Markets meander as investors worry about inflation data next week

Dow edged up 75, advancers modestly ahead of decliners & NAZ added 12.  The MLP index rose 1+ to 240 & the REIT index fell 1+ to the 262s.  Junk bond funds inched higher & Treasuries had limited buying so yields were little changed.  Oil went up fractionally to the 87s & gold was steady at 1942 (more on both below).

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Apartment rents have been cooling off sharply for several months & they look like they're about to go negative compared with a year ago.  Rents in Aug were just 0.28% higher than Aug 2022, according to real estate tech platform RealPage.  Compare that to a year ago, when rents were posting 11% annual growth.  With the exception of a very brief drop during the Covid lockdowns, rents have not shown negative annual growth in well over a decade.  When they did, it was due to a recession hitting demand.  That is not the case now.  Apartment occupancies nationally are at a pretty healthy 94%, which is right along historical norms.  High mortgage rates combined with high home prices & tight supply have kept more would-be buyers in the rental market.  The issue instead is just a massive amount of apartment supply.  The number of new units being built is at a 50-year high, with more than 460K being completed this year alone.  Over 1 M new units have been built in the past 3 years.  That's a record, & much of that supply is on the higher end.  Renters have more options, so landlords have less pricing power as turnover increases.  While rents nationally haven't gone negative yet, they have in several local markets.  The Midwest & Northeast regions continue to see very strong rent increases.  One exception is New York, where rents were up just 1.9% annually as significant supply comes on the market.  Looking ahead, supply should remain high thru next year, which will push rents lower potentially thru 2025.  New construction, however, has dropped sharply this year because of financing & other challenges, so there should be far less supply going into 2026, giving rents a chance to make up some ground.

Apartment rents are on the verge of declining due to massive new supply

As prices that shoppers pay for groceries stabilize or fall, Krogers (KR) sales are sagging.  The company posted fiscal 2nd-qtr sales that missed expectations.  The company stuck with its full-year outlook, but said the slowing rate of inflation will mean less revenue.  The company posted a 25¢ loss per share, compared with EPS of $1 in the year-ago period.  One factor was the company's settlement of the majority of claims that it fueled the opioid crisis.  The company agreed to pay $1.2B to US states, local govs & Native American tribes to settle the majority of claims that it fueled the epidemic.  Its qtr included a $1.4B charge ($1.54 loss per share) for that settlement.  Net sales fell from $34.6B in the year-ago period.  KG reaffirmed its full-year guidance, saying it expects identical sales excluding fuel to 1-2%.  That includes the impact of ending an agreement with Express Scripts, a pharmacy benefit management company.  It said adjusted net earnings are expected to be $4.45-4.60 per share, including the benefit from having an extra week in the year.  The stock rose 1.40.
If you would like to learn more about KR, click on this link:
club.ino.com/trend/analysis/stock/KR_aid=CD3289&a_bid=6aeoso5b6f7 

Slowing inflation is dragging on Kroger sales, even as consumers feel a pinch

Stellantis (STLA) offered significant 4-year wage increases to its hourly workers represented by the United Auto Workers, as it scrambles to avoid a costly strike.  The offer would provide a 14.5% wage increase over the 4-year term of the proposed deal for most of its roughly 43K UAW-represented hourly workers.  Newer, or in-progression, employees would get a 27% boost to their starting wages & a shorter time period — 6 years, versus 8 years under the current deal — to advance to the maximum wage rate.  The current contracts between the UAW & the 3 Detroit automakers will expire at 11:59 PM Thurs.  Union leaders have threatened strikes if no deal is in place by that time.  The UAW has never in its history called major strikes simultaneously against all 3 companies.  The offer also provides its UAW-represented employees with a $6K one-time “inflation protection payment” in the first year of the deal, & a total of $4.5K in additional payments over the following 3 years.  In addition, the proposal would make Juneteenth a paid holiday for workers covered by the deal.  “This is a responsible and strong offer that positions us to continue providing good jobs for our employees today and in the next generation here in the U.S.,” said Mark Stewart, COO of STLA's North America unit.  “It also protects the Company’s future ability to continue to compete globally in an industry that is rapidly transitioning to electric vehicles.”  The stock was up 15¢.
If you would like to learn more about STLA, click on this link:
club.ino.com/trend/analysis/stock/STLA_aid=CD3289&a_bid=6aeoso5b6f7

Stellantis offers 14.5% pay increase to UAW, days before possible strike

Gold futures finished slightly higher, but posted a weekly loss of more than 1%.  For the week, gold has been under renewed selling pressure largely thanks to the strengthening $ & rising Treasury yields.  Improved US data & comments from FOMC members that suggested rates could stay higher for longer fed more fuel to this dynamic.  Dec gold was up pennies to settle at $1942 an ounce.  Prices based on the most-active contract ended the week were 1.2% lower.

Gold futures end more than 1% lower for the week

US crude futures end the day 0.7% higher, & rise 2.3% for the week, to finish at $87.51 a barrel.  Today's gains were driven largely by fuel markets, where prices continue to push higher despite the end of the peak-demand summer driving season.  ULSD diesel fuel futures ended the day 2.7% higher at $3.2991 a gallon, just a fraction away from a 7-month-high.  New global refinery capacity is not likely to make on-spec diesel until mid 2024.

WTI Oil Ends With a 2.3% Weekly Increase

Stocks were higher for much of the session after officials had hinted the Federal Reserve could hold off from hiking interest rates at its meeting in Sep.  That enthusiasm did not last & in the last 2 hours sellers dragged the averages into the red.  For the week, Dow fell 260 with a dreary outlook going into the new week.  

Dow Jones Industrials