, as saying on Wednesday.  Oanda senior market analyst Craig Erlam likewise noted that “At a time when central banks are starting to see the light at the end of the inflation tunnel, $100+ oil will be incredibly unwelcome and unhelpful. I’m not sure there’s much economic sense in tipping the global economy into recession if OPEC+ persevered with these cuts, which makes me question how high the price will go and how sustainable it will be,” as reported by Yahoo Finance.   Oil hit $95 per barrel earlier this week, and predictions of at least $100 oil are gaining momentum among the bull camps.  Last week’s 3.7% jump in the U.S. Consumer Price Index (CPI) was largely accounted for by a spike in gasoline prices, with CPI data overall showing a decrease in inflation.   In the UK, as well, analysts are concerned that soaring oil prices could reverse consumer price inflation that has been declining since February this year, with the Bank of English set to decide on interest rates on Thursday. NN:  Thats the problem with Doctoral Loraites.  THEY END UP GETTING THEIR SWOLLEN HEAD STUCK UP THEIR ASSES  AND THEIR OXYGEN STARVED BRAINS STOP WORKING. The FED has over 300 of them on the payroll. They always get it wrong. lest you forget the transitory inflation call. That was when the biggest inflation surge in 40 years hit the market. Their latest boondoggle is the soft landing hooplah. This is right before the biggest stock market crash in history is on the horizon. Inflation is about to soar.. And what do they do…. Nothiong!! instead of raising rates they sit on their hands…. Thats ok more money for me and you.

The Energy Information Administration reported an inventory build of 4 million barrels for the week to September 8. This compared with a draw of 6.3 million barrels for the previous week, which in turn followed another massive inventory decline of 10.6 million barrels for the week before that. Those large draws were made during peak demand season and there is a chance that now inventory draws may moderate or possibly even reverse as demand declines seasonally. In fuels, meanwhile, the EIA estimated a gasoline build and a middle distillate increase in stocks. In gasoline, the EIA reported an inventory increase of 5.6 million barrels for the week to September 8, with production averaging 9.2 million barrels daily. This compared with a draw of 2.7 million barrels for the previous week and a daily production rate of 9.8 million barrels. In middle distillates, the EIA estimated an inventory build of 3.9 million barrels for the week to September 8, with production at 5 million bpd. This compared with a modest inventory build of some 700,000 barrels for the previous week, with production averaging 5 million barrels daily as well, unchanged from the week before. Oil prices meanwhile have hit the highest in 10 months as traders focus on supply for a change, with concern about a potential slowdown in demand in some large consumers taking the back seat. In addition to the latest production control announcements from Russia and Saudi Arabia, a shutdown of oil terminals in Libya amid a storm has contributed to a perception of tighter supply. Prices continued higher earlier today, too, despite the American Petroleum Institute’s inventory report, which showed an unexpected build in crude oil, to the tune of 1.17 million barrels, for the week to September 8. “Bullish demand outlook by the OPEC and the U.S. Energy Information Administration’s (EIA) prediction of a decline in global oil inventories reinforced market views of tightening supply going forward,” Rakuten Securities analyst Satoru Yoshida told Reuters. OPEC, meanwhile, forecast a shortage of 3.3 million barrels daily for the final quarter of the year, prompting ING’s head of commodity strategy to comment that “These numbers will cause some to question OPEC’s claims that their main objective is to keep the market balanced as their own numbers clearly do not show this.” NN: this recent up-move is way overdone. We are not in refinery maintenance season. And out of driving season and not yet in winter heating oil time. Normally inventories build. And prices fall. Their are a LOT of weak longs in this market…… be a great time to flush the toilet.

For the first time ever, the United Auto Workers union is striking against all Big Three automakers at once, after it failed to clinch a deal on a new contract by the 11:59 p.m. deadline on Thursday. But the UAW strike won’t mean all of the nearly 150,000 union members who work at the three automakers will walk off their jobs en masse. Instead, workers at three Midwest auto plants — a General Motors assembly plant in Wentzville, Missouri, a Stellantis assembly plant in Toledo, Ohio, and part of a Ford plant in Wayne, Mich. — were the first to walk off the job under UAW president Shawn Fain’s “stand up strike” strategy. For now, that means the strike involves just under 13,000 workers — less than 9% of UAW membership at the three companies. But additional locations could follow at a moment’s notice, depending on how bargaining with the companies progresses — a strategy intended to ramp up the pressure on companies by keeping them guessing about how their operations would be disrupted. “This is our generation’s defining moment,” Fain told UAW members at a Facebook Live event on Thursday night. “The money is there, the cause is righteous, the world is watching.” The targeted strikes are a departure from the UAW’s traditional playbook, which has usually involved having all union members at a single company walk off the job at once. The UAW has also opted to negotiate with all three automakers at once, in another departure from its previous methods. Previously, the UAW had picked one automaker to hash out a deal with, focusing its actions on that company until it got a deal — and then pushed the other two of the Big Three members to more or less match that deal. Still, Fain did not rule eventually having all union workers at the Big Three automakers walk off the job at once.  President Biden voiced his support for the UAW on Friday, after saying little in the lead-up to the strike deadline. He said he is dispatching to Detroit acting Labor Secretary Julie Su as well as Gene Sperling, one of his White House economic advisers. “Auto companies have seen record profits, including in the last few years, because of the extraordinary skill and sacrifices of the UAW workers,” Biden said. “Those record profits have not been not been shared fairly, in my view, with those workers.” As the first-ever democratically elected leader of the UAW, Fain, a long-time union member himself, has taken a more confrontational approach to negotiations than his predecessors — including filming himself throwing Big Three automaker proposals in the trash. He has repeatedly doubled down on the union’s key economic demands – including 40% pay raises he says would be in line with CEO wage increases, the restoration of pension and retiree healthcare and cost of living adjustments. “The Big Three can afford to immediately give us our fair share,” Fain told UAW members on Wednesday. Fain has called out previous UAW leaders for cutting deals with the automakers that he says did not favor the union’s 150,000 members who work at these companies. During the 2008 financial crisis, the UAW made major concessions to help auto companies get back on their feet. Workers are still feeling the effects of those concessions to this day — a key dynamic underpinning this year’s negotiations. “We just want the wages that they gave up during the recession of ’08,” said Brandon Bell, who works on the engine line at the Ford plant in Michigan that’s currently on strike. “We’re tired of giving — we want to receive this time.” Bell said he joined the picket line as soon at the strike began at midnight. Under Fain, the UAW has also hinged its demands on the automakers’ profits in recent years, as well as pay disparities between top executives and rank-and-file union members. Collectively, the Big Three automakers have seen their profits soar during the pandemic when factors including parts shortages led to surging car prices, padding the profit margins of companies. In a Facebook Live event on Wednesday night, Fain compared the companies’ profits — up 65% over four years — to autoworkers’ pay, which increased just 6% in that same timeframe. CEO pay has also been a major issue of contention. GM CEO Mary Barra, the highest-paid chief executive among the Big Three, made nearly $29 million in 2022. Securities and Exchange Commission filings show that this is 362 times the median GM employee’s paycheck. In an interview with CNN on Friday morning, just hours after the launch of the strike, Barra responded to concerns about her pay raise far outpacing those of rank-and-file union members by pointing to the profit sharing and healthcare components of GM’s proposal. And in a video to workers on Thursday, Barra highlighted her background as a “second-generation GM employee who grew up in a union family,” mirroring Fain’s personal anecdotes in his address to UAW members earlier this week. “Ensuring the long-term success of our company is not only my job — it’s a responsibility that hits home,” Barra said. All three automakers have budged on their initial wage proposals, from opening bids of 9 or 10% increases to as high as 20% in the most recent offers. The union argues those offers don’t sufficiently account for years of stagnant wages. But the companies say they’ve made genuine attempts to reach agreements. General Motors attempted to head off a strike with a down-to-the-wire offer on Thursday afternoon, a proposal Barra called a “compelling and unprecedented economic package.” “It addresses what you’ve told us is most important to you, in spite of the heated rhetoric from UAW leadership,” Barra said in a statement about GM’s latest offer, which would raise wages by 20% over the length of the contract. The three companies have also put cost of living protections on the table — though the union says these offers wouldn’t provide enough wage protection to keep up with inflation over the next four-and-a-half years. Ford sources told reporters on Thursday that meeting the UAW’s demands in full would completely halt new production due to much higher labor costs. “If we signed up for the UAW’s requests … we would’ve lost $15 billion and gone bankrupt by now,” Ford CEO Jim Farley told CNBC on Thursday. “There’s no way we can be sustainable as a company.” UAW members would still have to ratify any deal struck between union negotiators and one of the automakers, and workers could choose to send their leaders back to the table to push for more. The UAW walkout is the 17th strike in the U.S. involving more than 2,000 workers so far this year, according to data from the Cornell University School of Industrial and Labor Relations. Many other unions have threatened to strike — in some cases resulting in substantial gains for workers. After months of contentious negotiations that led 340,000 UPS workers to the brink of a strike, the Teamsters union in July secured a 48% average total wage increase, over the course of the five-year contract, for existing part-time workers. In August, the Allied Pilots Association, which represents 15,000 American Airlines pilots, successfully pressured the airlines to increase pilots’ pay by more than 46% over four years. But some labor experts say the autoworkers might not have the same leverage as UPS workers and pilots to get that big of a pay raise. The Big Three automakers were once the main choice for many Americans. But today, the market is populated with foreign automakers such as Toyota and Volkswagen, which are not being impacted by strike threats and can continue to produce cars at a steady clip. “They don’t have exceptional leverage because there’s a lot of competition,” said Harry Katz, a professor of collective bargaining at Cornell University, referring to automakers’ ability to shift production to the non-union South or abroad. NN: this is a wage push inflation atomic bomb.

U.S. stocks fall, S&P 500 books another weekly loss amid worries over inflation pressure, auto worker strike

U.S. stocks ended down Friday as investors worried about inflationary pressures ahead of the Federal Reserve’s meeting next week as well as an auto workers strike.

 

• The Dow Jones Industrial Average shed 288.87 points, or 0.8%, to close at 34,618.24.
• The S&P 500 fell 54.78 points, or 1.2%, to finish at 4,450.32.
• The Nasdaq Composite dropped 217.72 points, or 1.6%, to end at 13,708.33.

For the week, the Dow rose 0.1%, while the S&P 500 dipped 0.2% and the technology-heavy Nasdaq declined 0.4%, according to Dow Jones Market Data. The S&P 500 and Nasdaq each booked a back-to-back weekly loss. Inflation worries kept pressure on stocks as Treasury yields edged higher, while investors also expressed concern over the start of an auto worker strike.

“The picture of inflation continues to be difficult,” said Marco Pirondini, head of equities for Amundi U.S., in a phone interview Friday. “The market is starting to understand that the Fed will keep interest rates high for longer.”

The Federal Reserve, which has been tightening monetary policy in a bid to cool the economy and bring down the elevated cost of living in the U.S., will hold a policy meeting next week. Traders are expecting the central bank will keep its benchmark rate at the current target range of 5.25% to 5.5%. The U.S. economy continues to be “fairly strong,” which makes it more difficult to bring down inflation, according to Pirondini. Fresh economic data on Friday came in stronger than anticipated for U.S. industrial output and manufacturing activity in New York state. The Fed said Friday that industrial production in the U.S. rose 0.4% in August. That exceeded the 0.2% gain forecast by economists surveyed by The Wall Street Journal. Meanwhile, the New York Fed released data from its Empire State manufacturing survey on Friday, with the business conditions index climbing to 1.9 this month. Economists polled by The Wall Street Journal had expected a negative reading on manufacturing activity in the state. Investors were also monitoring the start of a strike of the United Auto Workers against the Big Three U.S. automakers, Ford Motor Co. General Motors Co. and Chrysler owner Stellantis From a market perspective, the strike “doesn’t seem to be causing too much trouble if you look at the automakers,” said Randy Frederick, managing director of trading and derivatives at Charles Schwab, in a phone interview Friday. “It’s a nonevent at the moment,” he said, pointing to the rise Friday in shares of GM and Stellantis. But the strike could become more of a problem for markets if it goes on for a long time, he said.

Some analysts worry that the auto workers strike could drive up car prices, adding more fuel to inflationary pressures that have started to re-emerge over the summer while stoking fears about the impact on the broader U.S. economy.

A survey by the University of Michigan showed consumer sentiment falling in September for a second month in row. The survey also showed Americans think inflation will average 3.1% in the next year, down from expectations for 3.5% in the prior month and the lowest reading in two and a half years. Meanwhile, rising Treasury yields have weighed on U.S. equities in recent weeks. The yield on the 10-year Treasury note climbed 3.2 basis points on Friday to 4.321%, according to Dow Jones Market Data. “Tech tends to be a pretty sensitive sector for interest rates,” said Frederick. NN: this is a major trade. Selling the NASDAQ100 at these levels is the equivalent of us buying oil at $70 a barrel. I regard this high tech AI bubble trade as a potential big time money maker.

 

Macro Conditions Are Still Too Strong for the FOMC to Stop Its Rate Hikes

Forbes: The headline 12-month inflation rate increased in August from 3.2% to 3.7%, according to this morning’s Consumer Price Index, but the more important core inflation (which excludes food and energy prices) showed a widely anticipated decline from 4.7% to 4.3%. Investors are generally taking this as a reassuring sign that the Fed is finished raising interest rates to fight inflation. In fact, the market-implied probability that the Federal Open Market Committee (FOMC) will raise rates again at next week’s meeting sank from 8% yesterday to just 3% today, according to the CME FedWatch Tool. That’s whistling past the graveyard. The Fed’s fight is not merely against inflation—it’s against inflationary pressures. Fed Chair Jerome H. Powell could hardly have made that point more clearly than in his August 25 Jackson Hole speech, which began with the strong statement “It is the Fed’s job to bring inflation down to our 2 percent goal, and we will do so” and ended with the equally strong statement “We will keep at it until the job is done.” Memo to investors: the Fed is not gaslighting you! Let’s review the evidence on inflationary pressures. First, the labor market still shows a severe imbalance between the demand for and the supply of workers. There are lots of ways to see this, including the unemployment rate (still well below its noncyclical or “natural” rate) and the number of job openings (still around 50% more than the number of workers looking for a job), but perhaps the most important is simply the upward pressure on wages. The Wage Growth Tracker published by the Federal Reserve Bank of Atlanta, for example, shows that growth in the median wage averaged 5.3% during June-August. Sure, that’s down from 6.7% a year earlier, but it still represents tremendous upward pressure on overall inflation. Similarly, aggregate demand and supply in the overall economy still haven’t come back into balance. A good example is the retail inventory-to-sales ratio. Retailers need to keep enough stock so they don’t miss out when customers come in looking to buy, and too low a ratio indicates that supplies are not keeping up with demand. The inventory to sales ratio went dramatically negative when supply chains crashed early in the COVID pandemic, reaching a low point of 1.1, which was 39 percentage points below its long-term median. Since then it has recovered only about halfway and remains 19 percentage points below its long-term median. In other words, the demand/supply imbalance remains significantly worse than its pre-pandemic record of -15 back in 2012. Turning to inflation itself, the Fed considers more than just the overall rate of price increase. One useful measure is the breadth of inflation (also called inflation dispersion), which reflects either the proportion of goods for which prices are increasing or the proportion of total spending on goods for which prices are increasing. Breadth of inflation is important because it reflects whether the broad economy—rather than just certain narrow but important sectors—is subject to inflation pressures. Breadth of inflation has actually become a piece of good news, with the fraction-of-items measure having fallen all the way to its long-term median. (The fraction-of-spending measure remains above its long-term median, almost entirely because measured inflation for housing—the single largest segment of consumer spending—remains very high at 5.7%. That is a misleading artifact of the way housing prices are measured; actual inflation in housing costs has essentially come down to the target 2% range, if not even lower.)  The final piece that contributes to ongoing inflationary pressures is expectations. If consumers and business expect inflation to remain high, then the decisions they make will tend to produce higher inflation. The median year-ahead expected inflation has come down dramatically from its high of 6.8% just over a year ago—but, at 3.6% according to the Survey of Consumer Expectations from the Federal Reserve Bank of New York, it’s still in the higher-than-acceptable range that risks pushing actual inflation up. Yes, the battle against inflation is tilting in the right direction—but we’ve seen that before. In 1974, when President Gerald Ford enlisted Americans in a fight to “Whip Inflation Now,” it worked. The year-over-year inflation rate declined sharply from 12.2% in November of that year to just 5.0% (still a high figure) in December 1976. But Federal government leaders failed to keep up the fight—and inflation surged again until it reached a stupendous 14.6% in March 1980. The idea that our time’s inflation rate has declined all the way to 3.7% (headline) or 4.3% (core) is absolutely encouraging. But when Chair Powell says, as in his Jackson Hole speech, “We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective,” we would do best to remember the threat he and the other FOMC participants are trying to banish. Inflation can return with the power to inflict more pain. It’s too soon to stop raising rates. NN: It is important you understand .and that the big trade is the imminent  stock market crash. IN part driven by our last trade a 50% increase in energy prices. And the fact that the markets are in denial. Their will be no soft landing, But a old fashioned full blown depression. Driven by the fact that inflation is a raging forest fire. The FED, kicking and screaming along the way, will be forced to institute double digit FED FUNDS rates