Dow was up 80 in an otherwise down market, decliners over advancers about 2-1 & NAZ retreated 129. The MLP index was steady in the 224s & the REIT index lost 1+, falling to the 368s. Junk bond funds remained weak & Treasuries continued in demand which lowered yields. Oil was flattish holding above 80 & gold was steady after its recent rally (more on both below).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
Bloated warehouse inventories are an expensive pressure eating away at the bottom line of many companies, & for many, the excess supply & associated costs of storage won't abate this year, according to a new CNBC Supply Chain Survey. Just over one-third (36%) said they expect inventories to return to normal in H2 of this year, with an equal percentage expecting the gluts to last into 2024 — 21% saying a return to normal can occur in the first ½ of the year & another 15% expecting normal activity by H1-2024. But uncertainty about inventory management is significant, with almost ¼ (23%) of supply chain managers saying they are not sure when gluts will be worked off. “We don’t expect significant decreases in inventory levels within our network in 2023,” said Paul Harris, VP of operations for WarehouseQuote. “Several of our manufacturing clients are experiencing dead/bloated inventory challenges due to over-ordering in the container grid-lock from prior quarters. A majority have elected to keep the inventory on hand and are opposed to liquidating.” A total of 90 logistics managers representing the American Apparel & Footwear Association, ITS Logistics, WarehouseQuote, & Council of Supply Chain Management Professionals (CSCMP) participated in the survey between Mar 3-21 to provide information on their current inventories & the biggest inflationary pressures they are facing, & often passing onto the consumer. Logistics experts said 20% of their excess inventory sitting in warehouses is not seasonable in product nature. Slightly more than ½ of survey participants said they would keep the items in warehouses. But 27% said they are selling on the secondary market because inventories impact a company's bottom line thru elevated storage prices. Harris said many clients with perishable goods are selling them on secondary markets to avoid destroying products. “However, if a secondary market is not an option, they are forced to destroy the product,” he added. “If it’s a consumable, they are donating the goods to take tax deductions.” Investors are worried about the earnings & margin trends & expect analysts to revise estimates lower. The supply chain pressures will be among the factors that weigh on quarterly numbers. Almost ½ surveyed said the biggest inflationary pressures they are paying are warehouse costs followed by the other category, which includes rent & labor.
As economy weakens, inflation’s inventory gluts are here to stay
A key measure of home-purchase applications fell last week for the first
time in a month as potential buyers struggled to find listings on the
market amid a lack of supply. The Mortgage Bankers Association’s index of mortgage applications
tumbled 4.1% last week compared with the previous week, according to
new data published today. Demand remains 35% lower than the same
time one year ago. "Spring has arrived, but the housing market is
missing the customary burst in listings and purchase activity that
typically mark the season," said Mike Fratantoni, MBA’s chief economist.
"After four weeks of increasing purchase application activity, volume
declined a bit this week even with another small drop in mortgage
rates." Homebuyers are having difficulties finding properties, with new
listings down 20% in Mar compared with last year, according to
Realtor.com. Total inventory remains about ½ of what it was in Mar
2019, before the COVID-19 pandemic began. "A
smaller number of new options will be a challenge for buyers and the
number of existing home sales, which remain low despite a significant
pickup in February," said Danielle Hale, chief economist at Realtor.com. The interest rate-sensitive housing market has cooled rapidly in the wake of the Federal Reserve's aggressive tightening campaign. The interest rate-sensitive housing market has cooled rapidly in the wake of the Federal Reserve's aggressive tightening campaign. For months, higher mortgage rates have dampened consumer demand & brought down home prices. But as rates have slowly fallen from a peak of 7%, the housing market has shown early signs of stirring back to life. Median home prices climbed 0.16%
in Feb from a month earlier, compared with a 3.4% decline in
Jan, mortgage analytics firm Black Knight said. It marked the strongest one-month gain since May of last year. Prices are expected to climb higher as rates continue to drop & supply remains constrained. "The
unfortunate reality is that the scarce supply of inventory that’s the
source of so much market gridlock isn’t getting any better," said Andy
Walden, Black Knight's VP of enterprise research. "Without a
significant shift in interest rates, home prices or household income,
this is a self-fulfilling dynamic that is quite likely to continue for
some time."
Mortgage demand drops as Americans struggle to find homes for sale
Walmart (WMT), a Dow stock & Dividend Aristocrat, expects around 65% of its stores to be serviced by automation by the fiscal year 2026. The retail giant
said around 55% of packages that it processes thru its fulfillment
centers will be moved to automated facilities & unit cost average
could improve by around 20%. The company hopes that these changes will create roles that
require less physical labor but have a higher rate of pay. Over time the
company anticipates increased throughput per person due to the
automation while maintaining or even increasing its number of associates
as new roles are created. "It
all starts with our associates," CEO Doug McMillon said. "We are a people-led, tech-powered
omnichannel retailer. As it relates to being people-led, it’s about
purpose, value, culture, opportunity, and belonging." The announcement came just days after the company revealed plans to lay off
more than 2000 people at facilities that fulfill online orders. It was
not immediately clear if the push for automation would lead to more
layoffs. WMT maintained its forecast for the fiscal year ending Jan 31, 2024
which calls for net sales to rise by 2.5-3% & EPS of $5.90-6.05. The stock rose 2.45.
If you would like to learn more about WMT, click on this link:
club.ino.com/trend/analysis/stock/WMT_aid=CD3289&a_bid=6aeoso5b6f7
Retail titan announces major upcoming change to stores
Gold futures finished with a loss. Back-to-back session gains had lifted prices to their highest in more than a year a day earlier, as weaker-than-expected US economic data fueled expectations for a recession, boosting the precious metal's appeal as a haven investment, analysts said. Gold for Jun fell $2 to settle at $2035 an ounce.
Gold Futures End Lower After Back-To-Back Session Gains
Oil futures settled modestly lower, with US prices posting a loss for the first time in 5 sessions. Oil markets have priced in the initial shock of the announced OPEC+ production cuts, but prices could continue higher if demand surprises to the high side as summer approaches. However, this is a massive if. Gasoline demand has recovered alongside consumer spending in the services sector in recent months but today's disappointing US ISM services PMI data suggests that the US consumers may be approaching spending limits. May West Texas Intermediate crude fell 10¢ to settle at $80.61 a barrel.
U.S. oil futures mark first loss in 5 sessions
Economic data keeps coming in unimpressive & that fails to excite investors. The Dow chart below shows the last 5 months for the Dow have been unexciting. For the near term, that trend should continue.
Dow Jones Industrials
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