Markets drift lower today, but stocks & gold had spectacular years

Dow fell 20, decliners over advancers better than 2-1 & NAZ dropped 83.  The MLP index was steady in the 254s & the REIT index gave back 4+ to the 295s.  Junk bond funds fluctuated & Treasuries continued to see slightly lower prices which took yields a little higher.  Oil was off chump change in the 71s & gold retreated 6 to 2077 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Oil prices are on pace to close out the year about 10% lower as bearish sentiment has taken over due to worries that the market is oversupplied from record production outside OPEC.  The West Texas Intermediate contract for Feb gained 10¢ to trade at $71.87 to barrel today & the Brent contract for Mar rose 12¢ to trade at $77.27.  But US crude & the global benchmark were headed for the first annual decline since 2020 despite ongoing geopolitical risk in the Middle East due to the devastating war in Gaza.  Oil prices rose nearly 3% on Tues on worries that militant attacks on shipping in the Red Sea would disrupt global trade & crude supplies.  However, WTI is down over 10% for the year & Brent has lost 9.9%.  While fears of escalation in the Middle East have triggered brief spikes in crude prices, traders are primarily focused on the supply & demand balance.  The US is producing crude at a record pace, pumping an estimated 13.3M barrels per day last week.  Output is also at a record in Brazil & Guyana.  The historic production outside OPEC has collided with an economic slowdown in major economies, above all China. OPEC & its allies, meanwhile, have promised to cut production by 2.2M barrels per day in the first qtr of 2024, but traders apparently have little confidence that the bloc's policy will bring the market into balance.  Oil production outside OPEC, above all in the US, is expected to more than cover demand growth in 2024, according to the Intl Energy Agency (IEA).  Global oil demand growth is expect to fall by ½ to 1.1 mbd next year, while output outside OPEC is expected grow by 1.2 mbd.  The shift in crude supply from the Middle East to the US & other Atlantic countries is “profoundly impacting the global oil trade,” the IEA said in its Dec outlook.  The US was responsible for 2/3 of the growth in supply outside OPEC this year.  This is challenging efforts by producers in the Middle East to defend their market share & lift oil prices, according to the IEA.  OPEC seems to have little room to maneuver, with production cuts falling on deaf ears.  Brazil has agreed to ally itself with the bloc, but it is not clear what that means for markets.

Oil poised to end the year 10% lower in first annual decline since 2020

Apple (AAP) stock, in the Dow, rallied in 2023, but its performance was outshined by all of its mega-cap tech peers, as the company suffered 4 straight qtrs of declining revenue.  It's the longest such slide for AAPL since the dot-com bust of 2001.  Some of its troubles this year were due to a bad economic environment for phones & computers.  Over the summer, total smartphone sales were the slowest in more than a decade.  But AAPL also dealt with some company-specific issues.  AAPL didn't release new iPad models in 2023, the first time that's happened in a calendar year since the product was launched in 2010.  Without new models, it has less to promote & older versions of the product don't see official price cuts that boost sales.  Earlier this month, all current model iPads were shipping from AAPL's website in a day, according to Morgan Stanley analysts.  That’s a sign of weak demand because with the hottest products, AAPL doesn't have enough supply to ship that quickly.  In fiscal 2023, which ended in Sep, iPad revenue dropped 3.4% to $28.3B.  On a unit basis, iPad sales were even worse, falling 15%, according to a recent estimate from Bank of America analyst Wamsi Mohan.  To make matters worse, new Apple Watch models were removed from its stores in the US days before Christmas over an intellectual property dispute.  After a late Dec appeal, the devices have been returned to store shelves, but Morgan Stanley analysts estimate AAPL lost about $135M in sales per day during the brief ban.  Even for its new products, like Mac computers, consumers showed less interest in opening their wallets for devices with minor upgrades.  Sales of Mac PCs & laptops fell nearly 27% to $10.2B in fiscal 2023.  Unit sales declined 11%, according to Bank of America's estimate.  In order to return to revenue growth & support its $3T market cap, AAPL needs some new products to hit & global demand for smartphones & laptops to recover.  The stock fell 97¢ 1.07.

Apple’s stock underperformed top tech peers in 2023 due to longest revenue slide in 22 years

Alphabet (GOOG) Google has agreed to settle a lawsuit claiming it secretly tracked the internet use of Ms of people who thought they were doing their browsing privately.  US District Judge Yvonne Gonzalez Rogers in Oakland, California, put a scheduled Feb 5, 2024 trial in the proposed class action on hold, after lawyers for Google & for consumers said they had reached a preliminary settlement.  The lawsuit had sought at least $5M.  Settlement terms were not disclosed, but the lawyers said they have agreed to a binding term sheet thru mediation & expected to present a formal settlement for court approval by Feb 24, 2024.  The plaintiffs alleged that Google's analytics, cookies & apps let the GOOG unit track their activity even when they set Google's Chrome browser to “Incognito” mode & other browsers to “private” browsing mode.  They said this turned Google into an “unaccountable trove of information” by letting the company learn about their friends, hobbies, favorite foods, shopping habits, & “potentially embarrassing things” they seek out online.  In Aug, Rogers rejected Google's bid to dismiss the lawsuit.  She said it was an open question whether Google had made a legally binding promise not to collect users' data when they browsed in private mode.  The judge cited Google's privacy policy & other statements by the company that suggested limits on what information it might collect.  Filed in 2020, the lawsuit covered “millions” of Google users since Jun 1, 2016, & sought at least $5000 in damages per user for violations of federal wire-tapping & California privacy laws.  GOOG stock fell 48¢.

Google settles $5 billion consumer privacy lawsuit

Gold prices held steady as they headed towards the end of their best year since 2020 at levels comfortably above $2000 an ounce, buoyed by hopes the Federal Reserve could cut interest rates as early as Mar.  Spot gold was at $2064 per ounce, little changed from the previous session.  US gold futures settled 0.6% lower at $2071.  Bullion has so far risen 13% in a year that saw prices swing between lows near $1800 & a record high of $2135.  Gold investors anticipate record-high prices next year, when the fundamentals of a dovish pivot in US interest rates, continued geopolitical risk & central bank buying are expected to support the market.  The dollar index (.DXY) was headed for a 2% decline in 2023, while benchmark 10-year Treasury yields languished near their lowest levels since Jul.

Gold Sits Above $2,000 on Track for Best Year Since 2020

US crude oil closed out the year more than 10% lower as bearish sentiment has taken over due to worries that the market is oversupplied from record production outside OPEC.  The West Texas Intermediate contract for Feb shed 12¢ to settle at $71.65 a barrel & the Brent contract for Mar lost 11¢ settle at $77.04.  US crude & the global benchmark booked the first annual decline since 2020 despite ongoing geopolitical risk in the Middle East due to the devastating war in Gaza.  WTI is down 10.7% for the year & Brent has lost 10.3%.  Oil prices rose nearly 3% on Tues on worries that militant attacks on shipping in would disrupt global trade and crude supplies.

U.S. Crude Oil Sheds more than 10% for the Year in First Annual Decline Since 2020

After choppy times in the first 10 months of 2023, Dow & gold were bid to new heights in Nov-Dec.  WTI rose 256 in 2023 while Dow soared 4550.  Now the bulls have the challenge of extending both of these runs.  Especially for stocks, waiting for maybe 3 rate cuts in 12 months may not be easy for investors with a presidential race in the background.  Have a good holiday & a better new year!  😀😀

Dow Jones Industrials 

Markets slipped lower with stocks and gold near records

Dow slid back 31, decliners over advancers 2-1 & NAZ were off 82.  The MLP index added 1 to the 255s & the REIT index declined 2+ to the 397s.  Junk bond funds inched higher & Treasuries had limited selling which brought higher yields.  Oil was up pennies in the 71s & gold fell 9 to 2074.

AMJ (Alerian MLP Index tracking fund)

Treasury yields were higher as investor attention remained focused on the path ahead for the economy & monetary policy.  The yield on the 10-year Treasury  was up nearly 3 basis points to 3.877% & the 2-year Treasury yield was last around 2 basis points higher at 4.299%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  As investors look ahead to the outlook for 2024, questions remain as to when & how often the Federal Reserve will cut interest rates.  The central bank said earlier this month that it expects to cut rates 3 times next year, however some investors are hoping for further reductions.  Markets are broadly pricing in the first rate cut to take place in Mar 2024, according to CME Group's FedWatch tool.  Uncertainty has also continued about the state of the US economy & whether the Fed will achieve a soft landing to avoid a recession even as interest rates remain elevated.  US bond markets will close early today & remain closed Monday in celebration of the new year holiday.

Treasury yields tick higher as investors prepare for the new year

Aircraft manufacturer Boeing (BA), a Dow stock, is urging airlines to inspect 737 MAX airliners for a possible loose bolt in the jet's rudder control system, the Federal Aviation Administration (FAA) said.  The FAA said that it is "closely monitoring targeted inspections" of Boeing 737 MAX airplanes after BA notified operators of newer single-aisle airplanes to look at specific tie rods that control rudder movement to see if there is any loose hardware.  BA recommended the inspections after an intl operator of the 737 MAX found a bolt with a missing nut during routine maintenance on a mechanism in the rudder control linkage.  The company also found an additional undelivered aircraft with a nut that wasn't properly tightened.  "The issue on the particular airplane has been remedied," BA said.  "Out of an abundance of caution, we are recommending operators inspect their 737 MAX airplanes and inform us of any findings. We informed the FAA and our customers and will continue to keep them aware of the progress."  BA noted that there have been no in-service incidents caused by this issue & that flight crews routinely conduct checks before departing the airport gate that would alter them if the rudder weren't functioning properly.

Boeing, FAA urge operators to inspect 737 MAX jets for loose bolt

US patients & drugmakers will get a first glimpse of how much Medicare can negotiate down drug prices in 2024, setting the precedent for a controversial process that may affect what seniors pay for dozens of medications by the end of the decade.  It could also be a pivotal year for the lawsuits that drugmakers have filed against the price talks.  Decisions could come down in some of the cases next year, which could eventually escalate the issue to the Supreme Court.  Pres Biden's Inflation Reduction Act, which passed in a party-line vote last year, gave Medicare the authority to directly hash out drug prices with manufacturers for the first time in the federal program's nearly 60-year history.  Medicare is negotiating prices for the first round of 10 prescription drugs in a bid to make those costly treatments more affordable for older Americans.  By the fall, the federal gov will publish the agreed-upon prices for those medications, which will go into effect in 2026.  The outcomes of the talks will have huge stakes for the pharmaceutical industry, which views the process as a threat to its revenue growth, profits & drug innovation.  The final prices will determine how much revenue the companies that make the drugs can expect to lose in a few years.  The figures will also give other drugmakers an idea of how much their sales could be affected if their medications are selected for future rounds of negotiations.  But the final agreed-upon prices are also significant for patients, who will get a first look at how much money the talks will save them at a time when many older people increasingly struggle to afford medications.

Medicare drug price negotiations will face major tests in 2024

Volume is thin as traders close out positions for 2023.  The tremendous advance in 2023 is attributable to the Nov-Dec rally.  It will be a major challenge to replicate such performance going forward.

Dow Jones Industrials 

Markets rise as stocks aim for a 9th straight weekly advance

Dow gained 53 with a little selling into the close, decliners slightly over advancers & NAZ slipped back 4.  The MLP index stayed close to 255 & the REIT index was up 1+ to the 399s.  Junk bond funds were mixed & Treasuries had more selling which increased yields.  Oil was off 2+ to 72 as some companies are using the Red Sea again & gold dropped 14 to 2078 after its recent run (more on both below).

AMJ (Alerian MLP Index tracking fund)

Mortgage rates marched down again this week in a hopeful sign for prospective buyers, but flat pending home sales indicate the recent declines have so far not been sufficient to get the housing market moving again.  Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate for the benchmark 30-year fixed mortgage fell to 6.61% this week, down from 6.67% last week but still higher than 6.42% a year ago.  At the same time, the rate on the 15-year fixed mortgage fell nearly a full point, averaging 5.93% after coming in last week at 6.95%.  One year ago, the rate on the 15-year fixed note averaged 5.68%.  Meanwhile, the National Association of Realtors' latest index of pending home sales showed contracts to purchase previously-owned homes held steady at a record low in Nov.  The forecast expected a rise of 1% from Oct's reading of 71.4, which was the lowest recorded since the index was created in 2001, reflecting the damage that inflation, high mortgage rates & a shortage of supply have inflicted on the housing market.  However, the Commerce Dept reported housing starts surged 14.8% last month, signaling progress in the stagnant market.  "Buyers over the last year have gravitated toward new construction as existing home supply has remained limited and builders are willing to incentivize purchases with lower rates," said Realtor.com chief economist Danielle Hale.  "Today’s data signal that home sales activity could register better than expected in Realtor.com’s 2024 Housing Forecast if mortgage rates are able to hold on to the improvement garnered in the last two months, which has been faster than anticipated," Hale added.  She continued, "With home prices likely to remain high, mortgage rates will be an important determinant of both affordability and overall activity."

Mortgage rates drop again, but pending home sales stall

The number of Americans filing initial claims for unemployment benefits rose last week, indicating the labor market continues to cool in the year's 4th qtr.  New state unemployment benefit claims rose by 12K last week to 218K, according to the Labor Dept.  The forecast called for an increase to 210K initial claims.  The rolls of those receiving benefits after one week of aid rose 14K from the week prior, reaching 1.87M.  Continued unemployment claims, a measure for hiring, have increased since mid-Sep, indicating those already out of work may be having difficulties getting a job.  In Nov's economy, 199K new jobs emerged, up from 150K in Oct according to the Labor Dept's non-farm payrolls report.  The unemployment rate also fell moderately from the month prior, to 3.7% from 3.9%.  Amid slower job growth & milder inflation, the Federal Reserve has left its benchmark interest rate unchanged for 3 consecutive policy meetings & it is expected that its rate hike campaign to be at an end.

New US jobless claims rise again as labor market cools

Israeli tanks advanced deep into a town in the central Gaza Strip after days of relentless bombardment that forced tens of thousands of already displaced Palestinian families to flee in a new exodus.  A Palestinian journalist posted pictures of Israeli tanks near a mosque in a built-up area of Bureij, the armored contingent having apparently advanced from orchards on the eastern outskirts.  Further south, Israeli forces struck the area around a hospital in the heart of Khan Younis, the Gaza Strip’s main southern city, where residents feared a new ground push into territory crowded with families made homeless in 12 weeks of war.  An Israeli air strike later today killed 20 Palestinians & wounded 55 in Rafah, a major town near Gaza's southern border with Egypt, Gaza health ministry spokesman Ashraf Al-Qidra said.  The building that was hit was housing displaced civilians, according to local medics & residents.  Palestinian health authorities said earlier that 210 people were confirmed killed in Israeli strikes in the past 24 hours, raising the toll of Palestinians killed in the war so far to 21K, nearly 1% of Gaza's population.  Thousands more dead are feared to be buried or lost in the ruins.  Over the course of the war, the Israeli military has expressed regret for civilian deaths but it blames Hamas for operating in densely populated areas & using civilians as human shields, a charge the group denies.  Israel has escalated its ground offensive in Gaza sharply since just before Christmas despite public pleas from its closest ally the US to scale the campaign down in the closing weeks of the year.  It launched the war to destroy the militant Islamist Hamas movement that runs Gaza after fighters rampaged thru Israeli towns in a cross-border raid on Oct 7, killing 1200 people & taking about 240 hostages.  Of the hostages, 110 were freed during a short truce in late Nov & another 23 have now been declared dead in absentia, an Israeli gov spokesperson said.  The main focus of fighting is now in central areas south of the wetlands that bisect the narrow coastal strip, where Israeli forces have ordered civilians out over the past several days as their tanks close in.

Israeli tanks push deep into central Gaza town, air strike kills 20 in south

Gold held gains after a 4-day rally as strong demand for Treasuries signaled investors are confident the Federal Reserve will loosen monetary policy next year.  US bonds rallied yesterday, dragging down yields to levels not seen in months, on growing expectations that inflation will keep decelerating to a level low enough to coax the Fed into soon slashing interest rates.  Falling yields also drove the $ lower, boosting the appeal of commodities priced in the currency.  Swaps markets are pricing in about an 84% chance of a cut by Mar.  Lower yields & rates are usually bullish for non-interest bearing assets like gold.  The precious metal is up about 14% in 2023, on track for its first annual increase in 3 years.  Gold was little changed at $2077 an ounce.  The Bloomberg Dollar Spot Index fell for a 5th day, losing 0.3% to the lowest level in 5 months.

Gold Holds Gains as Bond Markets Rally on Rate-Cut Optimism

Oil prices fell around 1% as concerns eased about shipping disruptions along the Red Sea route, even as tensions in the Middle East continue to fester.  Front month Feb Brent crude futures were down 90¢ (1.1%) at $78.75 a barrel in subdued trade ahead of their imminent expiry, while the more active Mar contract was down 69¢ (0.9%) at $78.85 a barrel.  US WTI crude futures were trading 80¢ (1.1%) lower at $73.31 a barrel.  Oil prices dropped nearly 2% yesterday as major shipping firms began returning to the Red Sea.  Denmark's Maersk will route almost all container vessels sailing between Asia & Europe thru the Suez Canal from now on while diverting only a handful around Africa, a breakdown of the group's schedule showed.  Major shipping companies, including container giants Maersk & Hapag-Lloyd, stopped using Red Sea routes & the Suez Canal earlier this month after Yemen's Houthi militant group began targeting vessels, disrupting global trade.  However, a US-led coalition to quell tensions in the Red Sea has not so far yielded coordinated action as hoped.

Oil Prices Slide as Red Sea Transport Disruptions Ease

Trading is subdued with some traders starting their long holiday early.  Stocks have had a very good year but 2024 will begin with a vastly overbought market.  There are still numerous problems starting with the southern border disaster, elevated high interest rates that will linger, continuing federal budget deficits, out of control crime & 2 gov shutdowns looming.  For the time being, the bulls are still in charge of the stock market.

Dow Jones Industrials 

Markets drift higher in what should be the best year since 2003

Dow went up 35, advancers slightly ahead of decliners & NAZ added 19.  The MLP index stayed close to 255 (basically even) & the REIT index was fractionally lower to the 397s after a strong rebound in the last 2 months,  Junk bond funds crawled higher & Treasuries had limited selling, raising yields a little (more below).  Oil slid back into the 73s & gold was off 7 to 2085 (but remaining in record high territory).

AMJ (Alerian MLP Index tracking fund)

In the final CNBC's Delivering Alpha Stock Survey poll of the year, the 300 investors, traders & money managers surveyed are behind Jerome Powell & the Federal Reserve.  88% give the Fed an excellent or good score for 2023, that's better than the 77% from the survey 3 months ago.  More than ½ believe they'll start cutting rates in the 2nd qtr of 2024.  Those surveyed are mostly planning to put their money in the S&P 500, with 28% saying that would be a main target for them in the new year.  16% said they'd mostly be investing in Nasdaq 100 stocks.  About 12% said China would have the strongest growth followed by Japanese stocks, high yield bonds, long range US bonds & bitcoin, all coming in 8% apiece.  Not one person surveyed said gold would be their favored investment of 2023.  The commodity is near record highs & up 15% in 2023.  In terms of sectors, 35% said financials would be the winner in the new year with 23% favoring high div stocks.  When asked what would do better in 2024, the “Magnificent 7” or the other 493 S&P stocks respondents were firmly behind the Magnificent 7 with 77% saying they'd do better cumulatively than the rest of the S&P 500.  Big cap tech is the favorite area for investors looking to invest in AI according to the survey with 58% saying that's where they'd put their money.  In case things get rough for the markets, 35% say money markets are the best place to be followed by 31% in US bonds & 19% in plain old cash.  Just 7% would choose gold, 4% for crypto & real estate.  When it comes to the biggest risks for stocks in 2024, stubborn inflation & problems with commercial real estate ranked highest followed closely by slow growth.  War overseas & a more militarily aggressive China scored 11% apiece.

Investors have faith in the Fed in 2024, see bank stock comeback, CNBC survey shows

Pending home sales in Nov were unchanged compared with Oct & 5.2% lower than Nov of last year, according to the National Association of Realtors (NAR).  The reading, which is based on signed contracts during the month, is a forward-looking indicator of closed sales as well as the most current look at what potential homebuyers are thinking.  Mortgage rates are key in this report, with the average rate on the 30-year fixed mortgage soaring over 8% in mid-Oct before dropping sharply to 7.5% in the first week of Nov, according to Mortgage News Daily.  It ended the month around 7.25%.  Analysts had expected the drop to cause a slight gain in pending sales, but apparently it wasn't enough, given steep home prices & tight supply.  “Although declining mortgage rates did not induce more homebuyers to submit formal contracts in November, it has sparked a surge in interest, as evidenced by a higher number of lockbox openings,” said Lawrence Yun, NAR's chief economist.  Mortgage rates are now solidly in the mid-6% range, but the supply of homes for sale is still very low.  Builders are ramping up production, but new homes come at a price premium & prices for existing homes continue to rise.  “With mortgage rates falling further in December – leading to savings of around $300 per month from the recent cyclical peak in rates – home sales will improve in 2024,” Yun added.

November pending home sales were unchanged, despite sharp drop in mortgage rates

Treasury yields were higher as investors weighed the path ahead for the economy & financial markets as the new year nears.  The yield on the 10-year Treasury added more than 3 basis points to 3.826% & the 2-year Treasury yield rose nearly 3 basis points to 4.271%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  The Federal Reserve's monetary policy decisions, & whether the long-anticipated recession will actually hit, remains top of mind for investors as 2024 approaches.  Following its last meeting earlier this month, the Fed noted that it expects to cut interest rates 3 times next year & inflation to ease further.  Recent economic data has prompted optimism amongst investors about the likelihood of the Fed's expectations for 2024 becoming reality.  But questions remain about when these rate cuts will come & whether they will be enough to avoid a recession in the US as interest rates will remain elevated even after the cuts.  According to CME Group's FedWatch tool, markets expect the first rate cut at the Fed's Mar meeting, which will be the central bank's 2nd meeting of the year.  Jobless claims data out today showed initial filings for unemployment last week move higher, rising 12K from the previous period.

Treasury yields rise as investors consider economic outlook

The Dow is currently up 4500 YTD, for an outstanding year.  Meanwhile gold is in record territory & remains in demand by investors with negative thoughts about risky stocks.

Dow Jones Industrials 

Markets advance carefully with Dow and gold at record levels

Dow finished up 111, advancers modestly ahead of decliners & NAZ gained 24.  The MLP index was steady in the 254s & the REIT index added 1+ to the 398s.  Junk bond funds had modest buying & Treasuries saw substantial buying which lowered yields.  Oil was off 1+ to 74 & gold jumped 19 to 2088 in record territory (more on both below).

AMJ (Alerian MLP Index tracking fund)

A federal appeals court granted Apple's (AAPL), a Dow stock, request to temporarily pause a federal trade commission’s ban on some of its Apple smartwatches amid an ongoing patent dispute with medical technology firm Masimo.  APL filed an emergency request with the US Court of Appeals for the Federal Circuit to halt the ban, which bars the import & sale of the Apple Watch Series 9 & Ultra 2 because of the US Intl Trade Commission's decision that the smartwatches infringed on Masimo's patented blood oxygen sensor technology.  AAPL began including pulse oximeters in smartwatches beginning with its Series 6 model in 2020.  The appellate court granted AAPL's request to pause the ban's implementation while Customs & Border Protection (CBP) determines whether AAPL's redesigned watches violate Masimo's patent.  CBP is expected to make its decision on Jan 12.  The ban on Apple Watches determined to have violated Masimo's patents took effect on Dec 26 after the Biden administration declined to veto the trade commission's decision.  Before the ban took effect, AAPL preemptively took steps toward compliance.  It announced on Dec 18 that it would halt sales of the Series 9 & Ultra 2 smartwatches on its website beginning on Dec 21, while the company's retail locations were to stop selling those watches after Dec 24.  The stock slid back 14¢.

Apple wins appeal to temporarily pause Apple Watch ban

2 senators have written to Elon Musk, Tesla  (Telsa's (TSLA) top exec, calling on him to “swiftly” recall any steering & suspension parts that pose a safety risk.  The letter cites “an alarming” Reuters investigation published on Dec 20 that exposed how TSLA has blamed drivers for frequent failures of components it has long known were defective.  “We write with extreme concern following recent reporting about Tesla’s knowledge of safety flaws in its vehicles and concealment of the causes of these flaws from the National Highway Traffic Safety Administration,” states the letter, which is signed by Senators Richard Blumenthal, of Connecticut, & Edward J Markey, of Massachusetts.  The senators call on Musk to correct “apparent false and misleading representations” made to the safety agency.  The Reuters report found that TSLA told NHTSA & customers that the frequent failures of defective parts in its electric vehicles were caused by driver “abuse,” such as hitting a curb.  In 2020, TSLA gave that explanation in a letter to the safety agency explaining why it would not recall a suspension part called the aft link in the US, despite having just recalled it in China.  TSLA documents show the automaker's engineers for years tracked frequent failures of aft links & other suspension, steering & axle parts, often on relatively new cars.  The company instructed its service managers to tell customers that the parts were not faulty as it struggled to contain soaring warranty costs.  “We are disturbed that you would blame your customers for these failures,” stated the letter from Blumenthal & Markey.  “It is unacceptable that Tesla would not only attempt to shift the responsibility for the substandard quality of its vehicles to the people purchasing them, but also make that same flawed argument to NHTSA.”  The stock rose 4.83.

Two U.S. senators call for Tesla recalls

Thousands of Palestinian families fled from the brunt of Israel's expanding ground offensive into Gaza’s few remaining, overcrowded refuges, as the military launched heavy strikes across the center & south of the territory, killing dozens, Palestinian health officials said.  On foot or riding donkey carts loaded with belongings, a stream of people flowed into Deir al-Balah, a town that normally has a population of around 75K.  It has been overwhelmed by several hundred thousand people driven from northern Gaza as the region was pounded to rubble.  Because UN shelters are packed many times over capacity, the new arrivals set up tents on sidewalks for the cold winter night.  Most crowded onto streets around the town's main hospital, Al-Aqsa Martyrs, hoping it would be safer from Israeli strikes.  Still, no place is safe in Gaza.  Israeli offensives are crowding most of the population into Deir al-Balah & Rafah at the territory's southern edge as well as a tiny rural area by the southern coastline.  But those areas continue to be hit by Israeli strikes that regularly crush homes full of people.  The newly displaced were fleeing from several built-up refugee camps in central Gaza targeted in the latest phase of Israel's ground assault.  One of the camps, Bureij, came under heavy bombardment throughout the night as Israeli troops moved in.  “It was a night of hell. We haven’t seen such bombing since the start of the war,” said Rami Abu Mosab, speaking from Bureij, where he has been sheltering since fleeing his home in northern Gaza.  He said warplanes flew overhead, & gunfire & explosions echoed from the eastern edge of the camp.  A home near his shelter was hit, but no one was able to reach the area, he said.  With much of northern Gaza leveled, Palestinians fear a similar fate awaits other areas, including Khan Younis, just south of Deir al-Balah, where Israeli forces launched ground operations in early Dec.  In Khan Younis, Israeli shelling struck a residential building next to Al-Amal Hospital, according to the Palestinian Red Crescent, which runs the facility.  Health Ministry spokesman Ashraf al-Qidra said at least 20 people were killed & dozens more wounded, with the death toll likely to rise.  Israel has said the bombing campaign & ground offensive are necessary to dismantle Hamas & prevent a repeat of its Oct 7 attack in which militants broke thru Israel's formidable defenses & killed 1200 people, mostly civilians, & abducted around 240.  An estimated 129 remain in captivity after dozens were freed.  Achieving its goals, Israel has said, will take “many months.”

Thousands flee widening Israeli assault in central Gaza as military launches new strikes

Gold scaled a 3-week peak as traders bought zero-yield bullion in anticipation of US interest-rate cuts next year, while a dip in the $ & bond yields also supported prices.  Spot gold was up 0.5%, at $2077 per ounce, its highest since Dec 4 & on track to gaining nearly 14% in 2023, if gains hold.  US gold futures settled 1.1% higher, at $2093.  The dollar index hit a 5-month low, & eyed its first yearly slide since 2020, making bullion more attractive for overseas buyers.  Benchmark 10-year Treasury yields also touched their lowest since Jul 24.  London's gold price benchmark climbed to an all-time high of $2069 per troy ounce, surpassing the previous record set in Aug 2020, the London Bullion Market Association said.

Gold Hits Three-Week High on Hopes of U.S. Fed Cutting Rates

Oil prices dropped nearly 2%, eating into the previous day's gains as investors monitored developments in the Red Sea, where shippers are returning despite further attacks yesterday.  Brent crude futures settled down $1.42 (1.8%) at $79.65 a barrel & West Texas Intermediate crude fell $1.46 (1.9%) to $74.11.  Danish shipping company Maersk said it has scheduled several dozen container vessels to travel via the Suez Canal & Red Sea in the coming weeks after calling a temporary halt to those routes this month after attacks by Yemen's Iran-backed Houthi militia.  France's CMA CGM also said it was resuming passage thru the Red Sea after deployment of a multinational task force to the region.  Elsewhere, oil loadings at the Russian Black Sea port of Novorossiisk were suspended because of a storm.  However, the Caspian Pipeline Consortium (CPC) terminal near the port was open, Kazakhstan's energy ministry said.

Oil Drops Almost 2% as Investors Watch Red Sea Developments

Once again stocks & gold are at or near record highs.  Of course volume is thin.  Next week this disconnect may get sorted out.

Dow Jones Industrials 

Markets struggle while stock indices and gold are near record levels

Dow was up 51, advancers over decliners better than 2-1 & NAZ slid back 10.  The MLP index crawled up to the 255s & the REIT index edged higher to the 397s.  Junk bond funds continued to be in demand & Treasuries saw more buying which reduced yields (more below).  Oil was fractionally lower to 75 & gold rose 17 to 2087 (in record territory).

AMJ (Alerian MLP Index tracking fund)

Treasury yields moved lower, as investors considered the outlook for monetary policy & financial markets for the coming year.  The yield on the 10-year Treasury fell nearly 4 basis points to 3.85% & the 2-year Treasury yield was less than a basis point lower at 4.283%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  In the last week of trading for 2023, investors considered the path ahead for interest rates & how this could impact the US economy & financial markets.  Earlier this month, the Federal Reserve indicated that interest rates will be cut 3 times next year, with further reductions expected in 2025 & 2026, as inflation has “eased over the past year.”  The US personal consumption expenditure price index, an inflation gauge closely followed by the Fed, rose just 0.1% on the month in Nov & was up 3.2% from the same period of 2022.  A recent survey showed that increases of 0.1% & 3.3%, respectively, were expected.  Many investors interpreted the data as a sign that the Fed would be able to stick to its monetary policy expectations for next year.  Uncertainty remains about when the central bank will start cutting rates.  According to CME Group's FedWatch tool, markets are expecting rates to be left unchanged at the Jan Fed meeting, but are pricing in an over 84% chance of rate cuts at the following reunion in Mar.

10-year Treasury yield dips as investors weigh the 2024 interest rates outlook

A growing number of working Americans expect to receive Social Security when they retire, according to a recent Gallup survey.  ½ of the respondents expect the Social Security system to pay them a benefit when they retire, while 47% do not.  In 3 prior readings from 2005 & 2015, non-retirees were more inclined to predict they would not receive Social Security retirement benefits.  Moreover, 53% of current US retirees believe they will continue to receive their full Social Security benefits, up from 37% in 2010 & 49% in 2015.  The improvement comes despite projections that show Social Security benefits could be cut by 20% as soon as 2034 if no changes are made to the system, according to the annual trustees' report recently released by the Treasury.  In 2034, the system is projected to be able to pay 80% of benefits to recipients.  "President Joe Biden brought up the future of the system in his 2023 State of the Union speech and appeared to receive support from both parties to protect Social Security from near-term cuts in federal budget negotiations," the Gallup survey said.  "It is unclear to what extent this recent display of bipartisan consensus on the issue has influenced Americans' opinions about their future Social Security benefits. Greater optimism about the future of Social Security in recent years comes at a time when Americans' satisfaction with the Social Security system has also been higher."  One in 5 (21%) adults age 50 or older said they have no source of retirement income besides Social Security, up from 13% in 2014, the Nationwide survey said.  A decade ago, 48% of respondents in this age group said they had a pension in addition to Social Security, compared to just 31% in 2023.  However, only 8% of respondents understood how to maximize their Social Security benefits.  For instance, only 13% of adults correctly guessed their full retirement age based on their birth year.  On average, Americans said it was 60 years of age; Generation Z & millennials thought 54 & 55, respectively.  The correct age is 66 or 67, depending on the year a person is born.

Americans are feeling more optimistic about the future of Social Security: survey

Yemen’s Houthi rebels launched fresh attacks on cargo ships in the Red Sea, while the US carried out strikes against targets in Iraq, amid fears that the war in the Gaza Strip could engulf the Middle East.  The US military carried out retaliatory strikes against 3 installations in Iraq linked to Kataib Hezbollah on Mon, the Pentagon announced, after 3 American service personnel were injured in a one-way drone attack carried out by the Iran-aligned militant group.  Secretary of Defense Lloyd Austin said that there is “no higher priority” than the protection of American troops & interests.  “While we do not seek to escalate conflict in the region, we are committed and fully prepared to take further necessary measures to protect our people and our facilities,” Austin added.  The Iraqi gov criticized the US strikes as “an unacceptable violation of Iraqi sovereignty” & emphasized that attacks by armed groups against military bases that house US-led coalition advisors are deemed to be hostile acts & violate Iraqi sovereignty, a gov statement said.  Tensions continued to stoke in the Red Sea.  Yesterday, Houthi militants, also backed by Iran, launched a fresh drone attack against a container ship operated by MSC that was heading for Pakistan.  “The naval forces of the Yemeni Armed Forces carried out a targeting operation against the commercial ship, ‘MSC UNITED,’ with appropriate naval missiles,” Yahya Sare'e, spokesperson for the Yemeni Armed Forces, said in a post.  “The Yemeni Armed Forces affirm their continued support and solidarity with the Palestinian people in consistent with their religious, moral and humanitarian duty.”  The US Central Command also announced that a US destroyer & F/A-18 fighter jets shot down 12 attack drones, 3 anti-ship ballistic missiles & 2 land attack cruise missiles that were fired by Houthi militants over the southern Red Sea across a 10-hour period yesterday.  There was no damage to ships in the area or reported injuries, the Pentagon said.  Drone & missile attacks by the militant group in recent weeks have upended shipping thru the Red Sea & Suez Canal, a narrow waterway thru which some 10% of the world's trade sails.

Houthi attacks and U.S. strikes add to concerns of broader conflict in the Middle East

Stocks continue to meander, looking for direction.  Chances are this trend will continue for the last days of 2023, unless there is more drama from the MidEast.  Also, the GDPNow model by the Fed estimate for real GDP growth (seasonally adjusted annual rate) in the 4th qtr of 2023 is 2.3% on Dec 22, down from 2.7% on Dec 19.  GDP for Q3 was lowered to 4.9% in its 2nd revision.

Dow Jones Industrials 

Markets continued the year-end rally

Dow climbed another 159 with selling into the close, advancers over decliners better than 3-1 & NAZ was up 81.  The MLP index added 1+ to the 255s & the REIT index went up 3+ to the 396s.  Junk bond funds remained in demand & Treasuries had limited buying which slightly reduced yields.  Oil rose 1+ to the 75s & gold gained 5 to 2074 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Israel's gov agreed to give Intel (INTC), a Dow stock, a $3.2B grant for a new $25B chip plant it plans to build in southern Israel, both sides said, in what is the largest investment ever by a company in Israel.  The news comes as Israel remains locked in a war with Palestinian militant group Hamas in the wake of the Oct 7 Hamas attack on Israel & is a big show of support by a major US company & a generous offer by Israel's gov at a time when the US has increased pressure on Israel to take further steps to minimize civilian harm in Gaza.  The expansion plan for its Kiryat Gat site which is 26 miles from Hamas-controlled Gaza is an “important part of Intel’s efforts to foster a more resilient global supply chain, alongside the company’s ongoing and planned manufacturing investments in Europe and the United States,” INTC said.  Under CEO Pat Gelsinger, INTC has invested Bs in building factories across 3 continents to restore its dominance in chip-making & better compete with its rivals.  The new Israeli plant is the latest investment by the US chipmaker in recent years.  Intel plans to spend more than €30 ($33B) to develop 2 chip-making plants in Magdeburg, as part of a multi-billion-dollar investment drive across Europe to build chip capacity.  Berlin has pledged big subsidies to attract Germany's biggest-ever foreign investment.  Israel's finance & economy ministries said INTC's investment, especially in this period & in light of the global competition to attract significant investments in the field of chips, is a significant expression of confidence in Israel's economy.  They added the investment has direct fiscal benefits for Israel that will be significantly higher than the state's grant.  “This investment, at a time when Israel wages war against utter wickedness, a war in which good must defeat evil, is an investment in the right and righteous values that spell progress for humanity,” Finance Minister Bezalel Smotrich said.  INTC stock rose 2.50 (5%).

Israel grants Intel $3.2 billion for new $25 billion chip plant, biggest ever company investment in country

Bristol Myers Squib (BMY) will buy RayzeBio (RYZB) for about $4.1B to bolster its cancer drug business, marking the 2nd multi-billion dollar deal struck by the drugmaker in less than a week.  BMY had announced a $14B buyout of schizophrenia drug developer Karuna Therapeutics (KRTX)  on Fri, nearly 2 months after newly-appointed CEO Chris Boerner officially took the helm at the drugmaker.  With the RYZB deal, Bristol gains a late-stage targeted radiopharma therapy, RYZ101, that acts like a ‘canon ball’ to kill cancer cells by delivering radioactive particles to the tumorous tissue or tumor-associated cells.  BMY also gains access to RYZB's manufacturing site in Indianapolis, Indiana.  Bristol will pay $62.50 for each share of RYZB in cash, representing a premium of 104% to the stock's last close.  “There’s still a lot of...firepower in the large pharma balance sheets and companies that have drugs that are going to lose exclusivity,” said Phipps, referring to a spree of acquisitions in the biotech sector in recent weeks.  BMY stock fell 82¢ & RYBZ stock jumped 30.93 to 61.49 on the buyout news.

Bristol Myers to buy RayzeBio for $4.1 billion in targeted cancer therapy push

The US military carried out retaliatory air strikes yesterday in Iraq after a one-way drone attack earlier in the day by Iran-aligned militants that left one US service member in critical condition & wounded 2 other US personnel, officials said.  The back-&-forth clash was the latest demonstration of how the Israel-Hamas war is rippling across the Middle East, creating turmoil that has turned US troops at bases in Iraq & Syria into targets.  Iran-aligned groups in Iraq & Syria oppose Israel's campaign in Gaza & hold the US partly responsible.  The US military carried out the strikes in Iraq, likely killing “a number of Kataib Hezbollah militants” & destroying multiple facilities used by the group, the US military said.  These strikes are intended to hold accountable those elements directly responsible for attacks on coalition forces in Iraq & Syria & degrade their ability to continue attacks.  “We will always protect our forces,” said General Michael Erik Kurilla, head of US Central Command.  A US base in Iraq’s Erbil that houses US forces came under attack from a one-way drone earlier yesterday, leading to the latest US casualties.  The base has been repeatedly targeted.  Reuters reported on another significant drone attack in Oct on the barracks at the Erbil base on Oct 26, which penetrated US air defenses but failed to detonate.

U.S. retaliates in Iraq after three U.S. troops wounded in attack

Gold ticked higher as the final week of the year got under way, with traders looking ahead to interest rate cuts from the Federal Reserve in 2024 & a weaker US currency.  Bullion is trading near a record high, heading for its first annual increase in 3 years, as data showing US price pressures easing reinforces expectations for multiple rate cuts in 2024.  A report last week showed the Fed's preferred gauge of underlying inflation barely rose last month & by one measure even trailed policymakers' 2% target.  Swaps markets are now pricing in a more than 80% chance of a cut by Mar, which would be bullish for non-interest bearing assets like gold, though some central bank officials have pushed back on the prospect of early easing.  Gold rose 0.2% to $2057 an ounce.

Gold Inches Higher on Expectations for Fed Rate Cuts Next Year

Crude oil futures settled at their highest level this month in thin holiday trade as risks of shipping disruptions in the Red Sea because of Houthi rebel attacks remain supportive of prices.  India moved warships into the Arabian Sea as a deterrent after an attack last week on a ship off the Indian coast & shipping giant Maersk said yesterday it plans to resume shipments thru the Red Sea "as soon as operationally possible" after a US-led force was deployed to protect vessels.  WTI for Feb settles up 2.7% at $75.57 a barrel after reaching $76.18 intraday & Feb Brent rises 2.5% to $81.07 a barrel versus an intraday high of $81.72.

Oil Futures Settle Higher as Red Sea Shipping Risks Remain

The bulls are in command of the stock market & want to take the popular indices higher to close the year at record levels.  The war in the MidEast will continue to be a major driver for stocks & that brings a lot of unknowns.

Dow Jones Industrials 

Markets edge higher with major indices near record highs

Dow rose 92, advancers over decliners better than 2-1 & NAZ went up 55.  The MLP index added 1+ to the 255s & the REIT index added 1+ to the 394s.  Junk bond funds also crawled higher & Treasuries were pretty much flat bringing small changes to yields (more below).  Oil rose 1+ to the 75s & gold slid back 1 to 2068.

AMJ (Alerian MLP Index tracking fund)

Home prices rose 4.8% nationally in Oct compared with Octr 2022, according to the S&P CoreLogic Case-Shiller home price index.  That's a jump from the 4% annual increase in Sep & marks the strongest annual gain seen in 2023.  The 10-city composite rose 5.7%, up from a 4.8% increase in the previous month & the 20-city composite rose 4.9%, up from a 3.9% advance in Sep.  The strength in home prices came despite a sharp rise in mortgage interest rates in Oct.  The average rate on the 30-year fixed loan crossed 8% on Oct 19, according to Mortgage News Daily.  That was the highest level in more than 2 decades.  Rates, however, dropped steadily thru Nov & more sharply in Dec, with the 30-year fixed rate now hovering around 6.7%.  “Home prices leaned into the highest mortgage rates recorded in this market cycle and continued to push higher,” said Brian Luke, head of commodities, real & digital assets at S&P DJI.  “With mortgage rates easing and the Federal Reserve guiding toward a slightly more accommodative stance, homeowners may be poised to see more appreciation.”  Among the top 20 cities, Detroit reported the largest year-over-year gain in home prices at 8.1% in Oct.  San Diego followed with a 7.2% increase & then New York with a 7.1% gain.  Home prices in Portland, Oregon, fell 0.6%, the only city in the index showing lower prices in Oct versus a year ago.  “Home price gains in the CoreLogic S&P Case-Shiller Index have increased by 7% since the beginning of the year and are 1% higher than at the peak in 2022, recovering all losses recorded in the second half of 2022,” said Selma Hepp, chief economist at CoreLogic.  “Given the stronger seasonal gains seen in early 2023, annual home price appreciation should accelerate this winter before slowing again next year.”

October home prices post biggest gain of 2023, despite higher mortgage rates, says S&P Case-Shiller

Struggles with the economy highlight a key conundrum puzzling economists: Why does the average American feel so bad about an economy that's otherwise considered strong?  By many accounts, it has been a good year on this front.  The annualized rate of price growth is sliding closer to a level preferred by the Federal Reserve, while the labor market has remained strong.  There's rising hope that monetary policymakers have successfully cooled inflation without tipping the economy into a recession.  Yet closely watched survey data from the University of Michigan shows consumer sentiment, while improving, is a far cry from pre-pandemic levels.  Dec's index reading showed sentiment improved by almost 17% from a year prior, but was still nearly 30% off from where it sat during the same month in 2019.  “The main issue is that high prices really hurt,” said Joanne Hsu, Michigan's director of consumer surveys.  “Americans are still trying to come to grips with the idea that we’re not going back to the extended period of low inflation, low interest rates that we had in the 2010s. And that reality is not the current reality.”  Still, Hsu sees reason for optimism when zooming in.  Sentiment has largely improved from its all-time low seen in Jun 2022, the same month the consumer price index rose 9.1% from a year earlier, as people started noticing inflationary pressures recede, she said.  One notable caveat was the drop in sentiment this past May, which she tied to the US debt ceiling negotiations.  The 2024 presidential election has added to feelings of economic uncertainty for some, Hsu added.  Continued strength in the labor market is something economists expected to sweeten everyday Americans' views of the economy.  But because consumers independently decide how they feel, jobs may hold less importance in their mental calculations than inflation.  There are still more job openings than there are unemployed people, according to the latest data from the Bureau of Labor Statistics.  Average hourly pay has continued rising, albeit at a slower rate than during the pandemic, & was about 20% higher in Nov than it was in the same month 4 years ago, seasonally adjusted Labor Dept figures show.  That's helped boost another widely followed indicator of vibes: the Conference Board's consumer confidence index.  Its preliminary Dec reading was around 14% lower than the same month in 2019, meaning it has rebounded far more than the Michigan index.

Inflation has created a dark cloud over how everyday Americans view the economy

The yield on the 10-year Treasury note dipped as the last week of the year got under way.  The yield on the benchmark note was last down nearly 2 basis points to 3.893% & the 2-year note yield was up 3 basis points at 4.367%.  Yields move inversely to prices.  US markets were closed yesterday due to the Christmas holiday.  The Federal Reserve's preferred inflation metric, the core personal consumption expenditures price index, rose 0.1% month over month in Nov & 3.2% from a year earlier.  The forecast called for a gain of 0.1% for the month & 3.3% year over year.  “Nothing in the report suggests that the US personal sector is close to rolling over, so the question that remains is whether the current improvement in goods costs can be sustained in a fairly high demand environment,” wrote Michael Shaoul, CEO of Marketfield Asset Management.  “If it can, then the FOMC can probably make good on its intention to ease policy in 2024, but any reversal in price trend would make it much harder to justify a meaningful pivot in policy,” he added.

10-year Treasury yield dips as final week of the year kicks off

Stocks are higher, but without of enthusiasm.  This is a shortened week & some traders are away on holiday.  The price of oil, a key ingredient for the economy, must be watched with all the fighting going on in the MidEast.

Dow Jones Industrials 

Markets waver as Dow ekes out its 8th weekly advance

Dow slid back 18, advancers over decliners better than 2-1 & NAZ rose 29.  The MLP index stayed in the 255s & the REIT index crawled fractionally to the 393s.  Junk bond funds ran into a little selling & Treasuries continued flattish keeping yields around breakeven.  Oil slid back pennies in the 73s & gold climbed 13 to 2064 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Housing affordability plummeted this year to the lowest level on record amid the astronomical rise in mortgage rates, which put ownership out of reach for Ms of Americans, according to a new report published by Redfin.  Just 15.5% of homes for sale in 2023 were considered affordable for the typical US household, the lowest level on record since Redfin began tracking the data in 2013.  It marks a steep drop from the typical 40% seen before the COVID-19 pandemic home-buying boom began & the 20.7% figure recorded in 2022.  The decline in affordability is partially due to a drop in listings, which fell 21.2% over the course of the year, but is largely a result of the spike in mortgage rates & subsequent rise in home prices this year.  Combined, the 2 have helped to push the typical portion of average wages nationwide required for major homeownership expenses up to 35%, according to a separate report published by real estate data provider ATTOM.  The Federal Reserve's aggressive interest-rate hike campaign sent mortgage rates soaring above 7% for the first time in nearly 2 decades last year.  Rates notched a new 23-year high in Oct, though they have started to slowly retreat since then as many investors believe the Fed is done raising interest rates.  The average rate for a 30-year fixed loan fell to 6.67% this week, Freddie Mac reported, but that remains well above both the 6.27% rate recorded one year ago & the pandemic-era lows of 3%.  The typical monthly mortgage payment costs about $250 more than it was 1 year ago.  Even though mortgage rates are more than double what they were three years ago, home prices have hardly budged.  That is largely due to a lack of available homes for sale.  Sellers who locked in a low mortgage rate before the pandemic began have been reluctant to sell, leaving few options for eager would-be buyers.  The number of available homes on the market at the end of Nov was down by more than 4% from the same time last year & down a stunning 34% from the typical amount before the pandemic began in early 2020.  The good news, however, is that housing affordability is finally beginning to improve, could continue to get better in 2024.  "Many of the factors that made 2023 the least affordable year for homebuying on record are easing," said Elijah de la Campa, Redfin senior economist.  "Mortgage rates are under 7% for the first time in months, home price growth is slowing as lower rates prompt more people to list their homes, and overall inflation continues to cool."

Housing affordability plummeted to lowest level on record in 2023

Bristol Myers (BMY) announced it agreed to buy biopharmaceutical company Karuna Therapeutics (KRTX) for $14B in cash, or $330 per share.  The deal will help expand BMY's’ drug pipeline after competition from a generic offering caused demand for the company's blood cancer drug Revlimid to tumble in its 3rd qtr.  The boards of directors at both companies unanimously approved the acquisition, & it is expected to close in H1 of 2024.  KRTX develops medications for patients living with neurological & psychiatric conditions.  The company's lead asset is an antipsychotic called KarXT, which is expected to serve as a treatment for adults with schizophrenia beginning in late 2024.  “There are tremendous opportunities in neuroscience, and Karuna strengthens our position and accelerates the expansion and diversification of our portfolio in the space. We expect KarXT to enhance our growth through the late 2020s and into the next decade,” BMY CEO Christopher Boerner said.  BMY went up 1.04 & KRTX surged 102.66 after the buyout was announced for 316.64.

Karuna Therapeutics surges 47% after Bristol Myers Squibb announces $14B deal

Boeing (BA), a Dow stock, handed over a 787 Dreamliner directly to a Chinese airline for the first time since Nov 2019, a milestone that could open up the possibility of deliveries of the manufacturer's cash cow, the 737 Max.  The Boeing 787-9 for privately owned Juneyao Airlines departed from outside of BA's Everett, Washington, factory for Shanghai.  The last new delivery of a new Boeing 787 to a Chinese airline was in 2021 thru a leasing company.  BA sent the aircraft as China's pause on scores of pending deliveries of the BA 737 Max, the company's bestselling jet, nears its 5th year.  China grounded that jet in Mar 2019 in the wake of the 2nd fatal crash of the plane in about 5 months & other countries followed.  The US lifted its ban in 2020 & others later followed suit.  BA has been scrambling to increase production & deliveries of new jets, when manufacturers receive the bulk of an airplane's price.  Just over a 3rd of BA's inventory of about 250 Max planes are dedicated to Chinese airlines.  BA had remarketed some of the other Maxes to other carriers.  The stock fell 1.52.

Boeing hands over first 787 Dreamliner to China since 2019

Gold prices closed higher for a 2nd-straight day as a key US inflation measure fell more than expected, pushing down the $.  Gold for Feb closed up $17 to settle at $2069 per ounce, the highest since the precious metal rose to a record $2089 on Dec 1.  The rise comes as the Bureau of Economic Analysis reported the Nov Personal Consumption Index (PCI), the Federal Reserve's preferred inflation measure, rose by 2.6% annualized, under expectations for a 2.8% rise & down from 2.9% in Oct.  Core PCI, excluding food & energy, rose 3.2%, down from 3.4% in Oct & under the expectation of a 3.3% rise.  The lower than expected reading is raising hopes the Federal Reserve will quickly move to cut interest rates in 2024, pushing the $ lower.  The ICE dollar index was last seen down 0.13 points to 101.71.  Treasury yields were mixed following the data, with the 2-year note last seen down 0.3 basis points to 4.336%, while the yield on the 10-year note was 1.0 basis points to 3.897%.

Gold Closes Higher as the Dollar Weakens After a Key US Inflation Measure Fell More than Expected in November

West Texas Intermediate (WTI) crude oil on record US oil production & slowing demand even as key US inflation measure fell more than expected last month & attacks on Red Sea shipping continue.  WTI crude oil for Feb closed down 33¢ to settle at $73.56 per barrel, while Feb Brent crude, the global benchmark, was last seen down 22¢ to $79.17.  The Bureau of Economic Analysis reported the Nov Personal Consumption Index (PCI), the Federal Reserve's preferred inflation measure, rose by 2.6% annualized, under expectations for a 2.8% rise & down from 2.9% in Oct.  Core PCI, excluding food & energy, rose 3.2%, down from 3.4% in Oct & under the expectation of a 3.3% rise.  Oil prices have been supported by ongoing attacks on shipping in the Red Sea by the Houthis, who are supporting Hamas in its war against Israel, disrupting 8% of seaborne crude shipments.  However the risks to Middle East shipping have been offset by record US oil production, rising inventories & Angola's withdrawal from OPEC.

WTI Crude Oil Closes Lower as Higher US Output Tops as Red Sea Shipping Disruptions

This was essentially an even week for the Dow, after its long rally.  Trading should slow next week, barring exciting developments around the world, as many will take a long holiday.  Dow finished the week up a meager 80.  Meanwhile, safe haven gold continues to flirt with its record with demand coming from nervous investors.

Dow Jones Industrials 

Markets struggle to extend the 2 month rally

Dow crawled up 8, advancers over decliners 3-1 & NAZ added 37.  The MLP index rose 1+ to the 257s & the REIT index gained 2+ to 395.  Junk bond funds fluctuated & Treasuries were flattish (more below).  Oil inched up to the 74s & gold jumped 21 to 2072.

AMJ (Alerian MLP Index tracking fund)

An inflation measure closely watched by the Federal Reserve cooled again in Nov, providing some welcome relief to Ms of Americans who have been crushed by higher prices.  The personal consumption expenditures (PCE) index showed that consumer prices fell 0.1% from the previous month, according to the Labor Dept.  On an annual basis, prices climbed 2.6%, down from the revised 2.9% recorded the previous month.  The figures were both below estimates.  In another sign the Fed's fight against inflation is making progress, core prices, which strip out the more volatile measurements of food & energy, climbed 0.1% from the previous month & 3.2% from the previous year.  It marked the best reading for core inflation since 2021.  While the Fed is targeting the PCE headline figure as it tries to wrestle consumer prices back to 2%, Chair Jerome Powell previously said that core data is actually a better indicator of inflation.  Both the core & headline numbers point to inflation that is steadily returning to the Fed's preferred 2% target.  Other figures included in the report showed that consumer spending rose 0.3% in Nov, compared to a 0.1% increase in Oct, suggesting that Americans are still spending ahead of the pivotal holiday season.  Still, many economists anticipate that spending will slow in the coming months as consumers continue to grapple with expensive goods, high interest rates & the resumption of federal student loan payments.

Fed's favorite inflation gauge cooled more than expected in November

The 10-year Treasury yield is set to wrap up the week below 3.9% after new inflation data showed cooling price pressures.  The yield on the benchmark 10-year Treasury note traded flat at 3.88%.  The yield on the 30-year Treasury bond declined 1 basis point to 4.02%, while the 2-year yield inched up 1 basis point to 4.37%.  Yields move inversely to prices.  The core personal consumption expenditures price index, the Federal Reserve’s preferred core inflation metric, increased 0.1% for the month of Nov, & was up 3.2% from a year ago, the Commerce Dept reported.  The forecast expecting respective increases of 0.1% & 3.3% respectively.  10-year Treasury yields have declined by almost a percentage point since the end of Oct on rising expectations that the Fed will begin cutting rates as soon as Mar.

10-year Treasury yield closes out week below 3.9% after cool inflation data

Nike's (NKE), a Dow stock, sank & dragged the Dow & shares of other sportswear companies after weak consumer spending forced the Air Jordan 1 shoemaker to cut its annual revenue forecast & signal a profit-over-sales strategy shift.  The company also laid out a $2B cost-saving plan & said it was adopting a "more prudent approach" to planning for the rest of the year, blaming the forecast cut on weakness in its online business & increased promotions.  "This 'margins before sales' theme is not new across the entire U.S. retail and wholesale sectors. As companies clean up inventory in a tough macro backdrop, it has been the norm to guide for a weaker top-line offset by stronger margins and cost-cutting," Barclays analyst Adrienne Yih said.  "Nike needs increased and improved marketing investments while HOKA, On and Lululemon are scaling further with increased customer acquisition and retention," TD Cowen analysts said after downgrading the stock to "market perform" from "outperform."  NKE also unveiled plans to simplify its product assortment, increase automation & launch fresher styles to attract consumers.  The stock sank 12.43 (10%).

Nike forecast cut rattles sportswear stocks as spending stumbles

The 2 month rally for stocks is very tired.  Dow is up an astonishing 5000 in just 2 months.  Even the bulls need to take a pause for rest as the S&P 500 aims for 8 straight winning weeks.

Dow Jones Industrials 

Markets climb after yesterday's selloff

Dow rose 322 (session high), advancers over decliners 5-2 & NAZ gained 185.  The MLP index was up 1+ to the 255s & the REIT index crawled higher in the 389s.  Junk bond funds fluctuated & Treasuries had some selling which raised yields marginally.  Oil remained fractionally lower in the high 73s & gold added 8 to 2056 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Mortgage rates ticked down again this week, continuing a series of declines since the end of Oct.  The trend is beginning to spark signs of life in the stalled real estate market, but economists do not expect affordability to improve materially any time soon.  Freddie Mac's latest Primary Mortgage Market Survey released today showed that the average rate for the benchmark 30-year fixed mortgage fell to 6.67% this week, down from 6.95% last week but still higher than 6.27% a year ago.  At the same time, the rate on the 15-year fixed mortgage fell, averaging 5.95% after coming in last week at 6.38%.  One year ago, the rate on the 15-year fixed note averaged 5.69%.  "Lower rates are bringing potential home buyers who were previously waiting on the sidelines back into the market and builders already are starting to feel the positive effects," said Sam Khater, Freddie Mac's chief economist.  "A rise in home builder confidence, followed by new home construction reaching its highest level since May, signals a response to meet heightened demand as current inventory remains low."  Data from the National Association of Realtors shows existing home sales ticked up by 0.8% in Nov after 5 months of declines & the Commerce Dept reported housing starts surged 14.8% last month, signaling progress in the stagnant market.  Still, according to Realtor.com senior economic research analyst Hannah Jones, both buyer & seller activity remain near recent lows.  "Though recent data signals a shift towards a more hospitable housing market, the return to balance will be slow," Jones said reacting to the latest mortgage rates.  "Mortgage rates and home prices are well above pre-pandemic levels, and are projected to remain elevated through next year."  Jones pointed out home prices remain elevated & the housing market remains under-supplied, noting the median listing price for a home in the US in Nov was 37.7% higher than in 2019, while for-sale inventory was 34% lower than before the pandemic.

Mortgage rates continue downward trend, housing market still sluggish

With the Red Sea diversions by shipping companies including Maersk continuing amid the risk of attacks by the Houthis, global logistics managers are faced with a 2-front storm of rising ocean 2 air freight prices & stranded cargo.  Both are threats to the global supply chain after 3 tumultuous years of inflationary pressures & delays from Covid disruptions which recently seemed to finally have been vanquished.  The ceiling in ocean freight prices shot up in a matter of hours today as a result of more vessels diverting from the Red Sea.  Logistics managers were quoted this morning an ocean freight rate of $10K per 40-foot container from Shanghai to the UK.  Last week, rates were $1900 for a 20-foot container, to $2400 for a 40-foot container.  Truck rates in the Middle East now being quoted are more than double.  Alan Baer, CEO of OL USA said while pricing is undergoing rapid adjustments as ocean carriers work to recover the added costs of diverting their vessels, these massive jumps in rates need to be clarified as the shipping community of importers & exporters, along with gov regulators seek to better understand the overall drivers of these large increases.  “During Covid, we had a slower build-up in freight prices due to the impact the pandemic had on the global supply chain,” Baer said.  “What we are experiencing here is a light switch event where vessels are being redirected in real time. But, that said, in certain trade lanes you are seeing freight rates going up between 100 to 300 percent. This does not appear to be totally driven by changes in supply and demand.”  As of today, 158 vessels are currently re-routing away from the Rea Sea carrying over 2.1M cargo containers, Kuehne.  The value of this cargo based on MDS Transmodal estimates of $50K per container is $105B.  There is no short-term end to the attacks in sight.

Container rates hit $10,000 as ocean freight inflation soars in Red Sea crisis

General Motors (GM) bought out roughly ½ of Buick dealers across the US due to their reluctance to sell electric vehicles as the automaker looks to transition to EVs.  About ½ of GM's 2000 Buick dealers accepted the voluntary buyout.  The program remains open so additional dealers may opt to take the buyout instead of making the EV-related investments that GM required for them to continue selling Buicks, as GM is planning for the brand's vehicles to be 100% electric by 2030.  A spokesperson for the company said, "Buick is transforming, launching the best vehicles the brand has ever had and is the fastest growing mainstream brand in 2023. This all needs to be supported by the best customer experience in the transition to EVs."  "As stated before, this year we’ve given dealers who are not aligned with Buick’s future to exit voluntarily in a respectful and structured way; with the full support of our National Dealer Council," his statement continued.  Last year, GM began planning to offer buyouts to its network of Buick dealers after it told the dealers to invest at least $300K to facilitate the selling & servicing of electric vehicles, including initiatives like the installation of EV chargers & training of staff, or give up the Buick franchise.  The company noted in its statement that Buick sales are up nearly 60% this year even as it reduced the number of dealer points by 47%.  It added that 90% of the US population lives within a roughly 25-mile radius of a Buick dealer so they will continue to have access to parts & service.  The stock rose 79¢.

GM bought out nearly half of Buick dealers who opted against selling EVs

Gold moved higher as the $ fell to a 5-month low on weak economic data.  Gold for Feb closed up $3 to $2051 per ounce.  The rise came as the US revised 3rd-qtr growth in its GDP to 4.9% from 5.2%, lower than the estimate for a rise of 5.1%.  The Philadelphia Fed manufacturing survey was also weaker than expected, coming in at -10.5, while expectations were for a reading of -4.0, showing continuing weakness for the sector.  The $ weakened following the data, with the ICE dollar index last seen down 0.44 points to 101.97, the lowest since Jul 31.  Treasury yields rose, bearish for gold since it offers no interest.  The 2-year not was last seen paying 4.347%, up 0.8 basis points, while the yield on the 10-year note was up 4.9 basis points to 3.897%.

Gold Closes with a Gain as the Dollar Drops to a Five-Month Low on Weak Economic Data

West Texas Intermediate (WTI) crude oil closed with a loss amid a shake-up in OPEC as Angola quit the cartel while record US production & high inventories offset geopolitical concerns over the safety of Red Sea shipping.  WTI crude for Feb closed down 33¢ to $73.89 per barrel, trading between $72.44-74.58 during the session.  Feb Brent crude, the global benchmark was last seen down 63¢ to $79.07.  The drop comes as Angola said it is withdrawing from OPEC+.  The African country had pushed for higher productions quotas at the Nov 30 meeting of the group, which ended with further voluntary production cuts.  It produces 1.1M barrels of oil per day & reports said its departure is a protest over OPEC's production restrictions.  Record US production & rising inventories are also pressuring oil.  The Energy Information Administration reported the country's production rose 13.3M barrels per day last week, up by 1.2M bpd over a year.  As well, US oil inventories rose again, climbing by 2.9M barrels, while most analysts expected a drop in stocks.

WTI Crude Falls as Record US Oil Production, and Angola's Withdrawal From OPEC Offset Red Sea Disruption

Dow is up a staggering 5K, setting new records, during the last 2 months (see below).  It seems that the main driver is the Fed's signalling that it intends to raise interest rates 3 times next year, beginning in Mar.  However its mission is to deal in reality which will be based on economic data in the coming months.  Seemingly inflation rates will be moderate & far below the very high interest rates in the last couple of years.  But that scenario needs to play out over time, which makes it appear that the market has gotten ahead of itself.  While stocks have been in a rally mode, safe have gold & Treasuries have also been climbing.

Dow Jones Industrials