We Shall Not Forget… 25 years ago, 9/11, Islamic militants, under the direction of Osama bin Laden, struck America in the deadliest attack ever on U.S. soil. Al Qaeda militants hijacked commercial aircraft, crashing two into the Twin Towers Trade Center, another into the Pentagon with the 4th overtaken by fighting passengers crashing in Pennsylvania. Tremendous loss of life with massive destruction has not destroyed America’s will, spirit and determination to stand strong and united against radical terrorists.
The Labor Department’s release Friday of the monthly Consumer Price Index for August’s inflation was 3.4%, equaling July’s number. Some economists had ‘looked’ for a lower number hoping for a declining trendline. The Fed, evenly divided board of governors will release a decision Wednesday. Omar Sharif, head of advisory firm Inflation Insights said; “If you don’t raise rates now you better have a damn good story on why you didn’t.” Investors and traders with the resolve that a hike is coming, turned positive, as buying volumes were heavy. Indexes were all positive with the Dow Jones Industrial Average adding 509 points while the S&P 500 and the heavy–tech Nasdaq were up 0.9% and 1% respectively. For the week all three indexes fell, unable to generate traction. Greg Peters, investment officer at PGIM Credit said; “The inflation data takes a lot of guess work out. It’s the classic case where a little more certainty is preferred versus uncertainty going into a Fed meeting.” The 10-year Treasury note yield edged up to 4.974% according to TradWeb, up from 4.943% on Thursday. The preferred note is a strong barometer on future borrowing costs relating to all debt. Benchmark crude oil is trading near $110 barred, settling late Friday at $105 a barrel.
Monday’s 10-year Treasury note yield crested to 5.012%, the first time since 2007, settling at 4.96% at close. Interest rates are reflecting the strong bond market, as investors are and have been rotating to higher interest rate bonds. Many economists believe the elevated price of oil [over $100 a barrel] driven by the ongoing war and creeping inflation that refuses to retreat, will continue to push borrowing costs to higher levels. The soaring stock market, and a sizzling economy have ‘shrugged off’ most of the negatives of war, higher consumer prices and higher borrowing costs. [Even the massive Federal debt of… $40 Trillion] The artificial intelligence sector with its deep financial build–out concern has continued to forge ahead.
Markets were mixed to lower Tuesday as apprehension clouded investors and traders, worried about the stubborn war, the rate’s impact on borrowing costs and ever increasing consumer prices. The bond market, a recent driver of uncertainty, continued higher while indexes drifted lower. The Dow Jones slipped 328 points while both the S&P 500 and Nasdaq were off 0.4% and 0.8% respectively. Oil jumped again to $108.75 a barrel, with $5.00 a gallon gasoline now a certainty. As expected Wednesday, The Federal Reserve opted for a hike of 0.25 percentage points, “bringing the target range to 3.75%–4.00%.” Citing inflation, the Middle East War and escalating oil prices, Fed Chair Warsh also predicted “that harnessing inflation would be a major task.” Mortgage rates are nearing 7%, stalling many home buyers. “According to Mortgage News Daily, which uses a different methodology, rates have already surpassed 7%.” “A jump in rates like this will certainly cause [prospective homebuyers] to panic. They may not go ahead and put in that contract or apply for the loan,” said Michael Fratantoni, chief economist at Mortgage Bankers Association.
RUMBLINGS ON THE STREET
Thomas B. Michand, President and CEO of KBW, a Stiffel Company, Barron’s – “We must remember what happened that morning, but we should remember what happened afterward. Because in the wake of one of the darkest days our country has experienced we witnessed some of the very best humanity was to offer. [“One thing I have said often over the years is that I never want 9/11 to become just a few paragraphs in a history book.”]
Sung Won Sohn, economist, quoted from The Wall Street Journal, “WSJ – Energy inflation does not stay at the gas station,” as Sohn wrote in a quote to clients Friday. “It travels by truck, airplane and cargo ships into every store in America.”
Matt Stucky, Chief Portfolio Manager Equities at Northwestern Mutual, WSJ – ”We do expect strong earnings growth to continue, but higher rates can easily overwhelm that if things really back up.”
