Dow rose 83, advancers over decliners 5-2 & NAZ was off 3. The MLP index stayed at 260 & the REIT index gained 4+ to 371. Junk bond funds were higher & Treasuries saw more buying which reduced yields. Oil was flat at 76 & gold advanced 11 to 2068.
AMJ (Alerian MLP Index tracking fund)
Saudi Arabia & Russia deepened their oil supply cuts, announcing an agreement to continue scaling back production at the beginning of 2024. The voluntary move by Moscow, Riyadh & other members of OPEC+ will reduce crude output by about 2M barrels a day for Q1-2024. Saudi Arabia first began scaling back output in Jul & has extended the production cut 3 times so far. OPEC+, which is the group of oil-producing nations responsible for about 40% of global output, announced the news after its virtual meeting to discuss 2024 output amid concerns of a potential surplus. Other members, including the UAE, Kuwait, Iraq, Algeria, Kazakhstan & Oman, pledged additional cuts in the 3-month period from Jan-Mar. Oil prices initially rose yesterday but fell later in the session despite the fresh supply curb. Investors were bracing for deeper production cuts. "The market reaction implies disbelief in the full efficacy of the cuts," JPMorgan Chase analyst Christyan Malek said. West Texas Intermediate crude, the US benchmark, fell to about $76 a barrel (where it was at the start ov 2022) during late PM trading, down from a recent peak of $93. Brent crude, the intl benchmark, was hovering around $80 a barrel, down about 2.5% from the previous day. Americans have enjoyed the benefits of lower gas prices recently, despite the extensive oil cuts by OPEC+. The average cost of a gallon of regular gasoline was about $3.24 yesterday, according to AAA, well below the record high of $5.01 notched in Jun 2022 & a marked drop from just one month ago, when prices hovered around $3.49. The latest export cuts come in addition to existing supply reductions by OPEC+. The group already had in place oil output cuts of about 3.66M barrels per day when Saudi Arabia & Russia introduced the additional supply cut yesterday.
Saudi Arabia extends oil production cuts into start of 2024
Treasury yields dipped as investors awaited comments from Federal Reserve Chairman Jerome Powell later today. The yield on the 2-year Treasury was 2 basis points lower at 4.696% & the 10-year Treasury yield was last at 4.332% after declining by around 2 basis points. Yields fall when the price of bonds increases & 1 basis point equals 0.01%. Yields tumbled in Nov because traders increasingly began to believe the Fed was done raising rates & that it may start cutting them in the first ½ of next year. Powell could throw some cold water on that notion, maintaining that the central bank had to remain vigilant against inflation. The Fed next decides on rates on Dec 13. Investors digested inflation data released yesterday in form of the personal consumption expenditures price index for Oct, which was in line with expectations. The core PCE index, which excludes food & energy prices, reflected an increase of 3.5% on an annual basis. This also marked a slowdown from the previous reading for Sep, which came in at 3.7%. The PCE index is the Fed's preferred inflation measure & could therefore impact monetary policy decisions. The central bank is set to meet later this month for the last time in 2023. Markets are pricing in an over 98% chance of interest rates being left unchanged then, according to CME Group's FedWatch tool. Investors are also hoping to gain some insights into when policymakers believe that interest rates may be cut, & what their expectations for the economy are, especially whether a recession can be avoided.
Treasury yields are slightly lower ahead of Powell comments
The United Auto Workers (UAW) union's weekslong strike against Ford (F) cost the automaker $1.7B & the added costs from the new
contract reached to end the work stoppages will cost more than 5
times that amount, according to the automaker. Ford, which pulled its full year 2023 outlook in Oct as the UAW's
strike held some major production facilities at a standstill, unveiled a
new trimmed-down forecast yesterday. The automaker now expects adjusted earnings before interest & taxes
(EBIT) of $10-10.5B for 2023, down from its prior
forecast of $11-12B offered in Jul. The
company said $1.6B of the total strike-related lost profits were
incurred during the 4th qtr, & the shutdowns resulted in a
reduction of roughly 100K fewer wholesale vehicles being sold than
originally planned. The new labor agreement, which includes a 30% wage increase for union autoworkers over the 4½-year contract, will cost Ford $8.8B over the life of the contract. CFO
John Lawler confirmed a previous estimate that the added labor expenses
will add about $900 in costs per vehicle by 2028 & says the company
will work to offset those costs by boosting productivity & lowering
expenses elsewhere. Ford stock rose 21¢.
There was heavy buying in stocks in Nov's last hour of trading yesterday. That looks suspicious. Powell's comments shortly will confirm if that optimism was justified.
Dow Jones Industrials
No comments:
Post a Comment