Dow was off 171, decliners over advancers 4-1 & NAZ fell 164. The MLP index fell 2 to the 215s & the REIT index slid back 2 to 450. Junk bond funds were weak & Treasuries continued to be sold, taking yields on the 10 year Treasury up toward 3%. Oil was up 1+ to the 88s & gold declined 7 to 1782 (more on both below).
AMJ (Alerian MLP Index tracking fund)
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Federal Reserve officials at their Jul meeting indicated they likely would not consider pulling back on interest rate hikes until inflation came down substantially, according to minutes from the session. During a meeting in which the central bank approved a 0.75 percentage point rate hike, policymakers expressed resolve to bring down inflation that is running well above the Fed's desired 2% level. They did not provide specific guidance for future increases & said they would be watching data closely before making that decision. Market pricing is for a ½-point rate hike at the Sep meeting, though that remains a close call. Participants noted that the 2.25%-2.5% range for the federal funds rate was around the “neutral” level that is neither supportive nor restrictive on activity. Some officials said a restrictive stance likely will be appropriate, indicating more rate hikes to come. “With inflation remaining well above the Committee’s objective, participants judged that moving to a restrictive stance of policy was required to meet the Committee’s legislative mandate to promote maximum employment and price stability,” the minutes added. The document also reflected the idea that once the Fed gets comfortable with its policy stance & sees it having an impact on inflation, it could start to take its foot off the policy brake. That notion has helped push stocks into a strong summer rally. “Participants judged that, as the stance of monetary policy tightened further, it likely would become appropriate at some point to slow the pace of policy rate increases while assessing the effects of cumulative policy adjustments on economic activity and inflation,” the minutes said. However, the summary also said that some participants said “it likely would be appropriate to maintain that level for some time to ensure that inflation was firmly on a path back to 2 percent.”
Fed sees interest rate hikes continuing until inflation eases substantially, minutes show
Target's (TGT), a Dividend Aristocrat, quarterly profit fell nearly 90% from a year ago, as the retailer followed thru on its warning that steep markdowns on unwanted merchandise would weigh on its bottom line. The big-box retailer missed expectations by a wide margin, even after the company itself lowered guidance twice. Yet
the company reiterated its full-year forecast, saying it is now
positioned for a rebound. It said it expects full-year revenue growth in
the low to mid single digits. TGT also said its operating margin
rate will be around 6% in H2. That
would represent a jump from its operating margin rate of 1.2% in the
fiscal Q2. CFO Michael Fiddelke defended its aggressive
inventory efforts. He said the retailer had to move swiftly, so it
could clear the clutter, gear up for the holidays & navigate an
economic backdrop clouded by inflation. In Q2, EPS dropped to 39¢ from $3.65 a year
earlier & total revenue rose to $26.0B from $25.2B a year ago, driven partially by higher prices due to inflation. Quarterly
profits got squeezed in many different ways. Sales of a lot of
merchandise became less profitable as it got marked down. Freight,
transportation & shipping costs rose, as fuel prices increased. And
the company had to add head count & cover more compensation in
distribution centers as it dealt with a glut of extra stuff. The stock dropped 4.69 (3%).
If you would like to learn more about TGT, click on this link:
club.ino.com/trend/analysis/stock/TGT?a_aid=CD3289&a_bid=6ae5b6f7
Target’s earnings take a huge hit as retailer sells off unwanted inventory
Mortgage rates fell slightly last week, but not enough to fuel any kind of recovery in consumer demand for home loans. Total mortgage application volume fell 2% from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Demand stands at the lowest level since 2000. It hit a similar low in Jul. Applications for a mortgage to purchase a home dropped 1% for the week & were 18% lower than the same week one year ago. Potential homebuyers are not only grappling with higher interest rates but with inflation in the overall economy & concern that home values will start to fall. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647K or less) decreased to 5.45% last week from 5.47% the previous week, with points decreasing to 0.57 from 0.80 (including the origination fee) for loans with a 20% down payment. The rate was just over 3% a year ago. While mortgage rates have come down slightly from their recent highs, there are precious few borrowers who can benefit from a refinance. Those applications dropped 5% for the week & were 82% lower than the same week one year ago.
Mortgage demand fell last week even as rates declined slightly
Gold weakened for a 3rd straight day, as a strong $ & rising Treasury yields pushed prices to their lowest price settlement in 2 weeks. Prices for the precious metal then moved up in electronic trading shortly after the release of minutes from the Federal Reserve's Jul monetary policy meeting. Dec gold futures were down $13 (0.7%) to settleat $1776 per ounce. Prices for the most-active contract settled at their lowest since Aug 3. The pullback in gold this week was attributed to 2 primary factors: weak economic data out of China, & a rebound in the $ & Treasury yields. The ICE US Dollar, a gauge of the $'s strength against a basket of rival currencies, was up 0.2%, while the 10-year Treasury yield was up 8.5 basis points to 2.908%. Gold prices edged higher from today's settlement to $1780 in electronic trading shortly after the release of minutes of the Federal Open Market Committee's Jul meeting. The minutes, released about a ½ hour after gold futures settled for the session, showed that many Fed officials were worried about the risk that the central bank could tighten the stance of monetary policy by more than was necessary.
Gold futures settle at a 2-week low, pressured by rising dollar, Treasury yields
US oil futures finished higher for the first time in 4 sessions, buoyed by hefty weekly declines in domestic crude & gasoline inventories. Prices yesterday had fallen by more than 3% to their lowest finish since Jan. The Energy Information Administration today reported that US crude supplies fell 7.1M barrels last week, while gasoline inventories declined by 4.6M barrels. Sep WTI crude rose $1.58 (1.8%) to settle at $88.11 a barrel.
U.S. oil futures mark first gain in 4 sessions
Dow began the day in the red. After the minutes were released in the PM, it rallied to about to breakeven, but finished down with selling in the last hour. The retail data was glum & the minutes from the FOMC did not bring enough cheer for investors. However, the Dow is s still up about 4K from its lows in Jul (see below).Dow Jones Industrials
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