Dow jumped 331, advancers over decliners better than 3-1 & NAZ gained 112. The MLP index was up 2 to the 243s & the REIT index shot up 6+ to 366. Junk bond funds eased lower & Treasuries saw more selling, raising yields. Oil finished up 1+ to go over 90 & gold slid back 1 to 1930.
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
More companies are warning that a surge in the cost of fuel & employee pay hikes will eat into profits this qtr. Companies from aerospace manufacturers to package delivery giant UPS (UPS) are digesting big new labor deals. Meanwhile, unions from the auto industry to Hollywood are pushing for better compensation. Airlines, whose biggest expenses are jet fuel & labor, are getting hit particularly hard. Delta Air Lines (DAL) cut its adjusted earnings forecast for Q3 to $1.85-2.05 a share, down from an earlier forecast of $2.20-2.50. DAL said it is paying more for fuel than it expected but said maintenance costs were also more than it anticipated. US jet fuel at major airports averaged $3.42 a gallon yesterday, up 38% from 2 months ago. Yesterday, American Airlines (AAL) trimmed its earnings forecast, following revisions at Alaska Airlines (ALK) & Southwest Airlines (LUV). AAL expects adjusted EPS of 20-30¢ in Q3, down from a previous forecast of as much as 95¢, citing more expensive fuel & a new pilot labor deal. The company expects to recognize a $230M expense for that new contract, which includes immediate 21% raises for pilots, & compensation increasing more than 46% over the duration of the 4-year contract, including 401(k) contributions. Elsewhere, labor unions from Detroit to Hollywood have pushed hard for raises, better benefits & schedules in new contracts. UPS UPS (UPS) & the Teamsters union representing about 340K workers at the package carrier in Jul reached a new labor deal that includes raises for both full- & part-time workers, & narrowly avoided a potential strike. UPS workers ratified the agreement ratified last month. By the end of the 5-year contract, a driver could make $170K in pay & benefits, the company said. Earlier this week, the delivery giant outlined the costs associated with the deal & said it the expenses from it will increase at 3.3% compound annual growth rate over the next 5 years. “Year one costs more than we originally forecast,” said Brian Newman, the company's CFO, said. He added it will cost $500M more in H2 than expected.
More companies, especially airlines, warn higher costs will eat into profits
The CEO of one of the country's biggest car manufacturers explained why electric vehicles (EVs) may not be a lightning hit for consumers. "We’re
going into the mass consumers who have a lot of charging anxiety," Ford
(F) CEO Jim Farley warned when explaining the growing push for EVs. "They [consumers] don't have range anxiety, they have charging anxiety," Farley stressed again. He also suggested that consumers are "not willing to pay a
premium" for electric vehicles, despite more being offered in today's
market. "Some customers who have the right duty cycle are really
interested, but the price premium that we see a year ago is not there
today," he continued. Ford announced that it is projected to lose $4.5B from electric vehicles this year, despite increased revenue. The automaker's EV division, called "Ford Model e," has lost $1.8B so far this year, according to Fortune. "We’re
going to offer customers a choice. We’re going to have a growth story
for all three of our businesses, including our pro-business, and we’ll
have the customer choose," Farley told. "The F-150 Lightning is the best-selling electric pickup in the U.S.
and for those customers, it works great, but it’s not for everyone," he
continued. "We think EVs could be 30, 40, 50% of our business. We just don’t actually know," he stressed. The stock fell 2 pennies.
If you would like to learn more about Ford, click on this link:
club.ino.com/trend/analysis/stock/F_aid=CD3289&a_bid=6aeoso5b6f7
Major automaker reports $4.5 billion loss fro m electric vehicles
The number of Americans applying for unemployment benefits last week ticked up modestly after falling to the lowest level in 7 months the week before, as companies continue to retain employees despite the Federal Reserve’s efforts to cool the economy. US applications for jobless claims rose by 3K to 220K for last week the Labor Dept reported. Jobless claim applications are seen as representative of the number of layoffs in a given week. The 4-week moving average of claims, a less volatile measure, fell by 5K to 224K. The Federal Reserve is well into the 2nd year of its battle against inflation, having raised interest rates 11 times since Mar of last year. At 5.4%, the Fed's benchmark borrowing rate is at the highest level in 22 years. The Fed's rate hikes are meant to cool the job market & bring down wages, which many economists believe helps to ease pressure on price growth. Though some measures of inflation have retreated significantly — from as much as 9% down closer to 3% — since the Fed starting raising interest rates, the job market has held up better than most expected.
Applications for U.S. jobless benefits tick up slightly
Gold futures finished slightly higher, a day after settling at their lowest in about 3 weeks. It is difficult to be too bullish on gold right now as the renewed surge in inflation may force the Fed to hike interest rates perhaps one more time before the end of the year. Dec gold inched up pennies to settle at $1932 an ounce.
Gold Futures End Higher a Day Settling at Their Lowest in 3 weeks
The US crude-oil benchmark settled above $90 a barrel for the first time since Nov, lifted by ongoing concerns over the outlook for tight global supplies. West Texas Intermediate crude for Oct rose $1.64, or nearly 1.9%, to settle at $90.16 a barrel. That was the highest finish for a front-month contract since Nov 7. Nov Brent crude, the global benchmark, climbed $1.82 (2%) at $93.70 a barrel, the highest finish since Nov 15. Crude oil appears to be responding more to supply issues once again amid signs that demand could hold up or even potentially increase in future. Undersupply is only an issue during times of healthy or strong demand, just as oversupply becomes a problem when demand is soft.
U.S. Crude-Oil Benchmark Settles above $90 a Barrel for the First Time this Year
After the strong rally today there was profit taking into the close. But there are headwinds out there starting with higher costs (see above). High inflation has the potential to drag on for some time. And the EV market will have to struggle more than expected (see Ford above). If the bulls are serious about taking the Dow higher, it needs to go over 35K. So near & yet so far.
Dow Jones Industrials
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