Dow fell 54, advancers over decliners about 2-1 & NAZ rose 196. The MLP index continued to stay in the 259s & the REIT index was off fractionally to the 276s. Junk bond funds edged higher & Treasuries had limited selling, bringing yields a little bit lower. Oil crawled higher in the 76s & gold was off 8 to 2039 (more on both below).
AMJ (Alerian MLP Index tracking fund)
The electric vehicle (EV) push is eating into Ford's (F) profit margins as the company seeks to find the right mix between profitable vehicles consumers want today & the next generation of EVs that may be in higher demand as the market's preferences shift in the future. Model e, the company's EV division, had a net loss of $4.7B last year, with $1.6B of that in the last qtr, & Ford's CFO John Lawler explained that both "the quarter and year were impacted by challenging market dynamics and investments in next-generation vehicles." Lawler added that Ford expects Model e "losses to widen to a range of $5 billion to $5.5 billion, driven by continued pricing pressure and investmfents in our next-generation vehicles" while noting that the company expects "our first-generation vehicles to improve their profits throughout the year." If Ford weren't selling Mustang Mach-E & F-150 Lightning vehicles while also investing in the next generation of EVs that will eventually supplant those, the automaker's adjusted operating profit would be about 50% higher than it currently is. CEO Jim Farley said that the EV market is going through a "seismic change" over the last 6 months of last year that will "rapidly sort our winners and losers in our industry." He said the catalyst for the change is a shift in EV makers cutting prices by 20% across major markets as well as an influx of investment & capacity in the 2-row crossover segment. Ford's targets for its next generation of EVs will be for them to be profitable within 12 months of their launch & that it will spend less on making larger EVs by focusing those models on "geographies and product segments where we have a dominant advantage, like trucks and vans." The stock lost 15¢.
Ford projected to lose $5 billion in profits over EV production
New York Community Bank (NYCB) was hit with its 3rd credit downgrade as fears linger that the
regional bank could be in peril nearly a year after the regional
banking sector was hit by a crisis that triggered some of the largest
bank failures in US history. Morningstar downgraded NYCB's credit rating & cited "outsized" exposure to commercial real estate (CRE) that the bank has pledged to reduce in the months ahead. CRE borrowers have been under pressure due to the higher interest rate environment as well as lower occupancy rates due to the rise of remote work. The downgrade comes after rating agencies Fitch & Moody's also lowered NYCB’s ratings in the last week. Last Fri, Fitch cut NYCB's rating from BBB to BBB-, its lowest investment grade rating, while Moody’s lowered NYCB's rating to Ba2, a non-investment grade or "junk" tier, on Wed. "Liquidity appears sufficient, but given the bank failures last spring, we remain cautious given that the adverse headline risk, including a significant decline in NYCB’s stock price, could eventually spook customer and depositor confidence," Morningstar said of its downgrade. Investor concerns about NYCB came to a head last week after the
company posted a surprise loss & announced a div cut to boost
reserves required by banking regulations, along with its exposure to the CRE market. Those worries sent the bank's stock plunging to its lowest level since 2000. NYCB’s management has tried to bolster investor confidence as the
company's stock has fallen over 59% in the last month, including a more
than 6% decline yesterday's trading. Newly-appointed exec chair
Alessandro DiNello said on Wed that NYCB will consider the sale of
loans in its commercial real estate portfolio or let them run off the
balance sheet naturally. The stock rebounded 49¢ (71%) but remains depressed.
Regional bank hit with 3rd credit downgrade as crisis concerns linger
PepsiCo (PEP), a Dividend Aristocrat, reported mixed quarterly results as North American demand for its food & drinks weakened. CEO Ramon Laguarta said that US sales broadly slowed down in the 4th qtr. “Part
of that is a slowdown due to pricing and [consumers’] disposable income
situation,” he said. He
added that US consumers are also shifting their behavior from eating & drinking at home to picking up more of their snacks & Gatorade
from convenience stores. But Laguarta expressed
optimism about the overall state of the consumer, citing low
unemployment & hopes that interest rates will fall by the summer &
wages will rise faster than inflation. 4th-qtr was 94¢, up from 37¢, a year earlier. Excluding items, the food & beverage giant earned $1.78 per share. Net sales dropped less
than 1% to $27.8B, it's the first qtr since 2020 that the quarterly revenue has declined compared with the year-ago
period. Currency exchange rates dragged net sales down by 1.5%. Organic revenue, which excludes acquisitions & divestitures, rose
4.5% in the qtr, helped by higher prices. But those same raised
prices have hurt demand for the company's food & drinks. Its volume, which strips out pricing & currency changes, slid again this
qtr. Execs said high borrowing costs & lower
personal savings have squeezed consumers' budgets, particularly in North
America. They also said consumers are increasingly choosing smaller pack sizes for convenience & their low price points. For 2024, PEP anticipates organic revenue will rise at least 4% & core constant currency EPS will climb at least 8%. The company previously forecast an increase in organic revenue on the
high end of 4-6% & core constant currency EPS
growth in the high single digits. The stock dropped 6.18 (4%).
PepsiCo earnings top estimates, but quarterly revenue slides for the first time in nearly four years
Gold closed lower for a 2nd day despite a weaker $ as treasury yields rose. Gold for Apr closed down $9 to settle at $2038 per ounce. The drop comes amid listless trade for the $ & little fresh economic data to spur activity. The ICE dollar index was last seen down 0.9 points to 104.07. Treasury yields were higher, with the 2-year note last seen up 1.3 basis points to 4.463%, while the yield on the 10-year note was up 2.6 basis points to 4.183%.
Gold Closes Lower on Rising Treasury Yields at the Dollar Weakens
West Texas Intermediate (WTI) closed higher for a 5th-straight day on
demand hopes & geopolitical worries, though prices failed to break out
of the range it has traded within for months.
WTI crude oil for Mar closed up 62¢ to settle at $76.84
per barrel, while Apr Brent crude, the global benchmark, was last
seen up 52¢ to $82.15. Prices rose this week after Israel rejected cease-fire overtures from
Hamas & US strikes on Iranian-backed militias continued, keeping
worries of a spreading war in the Middle East high, while gasoline &
distillate stocks in the US fell last week, seen as a
positive sign for demand, even as crude oil inventories rose more than expected. But
the bullish notes are offset as rising production from the US, Canada & other non-OPEC+ countries are offsetting OPEC+ cuts,
while demand from China remains weak, leaving oil trading within a tight
range for much of the past 3 months.
WTI Crude Oil Rises for a Fifth Day, Though Prices Remain Rangebound
The yields on the 10 year Treasury dropped sharply for months & then has risen for almost 2 months. Now it's back above 4%, near 4.2%. During most of this time stock averages have rallied to record highs with little profit taking (helped by the glamorous tech stocks). YTD Dow is up almost 1000, not bad all considered.
Dow Jones Industrials
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