Dow fell 317 with heavy late day selling, decliners over advancers 3-1 & NAZ lost 345. The MLP index slid back 2+ to the 264s & the REIT index was down 3+ to the 375s. Junk bond funds remained higher & Treasuries continued to be in demand which lowered yields. Oil was off 2+ to the 75s following recent strength & gold was up 8 to 2059 but below early highs (more on both below).
AMJ (Alerian MLP Index tracking fund)
The Federal Reserve sent a tepid signal that it is done raising interest rates but made it clear that it is not ready to start cutting. In a substantially changed statement that concluded the central bank's 2-day, the Federal Open Market Committee removed language that had indicated a willingness to keep raising interest rates until inflation had been brought under control & was on its way toward the Fed's 2% inflation goal. However, it also said there are no plans yet to cut rates with inflation still running above the central bank's 2% goal. The statement further provided limited guidance that it was done hiking, only outlining factors that will go into “adjustments” to policy. “The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent,” the statement said. While the statement did condense the factors that policymakers would consider when assessing policy, it did not explicitly rule out more increases. One notable change was removing as consideration the lagged effects of monetary policy. Officials largely believe it takes at least 12-18 months for adjustments to take effect. “In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” the statement added. That language replaced a bevy of factors including “the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.“ Those changes were part of an overhaul in which the Fed seeks to chart a course ahead as inflation data points move lower while economic growth has been resilient. The statement indicated that economic growth has been “solid” & noted the progress made on inflation. “The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance,” the FOMC missive said. “The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks.“ Gone from the statement was a key clause that had referenced “the extent of any additional policy firming” that might come. Some Fed watchers had been looking for language to emphasize that additional rate hikes were unlikely, but the statement left the question at least somewhat open.
Fed holds rates steady, indicates it is not ready to start cutting
Boeing (BA), a Dow stock, narrowed its losses at the end of last year, but its CEO said now is
“not the time” for financial targets as the manufacturer grapples with
the fallout from a fuselage panel that blew out midflight on one of its new 737 Max 9s earlier this month. CEO Dave Calhoun, who took the helm
of the aircraft giant 4 years ago in the wake of 2 deadly crashes
of the Max, is again under pressure to clean up the company’s reputation
with airline customers, regulators & the public after the Jan. 5
accident in which a panel blew out on Alaska Aitlines (ALK) Flight 1282 as the plane climbed out of Portland, Oregon. Calhoun
commended Alaska for grounding Max 9 planes after the accident. The
Federal Aviation Administration later grounded the fleet. “Alaska
airlines did exactly what companies like Boeing would hope that they do
at moment like that and that is why the airline industry is as safe as
it is,” Calhoun said. “We caused the
problem. And we understand that.” The accident was the most serious in a series of apparent
production flaws, which have slowed down deliveries of new planes &
angered some of the company's biggest airline customers in the process. BA reaffirmed its 2025 & 2026 financial targets that it laid
out: reaching about $10B of free cash flow & $100B in revenue by as early as next year. “We’re
still confident in the goals we laid out for ’25, ’26 although it may
take longer in that window than originally anticipate and we won’t rush
the system,” CFO Brian West said. BA delivered 528 airplanes to customers last
year, up from 480 in 2022. That includes the Max, 787 Dreamliners &
others. BA in 2022 said it was targeting annual deliveries of about
800 planes next year or in 2026. BA posted a net loss of $30M (4¢ a share) in the 4th
qtr, narrowing from a $663M loss, $1.06 a share, a year
earlier. Adjusting for one-time items, BA reported a net loss of 47¢ per share. Its free cash flow of $2.95B in the
qtr topped expectations. Revenue grew 10% year over year
to $22B. The stock rose 10.59 (5%).
Walmart
(WMT), a Dow stock & Dividend Aristocrat, sees room to get even bigger. The
company plans to build or convert more than 150 large-format stores
over the next 5 years. Some of the locations will
be expanded from a smaller location into a Supercenter with a full range
of groceries & merchandise, but the majority will be new stores a company spokesman said. WMT
declined to say how much the new stores will cost & where they will
be located. The company already has more than 4600 stores across the
country & nearly 600 Sam's Club warehouses. Sam's Club also is in
expansion mode, with plans to open more than 30 new stores in the US. The
big-box retailer is the largest private employer in the US with 1.6M employees. About 90% of the US population already lives
with 10 miles of a WMT store. With the expansion, it is
signaling that it sees its brick-&-mortar locations as a key part of
the future, despite heightened competition with online & its own push for growth of online sales & its 3rd-party marketplace. The stock fell 37¢.
Walmart plans to add more than 150 large-format stores across the U.S.
Gold closed at a 4-week high as the $ weakened ahead of an interest-rate decision from the Federal Reserve's policy committee following the end of its meeting today. Gold for Ap closed up $16 to $2067 per ounce, the highest since Jan 2. The rise comes ahead of the rate decision from the Federal Open Market Committee today. While the committee is expected to leave rates unchanged again, the market's focus will be on any indication on the timing of interest-rate cuts from the group. Until the first cut is delivered, the market may at times run ahead of itself, in the process building up rate cut expectations to levels that leave prices vulnerable to a correction. The $ moved lower ahead of the decision, with the ICE dollar index last seen down 0.16 points to 103.24. Treasury yields also weakened, as the 2-year note was last seen paying 4.266%, down 6.6 basis points. while the yield on the 10-year note was down 4.0 basis points to 3.994%.
Gold Trading at a Four-Week High as the Dollar and Yields Slip Ahead Of Fed Interest-Rate Decision
West Texas Intermediate (WTI) crude oil closed with a loss
on disappointing economic data from China, the world's #1 importer & an unexpected rise in US inventories. WTI crude for Mar closed down $1.97 to settle at $75.85
per barrel, while Mar Brent crude, the global benchmark, was last seen
down $1.14 to $81.73. China today reported manufacturing activity fell for a 4th-straight month, heightening concerns over the
health of its economy. The report follows on a court decision earlier
this week to order the liquidation of Evergrande, the country's largest
real-estate developer, after it failed to restructure
more than $300B of debt. The country's economy continues to
struggle amid a weak real-estate sector despite stimulus measures from
its gov & central bank. In
its weekly survey, the Energy Information Administration said US oil
Inventories rose by 1.2M barrels last week, countering a day
prior report from the American Petroleum Institute which said
inventories fell by 2.5M barrels. Both distillate & gasoline
inventories also rose, while US oil production rebounded to 13M
barrels per day, up 700K bpd a week earlier due to a bitter cold snap
that froze equipment. Continuing
violence in the Middle East & a deadly weekend drone attack on a US
military base in Jordan are offering support to prices, as is a bullish
outlook on global growth issued yesterday by the IMF.
WTI Crude Oil Falls on Weak Economic Data From China and a Rise in US Inventories
Powell signaled the Fed may not cut rates at the Mar meeting. That did not warm the hearts of investors, accounting for late day selling. After a sluggish start this year, Dow finished with a gain of 461 for the month. That's not bad following the spectacular rise in the prior 2 months.
Dow Jones Industrials
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