Markets rise led by tech shares on Nasdaq

Dow finished up 201 with a 250 rally in the last 2 hours,  advancers ahead of decliners 5-4 & NAZ jumped 200.  The MLP index slid back 1 to the 253s & the REIT index was off 2+ to the 379s.  Junk bond funds hardly budged & Treasuries continued to be sold, raising yields.  Oil gained 1+ to 74 & gold was up 16 to 2022 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Atlanta Federal Reserve Pres Raphael Bostic expects policymakers to start cutting rates in the 3rd qtr of this year, saying that inflation is well on its way back to the central bank's goal.  Bostic, a voting member this year on the rate-setting Federal Open Market Committee (FOMC), asserted that the goal ahead is to calibrate policy to be not so restrictive as to choke off growth while still acting as a bulwark against persistently elevated prices.  However, he said a “golden path” scenario of tamping down inflation while promoting solid growth & healthy employment is getting closer than many Fed officials had expected.  “Because I’m data dependent, I have incorporated the unexpected progress on inflation and economic activity into my outlook, and thus moved up my projected time to begin normalizing the federal funds rate to the third quarter of this year from the fourth quarter,” Bostic said.  While the remarks help illuminate a timeline for rate cuts, they also serve as a reminder that Fed officials & market participants have different expectations about policy easing.  Current pricing in the fed funds futures market points to the first cut coming as soon as Mar, according to the CME Group's FedWatch measure.  The implied probability for a qtr percentage point reduction has decreased in recent days but still stood around 57%.  Pricing further indicates a total of 6 cuts this year, or one at every FOMC meeting but one from Mar forward.  Bostic said he's not dead set against cutting earlier than the 3rd qtr, implying a move in Jul at the earliest, but said the bar will be high.  “If we continue to see a further accumulation of downside surprises in the data, it’s possible for me to get comfortable enough to advocate normalization sooner than the third quarter,” he said.  “But the evidence would need to be convincing.”  A number of factors could change the calculus, such as geopolitical conflicts, the ongoing budget battle in DC & looming presidential election, to name a few that Bostic cited.  Consequently, he advocated caution & said his approach will be “grateful and vigilant.”  “In such an unpredictable environment, it would be unwise to lock in an emphatic approach to monetary policy,” Bostic continued.  “That is why I believe we should allow events to continue to unfold before beginning the process of normalizing policy.”  Some of the data points Bostic said he will be watching include overall economic growth, inflation readings such as the Commerce Dept's personal consumption expenditures price index & data on job growth & losses.  The Labor Dept reported today that initial jobless claims hit their lowest level since Sep 2022, a sign that the labor market remains tight.

Fed’s Raphael Bostic expects rate cuts to happen in the third quarter

Mortgage rates dropped this week to their lowest level in 8 months in a welcome occurrence for potential homebuyers who have watched rates climb for the past few weeks.  Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate for the benchmark 30-year fixed mortgage decreased to 6.60% this week, a decline from 6.62% last week but still up from 6.33% a year ago.  The rate on the 15-year fixed mortgage edged lower for a 3rd straight reading, averaging 5.76% after coming in last week at 5.87%.  One year ago, the rate on the 15-year fixed note averaged 5.28%.  Sam Khater, Freddie Mac's chief economist, said these are the lowest rates since May of last year.  "This is an encouraging development for the housing market and in particular first-time homebuyers who are sensitive to changes in housing affordability," Khater said.  "However, as purchase demand continues to thaw, it will put more pressure on already depleted inventory for sale."  A dearth of existing homes for sale is keeping prices elevated, but a sharp decline in mortgage rates since the fall has spurred an uptick in demand, particularly for new homes.  However, the Commerce Dept reported there was a substantial drop in single-family home construction in Dec, a surprise following 4 months of increases in housing starts.

Mortgage rates fall to lowest level since May 2023

Execs are more concerned about employee productivity than about getting them back to the office, according to new research from Atlassian.  In Sep, the Australian software company asked 100 Fortune 500 & 100 Fortune 1000 execs what their biggest organizational challenge is & 43% said low productivity.  Only a 3rd of execs with an in-office mandate said they thought their in-office policies have had any impact on productivity.  Instead, 76% of the Fortune 500 execs surveyed said they are more worried about how their teams are working than where they work.  It's not the first time execs have said they're worried that workers are getting less done & evidence suggests their fears aren't unfounded.  At the start of the Covid-19 pandemic, productivity soared to levels not seen in decades.  But that surge was short-lived.  In H1-2022, productivity plunged by the sharpest rate on record going back to 1947 & remained low until this past summer, when worker productivity grew 5.2%, the fastest pace of growth since 2020, according to the Bureau of Labor Statistics.  Although productivity is improving, bosses are still struggling to trust that their employees are working without constant in-office supervision, Atlassian's co-founder & co-CEO Scott Farquhar said.  “People are still trying to adapt to remote work and managers, in particular, are still wrestling with that loss of control, of having someone sitting right there in front of them,” he adds.  It's hard to assign blame for lowered output and morale.  Some CEOs have pointed fingers at remote work, arguing that clocking in from home has made it easier for employees to extend less effort, but research has failed to draw definitive conclusions about remote worker productivity.  Economists & human resource leaders have attributed the decline in productivity to everything from sluggish economic activity to higher job turnover.  Gallup reports that employee disengagement costs the world $8.8T in lost productivity, equal to 9% of global GDP.  Plus, workers are historically stressed & unhappy at their jobs, leading to more burnout.

The No. 1 challenge Fortune 500 execs say they’re facing with employees right now

Gold futures rose early as treasury yields were mixed while the $ rose as another economic report showed the US economy continues to run hot.  Gold for Feb closed up $15 to settle at $2021 per ounce.  The US Labor Dept said initial jobless claims fell to 187K last week, the lowest since Sep 2022, down from 20K a week earlier & under the consensus expectation for 208K claims.  The data sent the $ higher, with the ICE dollar index last seen up 0.08 points to 103.49.  Treasury yields were mixed.  The 2-year note was last seen paying 4.342%, down 2.1 basis points, while the yield on the 10-year note was up 3.1 basis points to 4.139%.

Gold Moves Higher Despite a Rising Dollar as US Jobless Claims Drop to a 16-Month Low

West Texas Intermediate (WTI) crude oil closed with a gain as inventories in the US fell more than expected, even as the Intl Energy Agency cut its forecast for 2024 oil demand growth& a report said US oil inventories rose last week.  WTI crude oil for Feb closed up $1.52 to settle at $74.08 per barrel, while Mar crude, the global benchmark, closed up $1.22 to $79.10 per barrel.  In its weekly survey, the Energy Information Administration reported US oil inventories fell by 2.49M barrels last week, well under expectations for a 0.31M barrel drop, according to Investing.com.  The Intl Energy Agency slashed its 2024 demand-growth forecast to 1.2M barrels per day from its prior 2.3M bpd target, sharply lower than demand growth of 3.2M bpd in the 2nd qtr of 2023.  In its influential monthly Oil Market Report, the agency said the weaker demand forecast comes on slowing economies & higher efficiency standards & an expanding electric-vehicle fleet.  The forecast is sharply lower than OPEC's expectations for 2.2M barrels per day of new demand this year, a forecast it repeated on yesterday but has been widely dismissed.

WTI Crude Oil Closes Higher Following a Drop in US Inventories

Tech stocks were strong today which gave NAZ its big advance.  The Dow gain was largely attributable to Apple (AAPL) & Boeing (BA).  Otherwise the fairly even numbers for the advancers & gainers gives a better picture of today's trading.  The stock market is still struggling following the surge in late 2023.  There is nervousness about the path for rate cuts this year & the ongoing tensions in the MedEast are not helping.

Dow Jones Industrials