Dow recovered 41, declliners over advancers better than 2-1 & NAZ declined 144. The MLP index inched up to 238 & the REIT index was little changed in the 362s. Junk bond funds slid lower & Treasuries had limited buying, slightly lowering yields (more below). Oil was flattish in the 87s & gold eased back 1 to 1942.
AMJ (Alerian MLP Index tracking fund)
Treasury yields dipped as investors assessed the possibility of further rate hikes & a batch of economic data that suggested ongoing inflationary pressures & labor market strength. The yield on the 10-year Treasury last traded at 4.274%, after falling nearly 2 basis points & the yield on the 2-year Treasury fell nearly 3 basis points to 4.997%, hovering near the 5% level. Yields & prices move in opposite directions & 1 basis point is equivalent to 0.01%. Uncertainty about the Federal Reserve's monetary policy outlook has spread amongst investors as recent data signals continuing inflationary pressures & a tight labor market. Traders assessed a series of economic reports today, further adding to concerns that the Federal Reserve's hiking cycle may not be over just yet. This included fewer-than-expected jobless claims & a greater-than-expected uptick in labor costs for the 2nd qtr. This comes after the ISM Services index showed a bigger-than-forecast expansion of the services sector in Aug. Markets have also grappled in recent days with a rise in oil prices. Markets are still pricing in a 93% chance that the Fed will keep rates unchanged when it meets later this month according to CME's FedWatch tool. Expectations for a rate hike at the Nov however were last at roughly 45%.
Treasury yields inch lower as investors weigh interest rate path ahead
The ISM Services Index registered 54.5%, 1.8 percentage points (pp)
higher than the Jul reading of 52.7%. The composite index indicated
growth in Aug for the 8th consecutive month after a reading of
49.3% in Dec 2022, which was the first contraction since Jun 2020
(45.4%). “Thirteen industries reported growth in August. The Services PMI®,
by being above 50 percent for the eighth month after a single month of
contraction and a prior 30-month period of expansion, continues to
indicate sustained growth for the sector. The composite index has
indicated expansion for all but three of the previous 162 months,” said
Anthony Nieves, Chair of the ISM Services Business Survey Committee. The Business Activity Index registered 57.3%, a 0.2 pp increase
compared to the reading of 57.1% in Jul. The Inventories Index expanded
to 57.7%, up 7.3 pp from Jul's figure of 50.4%. The Employment Index registered 54.7%, up 4 pp from the Jul figure
of 50.7%. Comments from respondents include: “Hiring is stable, with
quality employees available.” The New Orders Index registered 57.5%, 2.5 pp higher than the Jul
reading of 55%. The index expanded in Aug for the 8th consecutive
month after contracting in Dec for the first time since May 2020.
Comments from respondents include: “Sales on a national level have been
strong” & “Material availability has returned to pre-COVID-19 levels.”
ISM: Service sector expanded in August
Defense giant Lockheed Martin (LMT) trimmed its delivery outlook for F-35 stealth fighters as it works thru delays related to a technology upgrade. LMT said in a regulatory filing that it now expects to
deliver 97 jets in 2023, down from the previous forecast of between 100-120 jets. The company expected to deliver the first F-35 with the
Technology Refresh 3 (TR-3) upgrade in 2023, but it now expects the
first upgraded jets will be delivered in Apr-Jun 2024. "As
a result, we now expect to deliver 97 aircraft in 2023 (all in the TR-2
configuration), which we do not currently anticipate will impact our
2023 financial outlook," the company said. The F-35 is LMT's largest program, having generated 27%
of its total consolidated net sales & 66% of aeronautics' net sales in
2022. Demand has risen over the last 2 years amid an influx of
orders as US allies ramp up defense spending & look to acquire the
F-35 for their militaries amid Russia's invasion of Ukraine & China's military build-up. LMT is currently producing F-35 jets,
known as the Lightning II, at a rate of about 156 per year – a pace it
expects to continue as it finalizes TR-3 software development &
testing. The company said that the number of
deliveries it will make in 2024 "will depend on when the first TR-3
aircraft is delivered and the time needed to complete the customer's acceptance process." The US military is the largest operator of the F-35, with variants in use by the Air Force, Marine Corps & Navy. Other
countries that currently operate or have ordered F-35 jets include
Australia, Belgium, Canada, Denmark, Finland, Germany, Japan, Israel,
Italy, the Netherlands, Norway, Poland, Singapore, South Korea,
Switzerland & the UK. The stock went up 2.29.
If you would like to learn more about LMT, click on this link:
club.ino.com/trend/analysis/stock/LMT_aid=CD3289&a_bid=6aeoso5b6f7
Defense giant Lockhood Martin trims delivery outlook for F-35 stealth jets
Everybody is nervous about what the Fed will do next with interest rates. Economic data remains mixed with a bias on the strong side which suggests at least one more rate hike, probably in Sep.Dow Jones Industrials
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