Markets wobble. looking for direction

Dow pulled back 134 after yesterday's rise. decliners modestly ahead of advancers & NAZ was off 6.  The MLP index slid back fractionally to 258 after yesterday's advance & the REIT index fell 3+ to the 381s on higher interest rates.  Junk bond funds fluctuated & Treasuries were sold, raising yields.  Oil was up chump change to 75 (more below) & gold gained 5 to 2027.

AMJ (Alerian MLP Index tracking fund)

Procter & Gamble (PG), a Dow stock & Dividend Aristocrat, reported mixed quarterly earnings & revenue for its fiscal 2nd qtr of 2024 as price hikes helped boost revenue 3%.  The company also narrowed its outlook for full-year adjusted EPS to $6.37-6.43, although its forecast for unadjusted earnings fell due to its plans to write down Gillette & restructure certain markets.  Excluding the impacts of restructuring & intangible impairment, EPS was $1.84.  Net sales rose 3% to $21.4B.  Organic revenue, which strips out the impact of acquisitions, divestitures & foreign exchange, climbed 4% in the qtr.  After roughly 2 years of higher prices on their Charmin toilet paper & Downy fabric softener, consumers have pulled back on their purchases of PG products.  Volume was flat overall for the qtr & only its grooming business reported volume growth.  The metric excludes the impact of currency & pricing changes to reflect demand.  Demand has improved in North America & Western Europe.  However, other markets saw weaker demand.  For example, Greater China saw its organic sales shrink 15%.  Execs cited further declines in consumer confidence as one reason for the decline in its 2nd-largest market.  For fiscal 2024, the company now anticipates core EPS growth of 8-9%, narrowing its prior range of 6% to 9%.  However, it now expects unadjusted EPS to be flat to down 1%, significantly lower than a prior forecast of 6-9% growth. PG reiterated its forecast for fiscal 2024 sales growth of 2-4%.  The stock rose 6.48 (4%).

Procter & Gamble price hikes boost revenue while Gillette write-down weighs on earnings

Global shipping rates are skyrocketing as the Iran-backed Houthi militants in Yemen step up their attacks on commercial shipping vessels in the Red Sea, a critical waterway for world trade.  New data from Freightos Terminal shows that rates for shipping goods from Asia to Northern Europe surged 461% compared to mid-Oct, before the diversion of vessels in the region began.  Rates on the route from Asia to the North American East Coast & to the North American West Coast have also skyrocketed, climbing a respective 130% & 97% since the end of Oct.  Carriers have also announced surcharges that are $500 to as much as $2700 per container.  About 15% of world shipping traffic, including 30% of global container trade, passes thru the Suez Canal to & from the Red Sea.  But to avoid being attacked or having their cargo stolen, many ships are instead sailing around the Cape of Good Hope, which is the long way around Africa.  The Houthi attacks on commercial ships have not stopped even after the US & the UK launched strikes against Houthi assets in Yemen.  The group has said that the attacks on shipping are a response to Israel's military campaign against Hamas in the Gaza Strip.  "This has added significant cost, and also significant delays, to shipments that are coming from the Middle East, to and from Europe and other regions in that area that rely on the Suez Canal a great deal," Robert Handfield, a professor of operations & supply chain management at North Carolina State University, said.  UBS has estimated that routing ships around Africa, which increases the journey length by about 2½ weeks, reduces an Asia-Europe trip's effective capacity by about 25%.  Drought-like conditions in the Panama Canal are compounding the pain from the attacks in the Red Sea.  The Panama Canal has restricted the number of ships going thru it due to extremely low water levels, further backing up global shipments, Handfield said.

Global shipping rates skyrocket as Red Sea crisis deepens

Oil prices were largely flat as investors monitored reports that Israel has proposed a 2-month pause of fighting in Gaza, which would mark significant de-escalation in the war.  The West Texas Intermediate (WTI) contract for Mar lost 15¢ to $74.61 a barrel & Brent  contract for Mar lost 26¢ to $79.80 a barrel.  The 2-month pause in fighting would come in exchange for Hamas releasing the remaining hostages, an Israeli gov official said.  It would be the longest pause since the war began in Oct.  But Hamas has rejected the proposal, a senior Egyptian official said.  The militant group is demanding that Israel end its offensive & withdraw from Gaza, an Egyptian official added.  In a bullish sign for the market, China is considering a $278B rescue package to boost its struggling stock market.  A rescue package in China would raise oil demand expectations, said Phil Flynn, an analyst with the Price Futures Group.  Traders have worried for months that a slowing economy in China would bring down crude demand.  Oil prices rallied about 2% yesterday after a suspected Ukrainian drone strike against a major Russian fuel terminal on the Baltic Sea highlighted the geopolitical threats to crude supplies.  “The attack by Ukrainian forces on the Russian company Novatek in the Baltic is a timely reminder that a bigger, more influential war is still waging on,” John Evans with PVM Oil Associates wrote.  The US & Britain yesterday also launched another round of airstrikes against Houthi militants in Yemen.  The militants have repeatedly attacked commercial vessels in the Red Sea over the past 2 months, forcing container ships & oil tankers to pause transit thru the key waterway.  On the supply side, the signals were mixed with cold weather hitting output in the US as Libya restarts production in a major oilfield.  Oil output in North Dakota, the 3rd largest crude producing state in the US, was down 400K barrels per day as of Fri due to a blast of Arctic cold this month, according to state authorities.  Potential threats to crude supplies have been tempered by Libya restarting production at the Sharara oilfield, which was shut down for about 2 weeks due to protests.  The oilfield has the capacity to produce 300K barrels per day.

Oil prices fall as investors monitor supply threats, Libya production restart

Stocks meanders while traders are waiting for more earnings reports.  A lot is going on in the oil market (see above), but WTI is still stuck in a sideways trend in the low to mid 70s.

Dow Jones Industrials