Dow went up 60 (below early highs), advancers over decliners about 5-4 & NAZ slid back 55. The MLP index added 2+ to the 265s & the REIT index slipped back 1+ to 380. Junk bond funds fluctuated & Treasuries had limited selling, raising yields modestly. Oil was fractionally higher to 78 & gold dipped back 1 to 2016 (more on both below).
AMJ (Alerian MLP Index tracking fund)
Intel (INTC), a Dow stock, issued a forecast for the current qtr that came in far short of estimates. In
its earnings report, INTC beat profit & revenue,
but the chipmaker said it expected adjusted EPS of 13¢ this qtr on $12.2-13.2B in sales. Analysts were expecting EPS of 33¢ on $14.1B
of revenue. The revenue guidance for the first qtr was below every analyst's estimate. While some parts of the semiconductor industry are booming because of strong demand for artificial intelligence chips, other server parts, like the central processing units (CPUs) INTC makes, don't have the same kind of momentum. The estimate for the 2nd, 3rd & 4th qtrs in 2024 all fell. CEO
Patrick Gelsinger said that first-qtr
sales performance would take a hit because of weakness at Mobileye (MBLY), where INTC owns a majority stake, as well as in the company's programmable chip unit. He
also said the company's core businesses of PC & server chips remained
“healthy” & would report sales at the low end of the seasonal range. INTC stock dropped 5.90 (12%).
Treasury Secretary Janet Yellen praised the positive economic growth numbers as a benefit for the middle class. “Though some forecasters thought a recession last year was inevitable, President [Joe] Biden and I did not,” Yellen said. “Instead of contracting, the economy has continued to grow, driven by American workers and President Biden’s economic strategy.” The report released by the Commerce Dept showed gross domestic product grew by a seasonally adjusted annualized rate of 3.3% for the last few months of 2023; more rapidly than the estimate of 2%. Economic growth for all of 2023 also beat the outlook at the start of the year. The indicators are evidence of “the fairest recovery on record,” said Yellen, adding that the US has “avoided financial pain for most middle-class American families” due to a strong post-pandemic recovery with faster relief from inflation than comparable countries. Consumer spending, measured by core prices for personal consumption expenditures, also rose 2% in Q4 while the headline rate was 1.7%. The Federal Reserve uses core prices to measure longer-term inflation. The rate of inflation reached record highs in 2022. Yellen credited steps taken by the Biden administration to curb supply chain scarcities that led to price increases, including the release of 180M barrels of oil from the Strategic Petroleum Reserve & a price cap on Russian oil as the Russia-Ukraine War escalated in 2022. “Though we’re focused on making historic investments in transitioning towards clean energy in the medium-and long-term, record domestic oil and natural gas production addressed our immediate needs,” Yellen said. “And energy prices have declined, with gas now down around $1.90 per gallon from its high in June 2022.” AAA quotes the average national price for a gallon of gas at $3.10.
Treasury chief Yellen touts GDP numbers as a boon to middle class
Freight going thru the Suez Canal has plunged by nearly ½ since Iran-backed Houthi militants began attacking vessels in the Red Sea as a show of support for Palestinians in the Israel-Hamas war. UNCTAD, the United Nations Conference on Trade & Development, which supports developing countries in global trade, says that 39% fewer ships than at the start of Dec transited the canal, leading to a 45% decline in freight tonnage. Container shipments thru the canal tumbled 82% in the week to Jan 19 from early Dec, while for liquified natural gas (LNG), the decline was even greater. The drop-off for dry bulk was smaller & crude oil tanker traffic was very slightly higher. UNCTAD has warned of risks of higher inflation, uncertainty about food security & increased greenhouse gas emissions due to the sharp decline. "We are very concerned," Jan Hoffmann, UNCTAD's head of trade logistics said yesterday. "We are seeing delays, higher costs, higher greenhouse gas emissions." The Suez Canal is a critical shipping lane, given that it offers vessels a direct route between the North Atlantic & northern Indian oceans via the Mediterranean Sea & the Red Sea. About 15% of world shipping traffic, including 30% of global container trade, passes thru the Suez Canal. But to avoid being attacked or having their cargo stolen, many ships are instead sailing around the Cape of Good Hope, which is a much longer way around the continent of Africa. Container shipping giant Maersk suspended use of the Red Sea & Suez Canal at the start of the year after one of its vessels was attacked by the Houthi militants & it warned of "significant" consequences for global growth as a result of the disruptions. The US & the UK have responded with strikes against the Houthi, which the US recently relisted as a terrorist group. The US & the UK yesterday announced sanctions leveled at 4 senior Houthi officials in Yemen. Hoffmann said there were now 3 key global trade routes disrupted, also including flows of grain & oils since Russia's invasion of Ukraine & the Panama Canal, where low water levels from drought meant shipping last month was down 36% year-on-year & 62% from 2 years ago.
Freight through Suez Canal sinks 45% amid Houthi attacks
Gold prices held steady as investors' attention shifted to the Federal Reserve's policy meeting due next week for more insights into the interest rate outlook. Spot gold was little changed at $2016 per ounce, down 0.6% this week. Gold futures settled mostly flat at $2017. US prices rose moderately in Dec, keeping the annual increase in inflation below 3% for a 3rd straight month, which could allow the Fed to start cutting interest rates this year. Another set of data yesterday showed the US economy grew faster than projected in the 4th qtr.
Gold holds steady with spotlight on Fed verdict
Dow Jones Industrials
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