Markets slip lower after Fed says policy needs to stay restrictive

Dow lost 62, decliners over advancers 2-1 & NAZ gave back 84.  The MLP index crawled up to the 252s & the REIT index was off 2+ to 354.  Junk bond funds saw minimal demand & Treasuries hardly budged.  Oil inched up pennies in the 78s & gold surged 21 to 2001 (more on both below).

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Federal Reserve officials at their most recent meeting expressed little appetite for cutting interest rates anytime soon, particularly as inflation remains well above their goal, according to minutes.  The summary of the meeting held Oct 31 - Nov 1 showed that Federal Open Market Committee members still worry that inflation could be stubborn or move higher, & that more may need to be done.  At the least, they said policy will need to stay “restrictive” until data shows inflation on a convincing trek back to the central bank's 2% goal.  “In discussing the policy outlook, participants continued to judge that it was critical that the stance of monetary policy be kept sufficiently restrictive to return inflation to the Committee’s 2 percent objective over time,” the minutes stated.  Along with that, however, the minutes showed that members believe they can move “on the totality of incoming information and its implications for the economic outlook as well as the balance of risks.”  The release comes amid overwhelming sentiment that the Fed is done hiking.  Traders in the fed funds futures market are indicating virtually no probability that policymakers will increase rates again this cycle & are pricing in cuts starting in May.  Ultimately, the market expects that the Fed will enact the equivalent of 4 qtr percentage point cuts before the end of 2024. However, the minutes gave no indication that members even discussed when they might start lowering rates, which was reflected in Chair Jerome Powell's post-meeting news conference.  “The fact is, the Committee is not thinking about rate cuts right now at all,” Powell said then.  The fed's benchmark funds rate, which sets short-term borrowing costs, is currently targeted at 5.25-5.50%, the highest level in 22 years.

Fed gave no indication of possible rate cuts at last meeting, minutes show

Lowe's (LOW) lowered its full-year sales outlook, after customers spent less on do-it-yourself projects & caused its fiscal 3rd-qtr sales to tumble nearly 13% year over year.  The home improvement retailer said it anticipates sales will total $86B for the fiscal year.  It had previously expected $88-89B.  It projects comparable sales will drop by about 5% this fiscal year, worse than a previously anticipated a decline of 2-4%.  The company expects adjusted EPS to be about $13, lower than its previously expected $13.20-13.60.  CEO Marvin Ellison said LOW felt a “greater-than-expected pullback” by customers on discretionary projects & big-ticket purchases.  “While we’ve seen a more cautious consumer for some time now, this quarter we saw some of these consumers increasingly prioritizing experiences over goods spending on travel and entertainment,” he added.  Yet he said its sales to home professionals, which are accounting for a growing share of its revenue, rose in the qtr.  Those pros drive about 25% of its business.  He also said the company, which sells Christmas trees & decorations, will focus on offering value & saving customers' time during the holiday season.  The stock dropped 6.43 (3%).
If you would like to learn more about LOW, click on this link:
club.ino.com/trend/analysis/stock/LOW_aid=CD3289&a_bid=6aeoso5b6f7

Lowe’s cuts sales outlook as homeowners take on fewer projects; shares slide

Abercrombie (ANF) blew past estimates as it posted a 20% jump in sales thanks to a strong back-to-school shopping season & growth at both its namesake brand & Hollister.  The retailer, which has bounced back after years of stagnation, also raised its outlook again as it continues to defy an overall slowdown across the apparel industry.  ANF reported EPS for the 3-month period that ended Oct 28 was $1.83, compared with a loss of 4¢ a year earlier.  Sales rose to $1.06B from $880M a year earlier.  For its 4rth qtr, ANF expects net sales growth to be up low double digits compared with the prior year, which is in line with the 11.6% growth that was expected.  It expects its operating margin to be 12-14%, compared with 7.7% in the year ago period & ahead of expectations of 11.3%.  The expected uptick is driven by a higher gross profit rate, lower freight costs & higher sales prices.  For the full year, the company expects net sales to grow 12-14%, up from a previous outlook of around 10% & ahead of the 10.8% uptick that had expected.  It's forecasting an operating margin of around 10%, up from its previous forecast of 8-9%, which is what had expected.  The expected increase is driven by lower freight & raw material costs.   CEO Fran Horowitz said the company has seen an “encouraging” start to the holiday shopping season.  But its forecast for the qtr failed to impress traders & was only in-line with consensus estimates despite the strong qtr.  Horowitz added: “While the macro environment remains challenging and uncertain, we’ve proven that we can deliver growth across brands and regions if we stay focused on our customer and execute our playbook.”  The stock rose 1.74 (2%).
If you would like to learn more about ANF, click on this link:
club.ino.com/trend/analysis/stock/ANF_aid=CD3289&a_bid=6aeoso5b6f7

Abercrombie & Fitch raises outlook after quarterly sales surge 20%

Gold prices rose to an over 2-week high, as the $ dipped on expectations that the Federal Reserve is done hiking interest rates, while investors awaited minutes from the central bank's latest meeting for further policy cues.  Spot gold climbed 0.5% to $1987 per ounce, as of 1215 GMT, after hitting its highest level since Nov 3 earlier in the session.  Gold futures gained 0.5% to $1989.  Expectations of a dovish Fed in 2024 have triggered a decline in the $, helping gold recover from recent lows.  The $ fell to more than a 2½-month low, making gold less expensive for other currency holders.  Meanwhile, the benchmark 10-year Treasury yields hovered near 2-month lows touched last week. 

Gold Hits Over 2-Week Peak On Softer Dollar, Fed Minutes In Spotlight

US benchmark oil futures settled with a loss for the first time in 3 sessions.  Traders await this week's US supply data from the Energy Information Administration due tomorrow, as well as Sun's expected decision on oil output from the Organization of the Petroleum Exporting Countries & the allies (OPEC+). Jan West Texas Intermediate crude fell 6¢ to settle at $77.77 a barrel.

U.S. Oil Prices Settle Lower for the First Time in 3 Sessions

Powell's comments on the future of interest rates were well understood by investors prior to the last meeting.  In the mean time investors need to understand what business is likely to be like & how high interest rates will affect the economy.  Retailers & many other businesses are already seeing that up close as consumer still must face substantially higher prices than just a few years ago.

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