Markets edge higher ahead of tomorrow's CPI report

Dow went up 125, advancers over decliners better than 3-1 & NAZ slid back 48.  The MLP index rose 3+ to the 262s & the REIT index was off fractionally to the 377s.  Junk bond funds remained slightly higher & Treasuries had minimal buying, reducing yields.  Oil remained flattish in the high 76s & gold was off 5 to 2033 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Just as inflation eases & more economists bet on a soft landing for the US economy, a new risk is emerging, a policy push & pull.  The divide between fiscal & monetary policy is increasingly worrying America's most noted economists.  "Panelists are more optimistic about the outlook for the domestic economy," added National Association of Business Economics (NABE) Policy Survey Chair Sam Khater, chief economist for Freddie Mac said, "but they have increasing concerns on the balance of risks around monetary policy that is ‘too restrictive’ versus a fiscal policy that is ‘too stimulative’" the group noted in its Feb survey.  57% believe current fiscal policy is "too stimulative," up from 54% in Aug & has been steadily rising.  Economists see reducing the deficit & debt as the 2 most important goals for promoting "medium-to-long-term growth."  The national debt, which measures what the US owes its creditors, increased to $34,228,699,143,453 as of Fri, published by the Treasury Dept.  By comparison, just 4 decades ago, the national debt hovered around $907B.  Additionally, last week the nonpartisan Congressional Budget Office (CBO) predicted the debt held by the public will soon surpass the size of the US economy & exceed a historical record in 4 years.  Spending will likely be driven by Social Security & Medicare as well as interest payments.  Debt held by the public, a key metric for tracking the size of the national debt used by economists, totaled $26.2T in 2023 & is set to rise to $27.9T in 2024.  Over the next decade, it is projected to rise to $48.3T in 2034, according to its budget & economic outlook for the 2024-2034 period.  As for monetary policy, the majority of NABE economists feel policy is "about right" but shifts are underway with those who feel its "too restrictive" rising by 21%, up from 14% in both Mar & Aug 2023.  Policymakers have indicated rate cuts are on the table for 2024, with expectations for the first rate cut taking place in Mar.  However, at the Federal Reserve's Jan meeting, Chair Jerome Powell dialed that back.  "I would tell you that I don't think it's likely that the committee will reach a level of confidence by the time of the March meeting to identify March as the time to do that," he said during the Q&A session.  The Fed left rates unchanged for a 4th time last month, leaving rates at 5.25%-5.50%.  On a positive note, the majority do not believe the US will enter a recession this year, but there are other risks on the horizon.  "As for the most likely geopolitical risks, NABE respondents express the greatest concerns about the Middle East conflict driving up oil prices or disrupting supply chains, a stagnant Chinese economy, and instability around U.S. elections" said Ellen Zentner, NABE pres.

Monetary, fiscal policy divide pose risks: NABE

ARM (ARM) rose again, extending last week's rally as investors continue to applaud the chipmaker’s better-than-expected 3rd-qtr earnings & its position in the artificial intelligence boom.  Arm is now up over 90% since it reported quarterly financials on Feb 8, though without any clear catalyst for today's move.  The stock is up 142% since its IPO in Sep & is now worth about $148B.  Last week, ARM said it could charge twice as much for its latest instruction set, which accounts for 15% of the company's royalties, suggesting it can expand its margin & make more money off new chips.  It also said it was breaking into new markets, such as cloud servers & automotive, due to AI demand.  Its royalty strength combined with ARM's optimistic growth forecast has made the company the latest AI darling among investors, despite a higher earnings multiple than Nvidia (NVDA) or AMD (AMD).  However, its value may become clearer next month when a 180-day lockup expires.  SoftBank (SFBQF) still owns 90% of the outstanding stock, meaning its stake in ARM has increased more than $61B since the company's report last week & is now worth upward of $131B.  ARM stock surged 33.76 (29%).

Arm shares jump 25% as post-earnings rally extends to second week

In the 24 years since JetBlue Airways's (JBLU) first flight, the New York-based airline has pushed the envelope for a carrier of its size.  Now, with some veteran exec hires & cost-cutting, it's trying to get back to basics.  JBLU was a pioneer in seat-back entertainment, free Wi-Fi, good snacks & a business-class cabin with lie-flat seats that debuted at lower prices than rivals.  More recently, it's ventured across the Atlantic with flights to London, Paris, Amsterdam & Dublin.  While JetBlue has never lacked big ideas, it has come up short on profits, cost control & reliability.  Those challenges will be top of mind for incoming CEO Joanna Geraghty when she takes the helm today, succeeding Robin Hayes.  Geraghty, 51, has been at JBLU for nearly 2 decades, most recently as pres & COO.  By naming her CEO, the company is promoting an insider who knows the complexities of running an airline with quirks like New York's congested airspace.  She's the first woman to lead a US passenger airline.  The stock rose 13¢.

JetBlue resets with new CEO, industry veterans to run on time, and profitably

Gold closed lower even as the $ & treasury yields weakened ahead of US Jan inflation data coming tomorrow.  Gold for Apr closed down $5 to $2033 per ounce.  The drop comes ahead of tomorrow's release of the US Jan consumer price index, which is expected to show inflation slowed to 2.9% annualized from 3.4% in Dec.  Excluding volatile energy & food prices, inflation is expected to slow to 3.7% from 3.9%.  Gold remains stuck in a tight trading range with tomorrow's US inflation report being the next potential directional catalyst for gold.  The $ weakened in of the key report, giving up early gains, with the ICE dollar index last seen down 0.07 points to 104.05.  Treasury yields eased, with the 2-year note last seen paying 4.463%, down 2.1 basis points & the yield on the 10-year note down 1.9 basis points to 4.148%.

Gold Closes Lower Ahead of Key US Inflation Data

West Texas Intermediate (WTI) crude oil closed with a small gain rising for a 6th-straight session but remaining firmly rangebound as concerns over violence in the Middle East are being offset by adequate supply & weak demand.  WTI crude oil for Mar closed up 8¢ to settle at $76.92 per barrel, while Apr Brent crude, the global benchmark, was last seen down 25¢ to $81.94.  The rise comes as Israel pushes its war against Hamas into the crowded city of Rafah in Gaza, while Yemen's Houthi militia continues to attack shipping in the Middle East.  However Iran's foreign minister said he believed the Israel-Hamas war is moving towards a diplomatic solution, easing concerns the conflict will spread to the key oil-producing Persian Gulf.  Weak demand from China as its economy slows & rising supply from the US & other non-OPEC+ countries that are offsetting production cuts from the cartel are also keeping prices rangebound.

WTI Crude Oil Closes With a Small Gain on Mideast Concerns

The CPI report tomorrow will give investors a first insight into how cool inflation is running in 2024 &, alongside an update on consumer spending, will set expectations for the timing & pace of Federal Reserve interest rate cuts this year.  Dow's rise today to a new record, suggests the market is betting on favorable reports.

Dow Jones Industrials