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Fed could raise interest rates earlier than expected – report

Amid a booming economy and rising inflation, the Federal Reserve this week could signal that it’s likely to move up the timetable for withdrawing the extraordinary stimulus measures it has enacted during the COVID-19 pandemic. The Fed meeting highlights a busy week of economic news that also features the latest data on retail sales and housing starts. Autos may crimp retail sales  Retail sales have been choppy lately, flatlining in April after a strong March fueled by government stimulus checks and a rebound from February’s storms. The May report, out Tuesday, is expected to show overall sales fell 0.4%, dragged down by a drop in vehicle inventories due to lingering computer chip shortages, according to a survey of economists by Action Economics and PNC Financial Services Group. But excluding vehicles, retail sales likely rose a solid 0.5%, according to the Action Economics survey.  Consumer spending makes up almost 70% of the nation’s gross domestic product. Americans are spending on things like clothing, sporting goods and dining out after the pandemic sharply curtailed their outlays Housing starts tumbled 9.5% in April to 1.57 million, driven by a slide in single-family home construction. Due to shortages of building materials and labor, residential construction has been delayed. A bounce-back is likely in May. Economists surveyed by Action Economics forecast that construction began on 1.65 million homes last month.  The economy has continued to show rapid progress amid rising vaccinations and falling COVID cases, and consumer prices have jumped as demand has surged while supply-chain snarls have caused product shortages. Although the Fed believes the stronger inflation is temporary, the developments could lead policymakers to push up their median forecast for the first hike from the Fed’s near-zero benchmark rate to 2023 from 2024 at the earliest. The Fed also could signal that it may begin tapering its $120 billion a month in Treasury and mortgage bond purchases — which help hold down long-term interest rates, such as for mortgages — earlier than anticipated, says economist Kathy Bostjancic of Oxford Economics. She expects the Fed to begin tapering the purchases early next year, with the Fed announcing the move at its August conference in Jackson Hole, Wyoming. But Fed Chair Jerome Powell needs to talk a fine line. With job gains disappointing the past two months because of worker shortages, the Fed likely hasn’t achieved “substantial progress” toward its goals of maximum employment and stable inflation, Bostjancic says. Powell may simply say Fed officials discussed reducing the bond purchases without hinting at a timetable.

 

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Iran enriches uranium 63% for first time in its history

Amid talks on renewing nuke deal, IAEA said to conclude Tehran exceeding 60% enrichment cap it announced, bringing it even closer to weapons-grade level

Iran has enriched uranium to 63-percent purity, higher than the 60% it has announced, which is already way beyond the 3.67% allowed under the 2015 nuclear deal, a report said Tuesday, citing a document by the International Atomic Energy Agency. “According to Iran, fluctuations of the enrichment levels… were experienced,” the UN nuclear watchdog said in a confidential report, according to the Reuters news agency. “The agency’s analysis of the ES [environmental samples] taken on 22 April 2021 shows an enrichment level of up to 63% U-235, which is consistent with the fluctuations of the enrichment levels [described by Iran],” the document said.

That is a short technical step away from the weapons-grade 90%. Iran insists it doesn’t plan to build a nuclear bomb, even as its leaders routinely threaten to annihilate Israel and flatten its cities.

The development comes as world powers have been holding high-level talks aimed at bringing the United States back into the nuclear deal with Iran, with both sides signaling a willingness to work out the major stumbling blocks. The talks began in Austria in early April, and a fourth round was held last Friday. The White House said Friday that sanctions on Iran would only be lifted if the country comes back into compliance with the nuclear agreement. There were no further details given on the potential conditions that would need to be met for the easing of sanctions. Spokesperson Jen Psaki said that progress had been made in the Vienna talks between world powers and Iran, and that it was a good sign that the discussions were continuing. The US pulled out of the landmark deal in 2018 after then-president Donald Trump said the pact needed to be renegotiated. The deal had promised Iran economic incentives in exchange for curbs on its nuclear program, and the Trump administration reimposed heavy sanctions on the Islamic Republic in an unsuccessful attempt to bring Tehran into new talks. Iran reacted by steadily increasing its violations of the deal by enriching uranium to a greater purity than permitted, stockpiling more enriched uranium than allowed and using more advanced centrifuges, among other moves aimed at pressing the powers remaining in the deal — Germany, France, Britain, Russia and China — for economic relief. Nick Note: this is how great empires are destroyed. As in destoring themselves

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Economic recovery hopes power European shares to record high

(Reuters) – European shares hit a record high on Monday (NASDAQ:MNDY) as investors bet on global central banks sticking to an accommodative stance on monetary policy even as the post-pandemic economic recovery gathers pace. The pan-European STOXX 600 was up 0.5% by 0704 GMT after ending Friday with its fourth consecutive weekly gain. Germany’s DAX and the UK’s FTSE 100 led gains on regional bourses. After the European Central Bank last week stood pat on monetary policy, all eyes this week will be on the U.S. Federal Reserve’s two-day policy meeting for signs it could start tapering its massive stimulus programme sooner than expected. In company news, Dutch medical equipment company Philips fell 3.4% to the bottom of the STOXX 600 as it said it would recall some “CPAP” breathing devices and ventilators globally because of a foam part that might degrade and become toxic. Nick Note: the greatest stk market rally ever has begun. Charleston anyone?

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Wall Street Week Ahead: Fed meeting looms for stocks as inflation worries collide with ‘Goldilocks’ markets

 

NEW YORK (Reuters) – Investors will be zeroing in on the Federal Reserve’s monetary policy meeting next week as a “Goldilocks” market environment that has helped lift stocks to record highs and tamed a bond selloff is tested by rising inflation. Stocks have climbed steadily in recent weeks and now stand at fresh records, extending a rally that has seen the S&P 500 gain 13% this year and nearly 90% from its March 2020 low. U.S. government bonds have also rallied after their first-quarter selloff, with the benchmark 10-year Treasury yield, which moves inversely to prices, recently at 1.46%, some 30 basis points below its first quarter highs. Some of those gains have been predicated on the Fed’s assurances that rising inflation will not last long enough to warrant a sooner-than-expected end to easy-money policies. Signals that the Fed is growing less confident in those assumptions could unsettle stocks, which have benefited from quantitative easing, and hurt bonds, as rising prices erode the value of longer-dated debt. Investors “are going to be looking for signs that the Fed might believe that inflation is more permanent,” said Michael Arone, chief investment strategist for State Street Global Advisors. The Fed has maintained that it has the tools to deal with accelerating inflation. The central bank may open discussion at the Tuesday-Wednesday meeting about when to begin unwinding its $120 billion per month purchases of government bonds, though most analysts don’t expect a decision before the Fed’s annual Jackson Hole, Wyoming, conference in August. For now, it appears some investors are coming around to the Fed’s way of thinking on inflation. Stocks on Thursday brushed off data showing that consumer prices rose in May at their fastest annual pace in 13 years, as the S&P 500 hit a new record. By contrast, a much higher-than-expected inflation number last month caused a selloff in stocks. Strong inflation numbers aside, recent data has offered snapshots of an economy that is strengthening but does not appear to be close to overheating. Employment, for instance, remains about 7.6 million jobs below its February 2020 peak while the latest monthly report fell short of economists estimates. “We are making progress, but the economy is not completely on fire and a runaway train where the Fed has to take action,” said Chris Galipeau, senior market strategist at Putnam Investments. “That puts us in the ‘Goldilocks’ scenario.” Still, others worry that markets have grown too complacent on inflation and other risks that could derail the current rally, from potential higher taxes to peaking economic growth rates. Analysts at BofA Global Research on Friday outlined a number of reasons that inflation may be more sustained than many expect, including second-tier indicators such as the National Federation of Independent Businesses survey of small businesses showing price pressures are filtering to customers. “The list of excuses for transitory inflation is getting long. The risk of higher, more persistent inflation is growing,” BofA’s analysts wrote. More broadly, bullish sentiment among individual investors has been above its historical average of 38% for 25 of the last 30 weeks, according to the American Association of Individual Investors. Bearish sentiment, meanwhile, is below its historical average of 30.5% for the 18th consecutive week. “At current levels, pessimism remains unusually low,” the AAII said on its website. “Historically, below-average readings for bearish sentiment have been followed by below-average six- and 12-month returns for the S&P 500 index.” Bulls can point to plenty of reasons for stocks to remain strong. Most investors believe the Fed will only start tapering its bond purchases in late 2021 or early next year. Bets in the eurodollar futures markets show investors believe the Fed will start hiking its benchmark rate in late 2022. Rising estimates for corporate profit growth are also supporting stocks. S&P 500 earnings are now expected to jump 36% this year, compared to an April estimate of 26% growth, with earnings expected to rise another roughly 12% in 2022, according to Refinitiv IBES. That has not stopped some of the world’s biggest banks, including Morgan Stanley, from warning in recent months that the market is primed for a sharp pullback. Matthew Miskin, co-chief investment strategist at John Hancock Investment Management, still favors stocks over bonds, with a preference for the healthcare, industrials, technology and communication services sectors. “We are due for some volatility and we have been saying that, and yet dips have been met with very strong demand,” he said.

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Lumber Prices Post Biggest–Ever Weekly Drop With Buyers Balking

(Bloomberg) — Lumber futures posted their biggest-ever weekly loss, extending a tumble from all-time highs reached last month as sawmills ramp up output and buyers hold off on purchases.

Prices in Chicago fell 18% this week, the biggest decline for most-active futures in records going back to 1986. Lumber has has now dropped almost 40% from the record high reached on May 10.

Sawmills appear to be catching up with the rampant homebuilding demand in North America that fueled a months-long rally, bringing some relief to a market beset by supply shortages and price surges. Buyers are balking at still historically elevated prices and awaiting additional supplies, setting off a cascading sell-off, analysts said. “Activity yesterday was brisk to start, turned lethargic and ended quite subdued,” William Giguere, who buys and sells eastern spruce with mills for Sherwood Lumber in Massachusetts, said in a note Friday. “There was plenty of lumber available from the mills and enough ambition to sell. Missing was the sense of urgency from buyers.” Many buyers only purchased if necessary, generally staying on the sidelines, CIBC analyst Hamir Patel said Friday, citing an assessment from Random Lengths. The closely watched trade publication reported further declines in several wood products that trade on the cash market, and pointed to an abundance of mill offerings, Patel said.

U.S. lumber production has responded to the price rally by ramping up output by 5% over the past 12 months with another expected increase of 5%, or roughly 1 billion board feet, according to Domain Timber Advisors LLC, a subsidiary of Domain Capital Group, in Atlanta, Georgia.

Resolute Forest Products Inc. is spending $50 million to increase its lumber production, the company said Thursday. West Fraser Timber Co., the world’s biggest producer, said recently that it’s expanding capacity at five U.S. mills, while rival Canfor Corp. has said it will invest around $160 million in a new sawmill in Louisiana. Still, while lumber prices may finally be pulling back from stratospheric highs, don’t look for a return to pre-pandemic levels any time soon, according to BMO Capital Markets. “‘Nosebleed’ prices won’t last, but strong demand, a limited supply response and a rising cost curve all point to above-trend prices for at least the next 12-24 months,” BMO analyst Mark Wilde said in a note. Lumber futures slid 5.6% in Chicago to $1,059.20 per 1,000 board feet on Friday. Prior to the rally that started in mid-2020, lumber futures traded mostly within the range of $200 to $600 since 1992. With strong U.S. home building expected to last for several years, lumber prices will likely remain above $500 per 1,000 board feet for the next five to eight years, said Scott Reaves, forest operations director at Domain Timber Advisors. “We’re at a new normal,” Reaves said in a phone interview. “We’re going to see this sustained level of housing demand and a new normal for a pricing floor in lumber.”  Nick Note: Hyper inflation…really? Running out of lumber? The shit grows on Trees.  Food inflation…..Yea right.. that shit grows in dirt. And you are only one growing season from over supply. And as far as global warming… well let me put it to you this way..  Its raining somewhere….. A US silver dollar has about $12 worth of silver in it. And the con men are selling sliders the worst condition for $40 a coin….REALLY?  How do you think that will turn out.

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Wall Street closes mostly higher with tech, vaccines in focus

NEW YORK (Reuters) – U.S. stocks closed modestly higher at the end of a torpid week marked with few market-moving catalysts and persistent concerns over whether current inflation spikes could linger and cause the U.S. Federal Reserve to tighten its dovish policy sooner than expected.The Nasdaq gained the most among the three major indexes, while the bellwether S&P 500 squeaked its way to a second straight record closing high. For the week, the S&P and the Nasdaq advanced from last Friday’s close, while the Dow posted a small weekly loss. The indexes have been range-bound, with few catalysts to move investor sentiment. Much of the focus centered on Thursday’s consumer price data, which eased jitters over the duration of the current inflation wave. “It’s a muted day today,” Oliver Pursche, senior vice president at Wealthspire Advisors, in New York. “The summer is settling in, people are slipping out of work early and there’s nothing in the news that’s going to materially drive the market in either direction.”

“So, investors are going to wait until earnings season.”

The Federal Reserve has repeatedly said that near-term price surges will not metastasize into lasting inflation, an assertion reflected in the University of Michigan’s Consumer Sentiment report released on Friday, which showed inflation expectations easing from last month’s spike. Investors now turn their attention to the Fed’s statement at the conclusion of next week’s two-day monetary policy meeting, which will be parsed for clues regarding the central bank’s timetable for raising key interest rates.

“Our view continues to be that inflationary data is transient and we will be around the 2% mark for the year,” Pursche added.

Benchmark U.S. Treasury yields posted their biggest weekly drop in nearly a year, weighing on the interest-sensitive financial sector in recent sessions. The Dow Jones Industrial Average rose 13.36 points, or 0.04%, to 34,479.6, the S&P 500 gained 8.26 points, or 0.19%, to 4,247.44 and the Nasdaq Composite added 49.09 points, or 0.35%, to 14,069.42. Among the 11 major sectors in the S&P 500, rebounding financial stocks and tech led the gainers, while healthcare suffered the biggest percentage drop. Much of the trading volume this week was attributable to the ongoing social media-driven “meme stock” phenomenon, in which retail investors swarm around heavily shorted stocks. Advancing issues outnumbered declining ones on the NYSE by a 1.83-to-1 ratio; on Nasdaq, a 1.70-to-1 ratio favored advancers. The S&P 500 posted 33 new 52-week highs and one new low; the Nasdaq Composite recorded 108 new highs and 16 new lows. Volume on U.S. exchanges was 9.11 billion shares, compared with the 10.56 billion average over the last 20 trading days. Nick Note: This will all resolve itself as the inflation myth is shattered and shown to be simply supply shortages which are temporary as the economy experience restocking  reflation. As inventories build and the makers go back to work making things the supply pipelines will not only fill up but overflow. The fucks went shit house crazy and pumped ten trillion dollars in stimulus. That is a lot of enchiladas. Sitting their the masses with a trillion dollars in new savings looking for a home will drive a stock market rally like never seen before. And after they blow their wad a crash.. Every boom is followed by a bust……

 

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US consumer confidence rises in June

The numbers: After hitting a pandemic high in April, and falling precipitously in May  the University of Michigan’s index of consumer sentiment  rebounded in June. The University of Michigan’s gauge of consumer sentiment rose to a preliminary June reading of 86.4 from a final May reading of 82.9. Economists polled by the Wall Street Journal has forecast a reading of 84.4.

What happened: A sub-index that measures how consumers feel about the economy right now rebounded somewhat, likely due to rapid job gains in recent month. Rising inflation fears are still weighing on Americans, leaving Americans feeling significantly more confident that earlier this year

Big picture: Americans are feeling the benefits of a relatively strong recover as more than 1 million jobs in the past three months, but they are still concerned about the prospect of runaway inflation.

Market reaction: The Dow Jones Industrial Average edged down into negative territory after the report.

 

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European shares hit record high, bond yields fall as inflation fears ease

London/Shanghai — Shares gained on Friday and bond yields fell from the US to Europe as investors shrugged off rising US consumer prices, even as fears of longer-term inflation lingered. The Euro Stoxx 600 added 0.3% to hit a record high and was on course for a sixth straight day of gains. London shares gained 0.6%, helped by a 1% gain for the mining sector, while Paris climbed 0.4%. Also boosting sentiment in Europe was the European Central Bank (ECB) on Thursday raising its growth and inflation projections, while pledging a steady flow of stimulus for now. The MSCI world equity index, which tracks shares in 49 countries, gained 0.1%. Wall Street futures were flat.

The US consumer price index posted on Thursday its biggest year-on-year gain since August 2008 of 5%, after a 4.2% rise in April. Hefty contributions from short-term rises in airline ticket prices and used cars, raised doubts about underlying inflationary pressures.

The rise in the US consumer price index reflected short-term adjustments related to the reopening of the economy, some economists say. As such, many investors are confident the Federal Reserve is deftly handling a rebound in economic growth, though its definition of “transitory” remains unclear. At the same time, US labor department data showed the lowest level of new claims for unemployment benefits in nearly 15 months last week. US stocks rallied to record highs on the data, with 10-year US Treasury yields also dipping to a three-month low. Market players said inflation worries have faded in the last month, even if the spectre of great pressure over the long run remains. “Peak inflation concern was almost a month ago before the higher prints came in,” said Kiran Ganesh, head of multi asset at UBS Global Wealth Management in London. “Markets seem to be taking the Fed at its word but when we talk to clients there is concern about long-term inflation.” Euro area bond yields followed suit on Friday, with German 10-year yields set for their biggest fall this year. Yields move inversely with prices. MSCI’s broadest index of Asia-Pacific shares outside Japan was last up 0.4%. Falling expectations that higher inflation could lead to early Fed tightening prompted a flattening of the US yield curve, with the spread between the 10-year and two-year yield at its narrowest since late February on Friday. The 10-year Treasury yields were last at 1.4418%, on course for the steepest weekly drop in a year. The 30-year yield touched 2.1270%, the lowest since February 26. Investors said that yields would likely move higher again as economies reopen from coronavirus lockdowns. “We still think consumers are going to help prices higher, when these economies reopen properly, that people can start travelling again, spending again,” said Jeremy Gatto, portfolio manager at Unigestion. “We are going to get a further boost from the consumption side, and we therefore expect bond yields moving higher.” The US dollar fell as yields dipped. Against a basket of currencies it fell slightly to 90.045, hemmed into the relatively tight trading range of this week and down very slightly for the week. The ECB’s dovish commitment to stick with its elevated tempo of bond buying held the euro in check at $1.2185. Nick Note: spot shortages in automobiles and airline  flight drove this report…Soon will be corrected. Specifically in this report itd a reflation in transportation,,,,, cars and planes

 

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Stocks Extend Record, U.S. Treasuries Hold Steady: Markets Wrap

 

 

(Bloomberg) — Global stocks extended a record high and U.S. Treasuries were steady amid growing confidence inflation will prove transitory, leaving scope for continued central-bank support. The MSCI All Country World Index was poised for a fourth weekly advance. S&P 500 Index futures were little changed after the benchmark gauge scaled a new high Thursday. Vertex Pharmaceuticals Inc. tumbled 12% in premarket trading after halting the development of a therapy for a rare genetic disorder. Faster-than-expected U.S. consumer-price growth for May was largely driven by categories associated with economic reopenings, bolstering the view price pressures may ease later in the year. With the Federal Reserve setting a high bar for reconsidering its dovish stance, the data ended up stoking risk appetite across global markets. “The bond market is falling in line with the Fed’s thinking that inflation is transitory and does not warrant tapering of monetary stimulus any time soon,” said Anu Gaggar, senior global investment analyst at Commonwealth Financial Network. The U.S. central bank’s view that inflationary pressures are temporary now dominates global markets, signaling any changes in ultra-accommodative policy would happen very gradually. That approach was also reinforced across the Atlantic Thursday, as the European Central Bank raised its inflation forecast and renewed its pledge to maintain faster emergency bond-buying to sustain the euro area. The 10-year U.S. Treasury yield held near 1.43%, its lowest point since early March. The benchmark rate is heading for a 12 basis-point decline this week.  European stocks rallied, with the Stoxx 600 gauge heading for a fourth weekly increase, as investors relished the prospects of continued policy support. Rallies in emerging markets and commodities also underscored the return of risk appetite. Nick Note: soon they will stop fearing the inflation boogieman.