Markets advance after a majority of earnings reports are in

Dow went up 156 (eking out a new record), advancers modestly ahead of decliners & NAZ gained 147.  The MLP index stayed in the 258s & the REIT index fell 1 the 373s.  Junk bond funds were higher along with stocks & Treasuries had limited buying which brought slightly higher yields.  Oil continued higher in the 73s & gold was flattish (more on both below).

AMJ (Alerian MLP Index tracking fund)

Federal Reserve Governor Adriana Kugler said inflation is showing solid signs of slowing down, but she is not ready yet to start lowering interest rates.  In her first major policy address since being confirmed to the Board of Governors in Sep 2023, Kugler said 3 factors are converging to ease inflation pressures: moderating wage growth, changes in how often companies are raising prices & survey indicators that the pace of price increases is expected to continue to fall.  With all that in mind, however, Kugler wants more confidence that it's time to cut rates.  “So I am pleased with the disinflationary progress thus far and expect it to continue. I must emphasize, however, that the [Federal Open Market Committee’s] job is not done yet,” she said.  “At some point, the continued cooling of inflation and labor markets may make it appropriate to reduce the target range for the federal funds rate,” Kugler added.  “On the other hand, if progress on disinflation stalls, it may be appropriate to hold the target range steady at its current level for longer to ensure continued progress on our dual mandate.”  The policymaker added that she expects consumer spending to grow & core services inflation excluding housing to pull back.  Additionally, she sees indications that firms which raised their prices frequently during the big inflation run-up of 2021-22 are doing so less now.  Should inflation continue to recede toward the Fed's 2% goal, that likely will lead to cuts later this year.  However, like other Fed officials, Kugler did not commit to a timetable, despite market pricing for aggressive reductions ahead.  “It all depends,” Kluger said on the pace of rate cuts once the Fed does move.  “I don’t think we can call it out now.”  She did add that “every meeting is live,” meaning the committee hasn't ruled out moving at any point.  As a governor is a permanent FOMC voter.  “I am pleased by the progress on inflation, and optimistic it will continue, but I will be watching the economic data closely to verify the continuation of this progress,” Kugler continued.  Fed officials generally have expressed broad satisfaction with the balance of growth & inflation as the central bank seeks to steer the economy back into stable inflation without halting growth.  “That drumbeat you hear is the soft landing,” Richmond Fed Pres Thomas Barkin said.  “All of these metrics are very strong, and inflation is coming down. So I’m very supportive of being patient to get to where we need to get,” he added.  “I see at this point, the trade off, which is coming into better balance, is still being in favor of continuing to work on inflation.”

Fed Governor Kugler backs caution on rates

Housing demand ground to a halt last week as mortgage rates inched closer to 7%, squeezing many would-be buyers out of the market ahead of the pivotal spring season.  The Mortgage Bankers Association's (MBA) index of >mortgage applications rose 3.7% last week, compared with the previous week, according to new data.  But the increase was entirely due to current homebuyers who refinanced their mortgages.  Applications for a mortgage to purchase a home fell 1% compared with the previous week as high mortgage rates continued to limit housing supply; application volume remains down 19% compared with the same time last year.  "Purchase activity has been strong to start 2024 compared to the final quarter of 2023," said Joel Kan, an MBA economist.  "However, activity is still weaker than a year ago because of low housing supply."  The data also showed that the average rate on the popular 30-year loan rose to 6.8% from 6.78% the previous week.  However, that does not take into consideration the sharp jump in mortgage rates that took place after the Jan jobs report came in much stronger than expected.  Rates on the 30-year loan surged 29 basis points on Fri, the largest one-day jump in more than a year, & continued to trend higher on Mon, crossing 7% for the first time since Dec, according to Mortgage News Daily.  Despite higher rates, demand for refinancing moved higher last week, rising 12% from the previous week.  Compared with the same time last year, refinance applications are up 1%.  The interest rate-sensitive housing market has cooled rapidly in the wake of the Federal Reserve's aggressive tightening campaign.  Policymakers lifted the benchmark federal funds rate 11 times over the course of 16 meetings in an attempt to crush stubborn inflation & slow the economy.

Weekly mortgage demand from homebuyers is flattening as interest rates rise

Uber (UBER) reported 4th-qtr results that beat estimates on the top & bottom lines.  Uber reported EPS of 66¢, compared with 29¢ in the same qtr last year.  Uber's net income includes a $1B net tail wind thanks to “unrealized gains” from revaluations of its equity investments.  Revenue for the qtr was up 15% from the same qtr last year & gross bookings came in at $37.6B, up 22% year over year.  CEO Dara Khosrowshahi said 2023 marked a year of “sustainable, profitable growth for Uber.”  He said the continued shift in consumer spending from retail to services has been a boon for the company.  “We continue to see consumer strength, and especially consumer strength as it relates to services,” Khosrowshahi added.  “People are going out to dinner, they’re going out to concerts, sports events, etc. And when people go out and they spend money, or when they want anything delivered to their home, Uber benefits.”  Reported adjusted EBITDA was $1.28B, up 93% year over year, which is slightly above the $1.23B expected & adjusted EBITDA also came in above the company’s guidance of $1.18-1.24B.  For the first qtr of 2024, Uber expects to report gross bookings of $37-38.5B, compared with estimates of $37.4B.  Uber anticipates adjusted EBITDA of $1.26-1.34B, compared with the $1.26B expected by analysts.  The number of monthly active platform consumers reached 150M in its 4th qtr, up 15% year over year from 131M.  There were 2.6B trips completed on the platform during the period, up 24% year over year.  The stock went up 20¢.

Uber beats estimates as revenue and bookings see double-digit growth

Gold closed with a small gain as the $ edged down while treasury yields were mixed.  Gold for Apr inched higher at $2051 per ounce.  After rising to a record in late Dec, the outlook for gold prices is uncertain, as much hinges on the timing of US interest-rate cuts & their effect on the value of the $ & Treasuries.  Gold prices are likely to remain stuck until there is a better understanding about the timing, pace & depth of future US rate cuts.  During the past week, the short-term rates market has gone from pricing in more than 6 25 basis points US rate cuts this year to less than 5, while bets on the first cut being delivered at the Mar 20 meeting has slumped to less than 20%.  All developments that highlight just how volatile markets can be in the runup to a change in monetary policy.  The ICE dollar index was last seen down 0.12 points to 104.1.  Treasury yields were higher, with the 2-year note last seen up 0.8 basis points to 4.42%, while the US 10-year note was paying 4.114%, up 1.1 basis points.

Gold Closes with a Small Gain as the Dollar Drops and Treasury Yields Rise

West Texas Intermediate (WTI) crude oil rose for a 3rd-straight session even after a report showed US inventories rose more than expected last week.  WTI crude for Mar closed up 55¢ to settle at $73.86 per barrel, while Apr Brent crude, the global benchmark, was last seen up 36¢ to $78.95.  In its weekly survey, the Energy Information Administration reported US oil inventories rose by 5.5M barrels last week, ahead of the consensus estimate for a 1.9M barrel increase. Gasoline & distillate inventories fell.  The report was the 2nd in as many days from the EIA, after yesterday 's releasing its influential Short-Term Energy Outlook that said US oil production is likely to fall off a record 13.3M barrels per day & not return to fresh record levels until 2025, while saying inventories are declining in the current qtr due to OPEC+ cuts.  Production is expected to return to almost 13.3M b/d in Feb but then decrease slightly thru the middle of 2024 & should not exceed the Dec 2023 record until Feb 2025.

WTI Crude Oil Rises Again Despite Larger Than Expected Rise in US Inventories

Dow had an advance in the first hour of trading held that level for the rest of the day.  The advance decline ratio continues to be low.  Meanwhile, gold is holding near its record highs & oil continues sideways in the 70-75 range.  For the time being investors are accepting thoughts about slower cuts in rates to help bring lower inflation.

Dow Jones Industrials