Did the price of crude oil peak last Friday, when futures traders in New York pushed up the near-term contract to an intraday high of $67.10, which stands as an all-time high?
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DEAD, OR JUST DORMANT?
Maybe it’s not so benign after all. Producer prices rose 1.0% in July, the Bureau of Labor Statistics reports. As with yesterday’s news on consumer prices, removing food and energy from the equation lessens the pricing momentum, bringing the PPI pace of advance down to 0.4% last month. But 0.4% ain’t hay.
RELATIVELY SPEAKING
Inflation jumped in July. But then that should come as no surprise for anyone watching the energy markets. The price of crude oil, for instance, rose more than 7% last month, based on the near-term futures contract traded in New York. The bull market in oil flowed through to consumer prices, with the CPI advancing 0.5% last month, reports the Bureau of Labor Statistics. That’s slightly higher than what the consensus estimate called for, and far above the unchanged consumer prices that prevailed in June.
CIRCULAR REASONING
It’s nothing new, but the endurance of the trend doesn’t dim the spectacle of the bond market resuming its preference for sending the yield on the benchmark 10-year Treasury Note lower. The decline is all the more striking coming in the wake of the Fed’s latest hike in interest rates on August 9. Since that day, the 10-year’s yield has slipped to roughly 4.25% on Friday from 4.40% when the central bank elevated the Fed funds rate rose by 25-basis-points to 3.50%.
DOLLAR BLUES ANEW
Is the dollar’s rally in 2005 history? It’s more than a little easy to suspect as much in August. After rallying 10.5% this year through the end of July, the U.S. Dollar Index has reversed course thus far in August, falling 2.7% through this morning’s trading. The recent fall from grace raises new questions about the greenback, which previously suffered a three-year bear market through the end of 2004. But the bulls were heartened by the dollar’s rebound this year, recently bolstered by recent economic news that showed the American economic expansion alive and well. What happened?
GREED & FEAR, GASOLINE & OIL
Crude oil futures reached yet another record high of $65 a barrel yesterday, and in early trading this morning the bull kept on rolling. Skeptics who thought oil couldn’t climb this far, this fast have been understandably quiet of late. But for all the talk of a secular rise in energy prices, one could wonder why the current rally hasn’t corrected. Indeed, we may very well be in the middle of a secular bull market for energy, but the ebb and flow of trading hasn’t yet been relegated to the dust bin of history.
FIGHT CLUB
The Federal Reserve yesterday repeated its intention to continue raising interest rates, and some investors actually believe it, which in turn inspires selling. But such running for cover isn’t universally embraced, at least not yet. The bond market, to name the conspicuous example, isn’t quite sure if it wants to take the Fed warning to heart.
INVERTED CURVES AND TORTURED MARKETS
The current pace of economic growth has “been worse than average,” the Center on Budget Policy Priorities laments today, although that didn’t stop the Federal Reserve from raising interest rates again today. In fact, the tax cuts of 2001 and 2003 were dispatched in vain, the think tank’s paper suggests, advising that “the economy’s overall performance does not make up for the adverse fiscal effects of the recent tax cuts or the unusually uneven distribution of the economic gains from this recovery.”
BULLS & BEARS, FEAR & LOATHING
It’s only a coincidence that President Bush signed energy legislation into law today as the price of crude oil nearly touched the heretofore unthinkable $64-a-barrel mark at one point during futures trading in New York. Perhaps that’s why the president announced what everyone already knew as he put pen to paper. “This bill is not going to solve our energy challenges overnight,” he warned in Albuquerque, New Mexico just before signing the bill.
207,000 AND COUNTING
The economy, to draw on the vernacular, is cookin’ with gas. That’s the message embedded in this morning’s jobs report for July, a month that witnessed a 207,000 rise in nonfarm payrolls. That’s well above the 180,000 consensus forecast and the revised 146,000 gain for June, according to Briefing.com. But wait, there’s more: average hourly earnings jumped 0.4% last month, the fastest monthly pace since an identical rise a year earlier.