Markets rose as a key inflation report showed prices were steady

Dow climbed 173, decliners just over advancers & NAZ added 100.  The MLP index lost 2+ to the 245s & the REIT index hardly budged from 375.  Junk bond funds remained a little higher & Treasuries had more buying which reduced yields.  Oil sold back 2+ to the 68s & gold inched up 1 to 1995 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Oracle (ORCL) missed estimates on revenue in its fiscal 2nd-qtr earnings report.  The software company posted adjusted EPS of $1.34, narrowly beating the estimate of $1.32.  Its revenue came in at $12.9B, missing the $13.05B projection.  Analysts pointed to ORCL's cloud revenue shortfall in notes to investors.  “For the second straight quarter, Oracle didn’t meet Cloud/OCI growth expectations and again pinned the blame on the pace of infrastructure capacity build-outs, which is disappointing and tough to get visibility into (what could be taking so long?),” wrote UBS analysts in a note to investors.  JPMorgan analysts expressed concern about the company's ability to beef up its Oracle Cloud Infrastructure at a fast enough rate.  “While there seems to be ample OCI demand for now, there are questions around Oracle’s ability to build out modern datacenter capacity quickly enough,” the JPMorgan analysts wrote.  The capacity limitation would stop ORCL from taking advantage of the “unlimited demand” for its infrastructure that the company has spoken about, according to JPMorgan.  The stock fell 4.56.

Oracle shares fall more than 10% on light cloud revenue

Ford (F) will soon reduce the number of F-150 Lightning electric pickup trucks it builds on average every week.  In a message to suppliers, the automaker said "changing market demand" led to it adjusting its planned Rouge Electric Vehicle Center production of the pickup to an average of 1600 per week, according to Automotive News.  That will reportedly begin in Jan.  Ford "will continue to match Lightning production to customer demand," a company spokesperson said.  The Rouge Electric Vehicle Center, which opened in Dearborn, Michigan, in 2021, received upgrades over the summer meant to lift its targeted annual F-150 Lightning run rate to 150K, with the facility’s operations picking back up at the beginning of Aug, according to a press release.  There had earlier been plans of averaging 3200 per week in connection to that, Automotive News reported.  The reported F-150 Lightning production slowdown comes after CFO John Lawler said during Ford's 3rd-qtr earnings call that the company was "being judicious about our production and adjusting future capacity to better match market demand" for its electric vehicle (EV) business "given the dynamic EV environment."  "For example, we have taken out some Mustang Mach-E production, and we are also slowing down several investments, including making a decision with SK On to delay the second BlueOval SK JV battery plant in Kentucky, and we have also said we are evaluating our BlueOval Battery Park Michigan plant to determine the best path forward," he said.  "In fact, all told, we have pushed about $12 billion of EV spend, which includes capex, direct investment and expense."  The "ultimate success" of the company’s EV transition "will be driven by our Gen 2 and Gen 3 products, which will be cost-optimized and guided by the learnings of our first-generation vehicles that are currently in the market," according to Lawler.  The company, which produces combustion, electric & hybrid vehicles, forecast that it will see an adjusted EBIT of $10-10.5B for the year.  The stock fell 10¢.

Ford reportedly cutting F-150 Lightning production next year

US crude oil dropped 4% as inflation data stoked anxiety among traders that the Federal Reserve may not be ready to ease up on interest rates.  The West Texas Intermediate contract for Jan lost $2.92 (4%) to trade at $68.40 a barrel & Brent contract for Feb shed $2.97 (3.9%), to trade at 73.06 a barrel.  While US stocks shrugged off the latest inflation data, the oil markets saw cause for concern.  The consumer price index edged up 0.1% in Nov after being unchanged in Oct, while prices increased 3.1% from a year ago, according to the Labor Dept.  Traders are worried that the Fed does not have inflation under control & will have to keep the foot on the accelerator when it comes to interest rates.  Fed Chair Jerome Powell said earlier this month that it is “premature” to discuss slashing interest rates.  Powell indicated that the central bank is prepared to raise rates if necessary.  The confidence of the oil market has been shattered after a 7-week streak of losses.  Oil prices are falling as record production in the US, Canada & Brazil collide with a weakening economy in China, raising concerns among traders that the market is oversupplied.  Oil demand next year is expected to be about 1M bpd less than supply growth, according Daniel Yergin, vice chairman of S&P Global.  “As long as supply and demand dominate you’re going to have that downward pressure on price,” Yergin said.  Several OPEC members & their allies such as Russia have promised to cut supply by 2.2M barrels per day in the first qtr of 2024.  Traders, however, are skeptical that the group will deliver on those cuts.  Yergin said OPEC+ faces a choice of whether they keep cutting supply or release oil to the market to let prices slide & undercut production in nations outside the group.

U.S. crude oil falls 4% as traders worry about inflation impacting demand

Gold closed with a small loss, sticking under the $2000 mark even as the $ weakened after the US reported headline inflation eased in Nov.  Gold for Feb closed down a smidgen to settle at $1993 per ounce.  The drop comes as the US reported headline inflation declined to 3.1% annualized in Nov, down from 3.2% in Oct, while core inflation, excluding volatile food & energy, was unchanged at 4%.  Both readings matched expectations.  The Federal Reserve's policy committee has begun its 2-day meeting, which is expected to end with no change to interest rates.  Investors will be looking for a signal from the central bank on when it expects to begin lowering interest rates as inflation continues to decline nearer to the 2% target rate.  The $ was lower following the inflation data & the ICE dollar index was last seen down 0.24 points to 103.85.  Treasury yields were mixed, with the 2-year note last seen paying 4.714%, up 0.8 basis points, while the yield on the 10-year note was down 3.3 basis points to 4.204%.

Gold Closes Lower Even as the Dollar Eases Following US Inflation Data

West Texas Intermediate (WTI) crude oil fell to the lowest in nearly 6 month, falling on continuing demand concerns despite rising geopolitical risk after Iran-backed Yemeni militants attacked a tanker in the Red Sea with a cruise missile, while US inflation declined again last month.  WTI crude oil for Jan closed down $2.71 to settle at $68.61 per barrel, the lowest since Jun 27.  Feb Brent crude, the global benchmark, was last seen down $2.91 to $73.12.  The drop comes on concerns demand may be lagging supply as shipments to China, the #1 importer, slow while other developed economies weaken amid high interest rates.  In its monthly Short-Term Energy Outlook, the Energy Information Administration said it estimates global oil inventories rose by an average 0.6-M bpd in 2023, while forecasting a drop of 0.8-M bpd in the first qtr of 2024 on OPEC+ cuts & then returning to balance for the remainder of the year.  The drop also comes despite rising geopolitical risk in the Middle East after Houthi militants attacked a chemical tanker in the Red Sea, the latest in a series of attacks in the key shipping lane by the Yemeni group that include attempting to strike a US destroyer with armed drones.

WTI Crude Oil Falls as Demand Worries Continue, Inflation Eases

The stock market has been extending its winning streak in Dec.  So far Dow is up 636 in early Dec.  However, market breadth is very weak which means a lot of stocks are not participating in the mini rally.  Oil continues to slump on demand worries while Houthi militants are attacking shipping in the Red Sea.  That needs to be watched!

Dow Jones Industrials