Markets soared after Powell signals smaller rate hikes ahead

Dow surged 736 (session high), advancera over decliners 5-1 & NAZ advanced 484.  The MLP index was 2+ higher, taking it to the 228s, & the REIT index went up 7+ to the 391s.  Junk bond funds rose along with the stock market & Treasuries saw purchasing.  Oil was up 2+ to go over 80 & gold added 13 to 1777 (more below).

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The House of Representatives passed legislation to avert a national railroad strike, but questions remain about whether the effort can clear the 50-50 Senate.  By an 290-137 vote, House lawmakers voted to pass legislation blocking nearly 100K railroad workers from striking in early Dec.  Economists & the White House have warned that a railroad strike could paralyze the nation's economy ahead of the holiday season.  "We must act to prevent a catastrophic strike that would touch the lives of nearly every family," House Speaker Nancy Pelosi said.  The legislation gives unionized train engineers & conductors 3 unpaid sick days a year for medical appointments, provided employers are given at least 30 days' notice about the time off.  It's based on an agreement that railroad companies & transportation unions agreed to in Sep.  While 8 unions have already adopted the agreement, 4 have not.  The standoff between the holdout unions & railroad companies has failed to resolve itself even as White House officials have become increasingly involved.  Pres Biden said the failure to achieve a breakthrough forced him to ask Congress to intervene & prevent a strike.  "I am calling on Congress to pass legislation immediately to adopt the Tentative Agreement between railroad workers & operators — without any modifications or delay — to avert a potentially crippling national rail shutdown," Biden said.  "A rail shutdown would devastate our economy," Bidenad added.  "Without freight rail, many U.S. industries would shut down."  "We must act to prevent a catastrophic strike that would touch the lives of nearly every family," said Nancy Pelosi.

 

House passes Biden-backed bill to avert rail strike

Federal Reserve Chair Jerome Powell said the central bank could slow its interest rate increases at its meeting next month, but stressed that policymakers have more work to do in order to crush stubbornly high inflation.  "The time for moderating the pace of rate increases may come as soon as the December meeting," Powell said during a speech in DC.  Still, he noted that "going increases will be appropriate" & that the focus on rate hike speed is less important than the question of how long rates should be held in restrictive territory.  The Fed raised rates by 75 basis points at the beginning of Nov for the 4th straight meeting as it tries to wrestle inflation closer to its 2% target with the most aggressive tightening since the 1980s.  A majority of traders expect the Fed to approve a smaller ½-point rate hike at the conclusion of a 2-day meeting Dec 14, with just 17% forecasting another super-sized, 75 basis point increase.

Powell signals smaller interest rate hikes could begin in December

Job openings dipped in Oct amid the Federal Reserve's efforts to cool off a red-hot employment market, the Labor Dept reported.  The Job Openings & Labor Turnover Survey (JOLTS), a closely watched gauge of slack in the labor force, showed there were 10.3M vacancies for the month.  That's a decline of 353K from Sep & down 760K compared with a year ago.  That left 1.7 job openings per available worker for the month, down from a 2 to 1 ratio just a few months ago.  The Fed has instituted a series of rate hikes aimed at bringing down runaway inflation.  One area of particular focus has been the ultra-tight jobs market, with a 3.7% unemployment rate & wage gains that are helping to fuel price pressures.  While the monthly numbers can be volatile, the JOLTS report provided at least some measure that the Fed's inflation-fighting efforts could be having an impact.  The report came the same day that payroll processing firm ADP reported job gains of just 127K in Nov, the lowest total since Jan 2021.  The quits level, a measure of worker confidence that they can easily move from one job to another, also declined, edging lower to 4M, down 34K from a month ago & well below the record 4.5M in Nov 2021 during what had been dubbed the “Great Resignation.”  Total separations nudged higher to 5.7M, while layoffs & discharges also rose, up 58K to 1.39.

Job openings fell in October amid Fed efforts to cool labor market

Gold futures finished a bit lower as Federal Reserve Chair Jerome Powell spoke at the Brookings Institution, but prices ended the month with their first monthly gain since Mar.  A weaker $ & falling 10-year Treasury rates will continue to support gold prices.  In turn, the $ & 10-year rate levels will be directed by inflation & economic strength or weakness exhibited in the US & globally.  Gold for Feb fell $3 to settle at $1759 an ounce.  Based on the most-active contracts, prices ended 7.3% higher for the month, their first monthly rise in 8 months

Gold futures log their first monthly gain since March

Oil futures climbed, buoyed by a hefty weekly decline in US crude inventories.  Traders also looked for signs of any easing of China's zero-COVID restrictions, which have influenced energy demand & hints on major oil producers' decision on production levels expected Sun.  OPEC+ is not expected to make any changes to current output targets, which should leave oil range bound.  US benchmark WTI crude for Jan rose $2.35 (3%), to settle at $80.55 a barrel, the highest finish since Nov 22.  For the month, prices based onwelcomed by imvestor the front month fell 6.9%.

Oil futures end higher for the session, but post a loss for the month

Thought about lower rate hike were welcomed by investors.  However all rate hikes will make more costly for business.  The bill to avert a rail strike still must be passe3d by the Senate which could be touchy for Senators who support unions.  The Dow was up 1850 in Nov, but that's only where it was 6 months ago on the way down.  It still needs more good news to extend this rise.                  

Dow Jones Industrials 

Markets drift lower as investors weigh economic data

Dow dropped 217, decliners over advancers 4-3 & NAZ crawled up 6.  The MLP index edged higher in the 226s & the REIT index was off 2+ to the 281s.  Junk bond funds fluctuated & Treasuries were sold (more below), taking yields higher.   Oil added 2+ to 80 & gold inched up 2

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Home prices declined again in Sep as higher rising mortgage rates sapped demand from the housing market.  Prices slid 1% nationally in Sep from Aug, the 3rd consecutive monthly decline, the S&P CoreLogic Case-Shiller index showed.  On an annual basis, the index climbed 10.6% in Sep, down from a 12.9% rate the previous month.  "As the Federal Reserve continues to move interest rates higher, mortgage financing continues to be more expensive and housing becomes less affordable," Craig Lazzara, managing director at S&P Dow Jone Indices, said.  "Given the continuing prospects for a challenging macroeconomic environment, home prices may well continue to weaken."  The 10-city composite, meanwhile, climbed 9.7% annually, down from 12.1% in Aug & the 20-city composite rose 10.4% in Sep, following a gain of 13.1% the previous month.  Price growth slowed in all 20 cities.  re still steeper than just one year ago.   The median new house price climbed nearly 15.4% in Oct from the year-ago period to $493K, according to a separate report last week from the National Association of Realtors.  That is also up more than 8% from Sep.  The interest rate-sensitive housing market has borne the brunt of the Federal Reserve 's aggressive campaign to tighten policy & slow the economy.  Policymakers already lifted the benchmark federal funds rate 5 consecutive times & have shown no sign of pausing as they try to crush inflation that is still running near a 40-year high.  Combined with high home prices, the rapid rise in borrowing costs has pushed many entry-level homebuyers out of the market.

US home prices tumble for third straight month

Private payroll job growth slowed sharply in Nov evidence that the historically hot labor market is finally starting to cool off, according to the ADP National Employment Report.  Companies added just 127K jobs last month, missing the 200K gain that economists surveyed by Refinitiv had predicted.  The weaker-than-expected report comes as the Federal Reserve wages the most aggressive fight since the 1980s to crush inflation & slow the labor market with a series of rapid interest rate increases.  "Turning points can be hard to capture in the labor market, but our data suggest that Federal Reserve tightening is having an impact on job creation and pay gains," said Nela Richardson, chief economist at ADP.  "In addition, companies are no longer in hyper-replacement mode. Fewer people are quitting and the post-pandemic recovery is stabilizing."  The bulk of the gains in Nov stemmed from the leisure & hospitality industry, which added 224K new workers.  Trade, transportation & utilities followed with 62K hires, trailed by education & health services with an increase of 55K.  The biggest losses, meanwhile, were in the manufacturing industry, which saw payrolls decline by 100K.  Professional & business services lost 77K jobs & financial activities shed 34K.  By size, only medium businesses that employ between 50-499 workers that led job gains last month, with an increase of 246K.  Large firms lost 68K workers, while small businesses, which have struggled the most with the worst inflation in 4 decades, shed 51K0 workers.

Companies added fewer jobs, well below economists' estimate

The 10-year Treasury  yield whipsawed following new jobs & GDP data while as investors awaited a key speech from Federal Reserve Chair Jerome Powell later in the day that could provide clues on monetary policy going forward.  The benchmark rate traded 4 basis point higher at 3.792% & the 30-year bond yield gained nearly 4 basis point to 3.838%.  Yields & prices move in opposite directions. One basis point is equal to 0.01%.  Investors scan economic data for hints about the impact of the Fed's interest rate hikes on the US economy as tightness in the labor market is often associated with high inflation.  The figure could therefore also inform the central bank' s policy decisions.

10-year Treasury yield rises on GDP revision as investors await Powell speech

Economic data is coming in mixed.  But Powell gives a speech later today which could be helpful for investors.

Dow Jones Industrials

 

Markets struggle on reports of more Covid cases in China

Dow inched up 2, advancers over decliners 4-3 & NAZ was off 65.  The MLP index added 3+ to the 225s & the REIT index rose 6+ to the 383s.  Junk bond funds crawled higher & Treasuries saw selling, bringing higher yields.  Oil recovered 1+ to the 78s & gold gained 10 to 1763 (more on both below).

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A top Federal Reserve official anticipates that interest rates need to rise further & stay high for stubbornly high prices.  new York Fed Pres John Williams said that policymakers have more work to do in order to control inflation, which remains "far too high."  "My baseline view is that we’re going to need to raise rates further from where we are today," he said.  "I do think we’re going to need to keep restrictive policy in place for some time. I would expect that to continue at least through next year."  The Fed raised rates by 75 basis points at the beginning of Nov for the 4th straight meeting as it tries to wrestle inflation closer to its 2% target with the most aggressive tightening since the 1980s.  Traders widely expect the Fed to approve a smaller ½-point rate hike at the conclusion of its next 2-day meeting on Dec 14, although 32% still anticipate another super-sized, 75-basis-point increase.  Williams said nothing to sway markets against that expectations.  Inflation using the Fed's preferred measurement, the personal consumption expenditures price index, climbed 6.2% in Sep from the previous year.  Williams said he expects inflation to settle between 5-5.5% by the end of the year & between 3- 3.5% next year.  The Fed's target is 2%.

Inflation fight could last until 2024, Fed official warns

Starting in 2026, Qatar will supply Germany with liquefied natural gas for the next 15 years, as gas supplies from Russia have gone dry due to the war in Ukraine.  The agreement is between Qatar Energy, the country's state-owned oil company, & Germany's ConocoPhillips, which will give Europe access to oil from Qata''s North Field expansion project for the first time.  Officials from both countries did not provide an official price tag to the deal, but Qatar will send up to 2M tons of gas to German annually via the Brunsbuettel Terminal that is currently under construction.  "[The agreements] mark the first ever long-term LNG supply agreement to Germany with a supply period that extends for at least 15 years, thus contributing to Germany’s long-term energy security," said Qatar Energy CEO Saad Al Kaab in a joint news conference with his German counterpart.  Following Russia's Feb invasion of Ukrainian territory, Moscow cut key gas supply lines to European countries that sanctioned Russia & supported Ukraine via military aid.  Germany was thrown into a fueling inflation & energy crisis because more than ½ its gas came from Russia at the time.  The gas supply to Germany officially shut down in Aug, forcing the European state to find new suppliers going into winter.  Moreover, the majority of Germany's current supply of gas comes from more European-friendly states such as Belgium, Norway & the Netherlands.  Germany is also building five liquefied natural gas terminals to prevent a short-term energy crunch.

Germany signs 15-year oil deal with Qatar amid Ukraine War

Mainland China reported more than 31K Covid infections today, including cases without symptoms.  That surpassed the 29K high seen in mid-Apr, during the Shanghai lockdown.  However, daily Covid infections with symptoms remain well below the high seen in Apr.  Nearly 90% or more of total Covid cases reported in recent days have been asymptomatic.  The southern city of Guangzhou, the national capital of Beijing &  the southwestern municipality of Chongqing have been the hardest hit in the latest Covid wave.  But nearly all of China’s 31 province-level regions have reported new Covid infections, with & without symptoms, each day.  Since the weekend, 6 Covid-related deaths have been reported as of today.  China's stringent Covid controls have weighed on sentiment & business activity. National GDP barely grew during the 2nd qtr due to the Shanghai lockdowns.  As of the end of the 3d qtr, growth for the year was up by just 3% from a year ago — well below the official target of around 5.5% announced in Mar.  Factories located near Covid outbreaks have tried to maintain operations using what's called closed-loop management, which typically requires staff to live on-site.

Mainland China’s total daily Covid cases soar above Shanghai lockdown highs    

Gold futures finished higher      to recoup much of loss from a day earlier, as the $ stabilized, easing pressure on the $-denominated prices for precious metal.  Gold for Feb, which is the most-active contract, rose $8 (0.5%) to settle at $1763 an ounce after losing 0.8% yesterday.  Gold futures climbed on the heels of a big relief rally in Chinese & Hong Kong equity markets.

Gold Ends Higher to Recoup Much of its Recent Loss as the Dollar Stabilize

Oil rose on on expectations for a loosening of China's strict COVID-19 controls, but concerns that OPEC+ would keep its output unchanged at its upcoming meeting limited gains.  Brent crude futures settled at $83.03 a barrel, losing 16¢.  West Texas Intermediate (WTI) crude futures settled at $78.20 a barrel, up 96¢ (1.2%).  Chinese health officials said the country plans to speed up COVID-19 vaccinations for elderly people, aiming to overcome a key stumbling block in efforts to ease unpopular zero-COVID curbs.  The prospect of a return to normality, in an economy that is the world's largest oil importer, was enough to make oil prices jump in the first significant price rebound of the last 2 weeks.  Weakness in the $, which tends to trade inversely with oil, also helped to boost crude prices.  The $ index has fallen to 106.65 from a 20-year high as investors look toward the Federal Reserve reaching a peak rate early next year with inflation pressures expected to ease.  The strong rebound is being furthered by a weakening in the $ & a need to discount some loss of Russian crude availability via next week's scheduled initiation of sanctions.

U.S. oil prices settle higher on hopes China will relax COVID curbs

Tomorrow the 2nd estimate for GDP will be released.  Changes from last month's data will drive the stock market.  Meanwhile intl stories are getting a lot of attention starting with China's Covid problem.  Dow was in the red for most of the day.

Dow Jones Industrials