Markets rise ahead of the Thanksgiving holiday

Dow rose 184 (near session highs), advancers over decliners better than 3-2 & NAZ was up 65.  The MLP index went up 1+ to the 253s & the REIT index added 1+ to the 355s.  Junk bond funds fluctuated & Treasuries were even.  Oil was down about 1 to the high 76s (above early lows) & gold fell 9 to 1992 (more on both below).

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A slew of retailers have issued tepid, cautious or downright disappointing 4th-qtr outlooks over the past few weeks, casting a pall over the crucial holiday season right as they gear up for the biggest shopping day of the year.  The companies, which include everyone from luxury goods giant Tapestry (TPR) to Nordstrom (JWN) cited the uncertain state of the consumer following months of persistent inflation, while others, some said demand is simply drying up for its basic T-shirts, socks & underwear as wholesalers look to keep inventories in check.  If there's one theme that captures the commentary, it's caution, & while some retailers may have been overly conservative with their outlooks, the resounding lack of confidence spells trouble for the holiday qtr & raises questions about the overall health of the economy.  “Consumers are still spending, but pressures like higher interest rates, the resumption of student loan repayments, increased credit card debt and reduced savings rates have left them with less discretionary income, forcing them to make trade-offs,” Target (TGT), a Dividend Aristocrat, CEO Brian Cornell said last week.  “As we look at recent trends across the retail industry, dollar sales are being driven by higher prices with consumers buying fewer units per trip. In fact, overall unit demand across the industry has been down 2% to 4% in recent quarters, and the industry has experienced seven consecutive quarters of declines in discretionary dollars and units,” he said.  When asked about the upcoming holiday season, Cornell said it was too soon to weigh in on early sales, saying only that the company was “watching the trends carefully.”  The stock fell 31¢.
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Bad news for Black Friday: Retailers cast doubt on holiday shopping with cautious guidance

The US is not in a recession.  Despite nearly 3 years of warnings that a recession was imminent, it hasn't happened yet.  An economic downturn could still be on the horizon, but so far unemployment remains low, GDP is growing & inflation has come down from its Jun 2022 peak.  Still, consumers don't feel like we’re in a booming economy.  As people take a look at their personal situations & the broader economy, some are making adjustments.  Consumer spending has begun to taper off, according to data from the new CNBC & National Retail Federation retail monitor.  Retail sales excluding autos & gas fell by 0.08% in Oct, the monitor found.  Plenty of factors may be contributing to this.  Federal student loan payments resumed in Oct, taking a bite out of Ms of Americans' spendable income.  Consumers may be preparing to spend more in Nov as the winter holiday season gets into swing.  And overall, people may just be checking in with themselves & realizing they need to rein in their spending after a year of post-pandemic “revenge spending,” when you spend more than usual or without as much consideration in response to an emotional or stressful event.  Credit card debt, after all, hit a record high at the end of the 3rd qtr of 2023.  Though inflation itself, the rate at which prices are increasing, slowed to just 3.2% in Oct, prices on necessities like rent & food are sitting at levels that feel astronomical compared with 2019.  That, along with a number of increasingly precarious geopolitical situations & continued tension within domestic politics, has consumers wary of the economy.  “I do think we’re making considerable progress in bringing inflation down. But Americans do notice higher prices from what they used to be accustomed to,” Secretary of the Treasury Janet Yellen recently said

Bad news for Black Friday: Retailers cast doubt on holiday shopping with cautious guidance

Markets may be failing to fully price in risks from geopolitics & the economic outlook, & the ECB is monitoring this as a potential threat to financial stability, the group's VP said.  “Markets have a very good perception, or illusion, of the macro economy.  They believe that we are going to have a soft landing, they believe that geopolitical risks will not escalate, and so the risk premia for both bonds and equities is very compressed,” Luis de Guindos said.  “So just in case we have a negative surprise in terms of the evolution of economy, in terms of the evolution of inflation, in terms of any escalation of geopolitical risks, I think this could give rise to an important correction in market prices.”  He added, “This is one of the main elements that we believe now could produce volatility in the financial landscape.”  He was discussing the release of the central bank’s Financial Stability Review for Nov, which tackles the challenges of a “soft landing” that brings down inflation without significant economic damage.  The report notes that concerns over banking sector volatility from the spring, when several banks collapsed, have faded.  However, it says risks to financial stability remain “elevated,” as attention is now on the knock-on effects of tight financial & credit conditions on borrowers, & a correction in real estate markets.  The ECB is projecting a low euro zone growth of 1%, but no recession in 2024, which de Guindos said he believed was the “baseline for everybody now.”  The region's economy contracted 0.1% in the 3rd qtr.  “There are always negative surprises that happen… with respect to inflation the evolution has been very positive, from 10.6% to the current level that is below 3%, and we expect this disinflation process will continue over time. Nevertheless, because of base effects we will have some increase in inflation over the next months,” de Guindos added.  Further negative surprises could be generated from the delayed transmission of higher rates into the real economy, wage growth, productivity and the price of oil, he said.

ECB’s de Guindos: Escalation in geopolitical risk could spark market correction

Gold closed with a loss while sticking above the $2000 mark as the $ & treasury yields rose.  Gold for Feb ended down $8 to settle at $2013 per ounce.  The drop comes on a strengthening US $ even as it remains down nearly 3% from its Nov high as weak economic data convinces investors the Federal Reserve is done with further interest-rate hikes.  Treasury yields are also well under their month highs.  Gold is benefiting from the tailwinds of heightened geopolitical risk, a weaker $ & retreating Treasury bond yields.  Investment flows are recovering in response.  Still, the $ was higher early, with the ICE dollar index last seen up 0.39 points to 103.95.  Treasury yields rose, with the 2-year note last seen paying 4.9%, up 2.1 basis points, while the yield on the 10-year note was up 2.1 basis points to 4.415%.

Gold Closes Lower as the Dollar and Yields Rise Even as it Remains Above US$2,000

Oil futures settled lower, as OPEC+ decided to reschedule its meeting this weekend to Nov 30 & US gov data revealed a hefty weekly increase in US crude supplies.  There appears to be unrest among OPEC+ members on who will participate in the production cuts as opposed to enjoy a free ride at the expense of those who have been cutting production.  Saudi Arabia alone has sacrificed its production in the last year & wants to invite other producers to share its burden.  Jan West Texas Intermediate crude fell 67¢ (0.9%) to settle at $77.10 a barrel ahead of tomorrow's Thanksgiving holiday.  Prices had fallen to as low as $73.79 during the session.

Oil prices settle lower as OPEC+ delays meeting amid reported infighting

Other than the infighting at OPEC+ about production cuts & the hostage release in the MidEast, there was little dramatic new news to motivate buyers or sellers.  On balance, the buyers prevailed, but all is not well.  Today trading was light & serious trading will resume on Mon.  Tomorrow the markets are closed & Fri will have only a ½ day of trading.  Have a good holiday.  😀😀

Dow Jones Industrials