Markets edge lower while Treasury yields remain in heavy demand

Dow was off 66 after yesterday's big selloff. decliners over advancers 3-2 & NAZ crawled up 13.  The MLP index was little changed in the 237s & the REIT index continued weak, down 6+ to the 372s.  Junk bond funds remained weak & Treasuries continued to see heavy selling, sharply raising interest rates.  Oil gained 2 to the 82s after Saudi Arabia extended its supply cuts into Sep & gold fell 6 to 1968 (more on both below).

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Sen Joe Manchin took a swipe at Pres Biden, Dems & Reps in response to Fitch Ratings downgrading the US gov credit rating, saying the AAA to AA+ status shift should serve as a "stark warning."  "The downgrading of America's credit rating by Fitch represents a historic failure of leadership by both political parties and the Executive branch," Manchin said.  "The credit agency specifically cited the decline in governance, erosion of cooperation in the federal government and ballooning national debt when making the determination to lower our credit rating."  "This is a stark warning that cannot be ignored," he continued.  "We must act now to fully fund the government and address our national debt before we wake up to a future where America's superpower status is in jeopardy and we have lost the confidence of our allies around the world. Every American will suffer if Washington politics get in the way of long-term solutions that address these challenges."  "September will be a crucial month as the deadline to fund the federal government grows closer," Manchin said.  "Now, more than ever, it is time for elected leaders from both parties to work together and send a clear message to the world that we will take the necessary fiscal and budgetary steps to restore our credit rating and keep America's economy strong for this generation and the next."  Tues, Fitch Ratings became the 2nd of the 3 major credit-rating firms to remove its coveted triple-A assessment of the US gov's credit worthiness, a move that spurred debate in DC about spending & tax policies.

Senator blasts 'historic failure of leadership' after credit downgrade

Weekly data on the US labor market showed an increase in first-time claims of joblessness, though the 4-week moving average showed an offsetting decline.  The Labor Dept reported initial claims of unemployment last week increased by 6K from the prior week to reach 227K.  The less volatile, 4-week moving average showed a decrease of 5K from the previous week.  More people, however, were without a paycheck for a longer period than last year.  The number of people filing over continued weeks declined by 53K to 1.86M, though that's well above the 1.47M people with continued claims during the comparable week in 2022.  Yesterday, private payroll processor ADP showed employers added 324K to their headcounts last month, suggesting the economy remains supportive of new hires despite higher lending rates & lingering inflationary pressures.  "The economy is doing better than expected and a healthy labor market continues to support household spending," said Nela Richardson, the chief economist at ADP.  Wage growth, however, is on the decline.  The 6.2% increase in wages from this time last year marked the slowest rate since Nov 2021.

New U.S. jobless claims rise, but offset by decline in the four week average

Heavyweight producer Saudi Arabia will extend a 1 M barrel per day voluntary crude oil output cut into Sep, in the 3rd month of such declines, the state-owned Saudi Press Agency (SPA) said.  “In effect, the Kingdom’s production for the month of September 2023 will be approximately 9 million barrels per day,” it said, citing a source from the Saudi Ministry of Energy.  The 1 M barrel per day cut, which was also implemented in Jul & Aug, “can be extended or extended and deepened,” the SPA said.  It adds to 1.66M barrels per day of other voluntary production declines that some members of the Organization of the Petroleum Exporting Countries are putting in place until the end of 2024.  Voluntary cuts fall outside of the production policy agreed by OPEC & its allies (OPEC+).  One of the group's technical committees, the Joint Ministerial Monitoring Committee (JMMC), meets virtually on Fri to review market fundamentals. The JMMC cannot independently decide policy, but may call an extraordinary meeting of OPEC ministers to do so.  Oil prices were little changed shortly after the announcement of Saudi Arabia's voluntary production cut extension.  OPEC & the Paris-based Intl Energy Agency both forecast a pickup in demand that could lead to supply tightness in H2.

Saudi Arabia to extend voluntary 1 million barrel per day crude oil production cut into September

Gold prices slipped again to book a 3rd day in the red, as rising Treasury yields & a stronger $ following Fitch Ratings' downgrade of the US credit rating put pressure on precious metals.  Gold prices for Dec fell by $6 to settle at $1968 per ounce.  Gold prices have seen their shine dim slightly this week.  While the yellow metal is still trading well above its late-Jun lows around $1910 per ounce, a stronger $ & rising Treasury yields threatened to push it even lower.  Fitch Ratings' decision to downgrade the US credit rating from AAA to AA+ & the Treasury Dept's plans to issue $1T in debt during Q3 stoked anxieties that pushed bond yields higher today.

Gold prices slide for 3rd straight day as rising Treasury yields, stronger U.S. dollar sap demand

US crude futures posted their largest one-day gain since Jul 7, climbing 2.6% to finish at $81.55 a barrel & leaving them nearly $1 higher for the week with one trading day left.  The gains were largely in response to an announcement this morning by Saudi Arabia, extending its 1-M-barrel-a-day production cuts to at least the end of Sep.  It said it may even extend them again after that & may even cut by more.  That was a surprise, as many analysts felt that if the Saudis were leaning in any direction, it was toward reducing the output cuts.  Next up for the market is tomorrow's weekly US rig-count report by oilfield services company Baker Hughes.

Oil Prices Rise by Most in Nearly a Month

After a weak opening, the Dow rallied almost 200 during the midday period.  Then there was more selling, taking it back into the red.  The credit downgrade dark cloud continues to weigh heavily on the stock market.  Effects of high interest rates are getting more attention by investors along with the greater potential for a recession.

Dow Jones Industrials