Markets slump ahead of Fed minutes tomorrow

Dow fell 64, decliners over advancers 3-2 & NAZ retreated 144.  The MLP index went up 1+ to the 269s (& has been strong for the last year, shown below) & the REIT index slid back 1+ to the 375s.  Junk bond funds were slightly higher & Treasuries had limited buying which reduced yields.  Oil was off about 1 to the high 78s & gold gained 12 to 2036 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Home Depot (HD), a Dow stock, quarterly sales declined nearly 3% year over year, but it surpassed earnings & revenue expectations despite the cooler demand.  CFO Richard McPhail said demand dipped throughout the year as consumers returned to more typical spending patterns.  He added that falling lumber prices & rising interest rates hurt the business.  But HD sees a chance to return to growth, McPhail said.  “Our market is on its way back to normal demand conditions,” he said.  “We’re not quite there yet, but the pressures we saw in 2023 are receding.”  The home improvement retailer expects total sales to grow about 1% in fiscal 2024, which includes an additional week.  That compares with a 1.6% increase expected.  However, it expects comparable sales, which take out the effect of store openings & closures, to decline about 1% during a period without the additional week.  HD anticipates it will open about a dozen new stores over the year.  EPS was $2.82, down from $3.30 a year earlier.  Net sales decreased from $35.8B in the year-ago period.  HD has faced a tougher sales backdrop over the past year.  The home improvement retailer is following a more than 2-year period when Americans had more time & money to spend on painting & fixing up their homes during the Covid-19 pandemic.  About ½ of its business comes from home professionals & about ½ comes from do-it-yourself shoppers.  Over the past year, McPhail & CEO Ted Decker described 2023 as “a year of moderation” after the outsize gains during the pandemic.  Decker compared the pandemic to a “giant hurricane” that created an unusual period of demand.  HD has also felt a pullback in consumer spending, particularly on big-ticket items, as some families postpone discretionary purchases because of inflation, put off buying a new home because of higher interest rates or choose to spend on experiences rather than goods.  The stock rose 27¢.

Home Depot beats earnings estimates even as sales fall

Corp America has a message for investors: It's serious about cutting costs this year.  From toy & cosmetics makers to office software sellers, execs across sectors have announced layoffs & other plans to slash expenses, even at some companies that are turning a profit.  As consumers watch their wallets, companies have felt pressure from investors to do the same.  Execs have sought to show shareholders that they’re adjusting to consumer demand as it returns to typical patterns or even softens, as well as aggressively countering higher expenses.  Airlines, automakers, media companies & package giant UPS (UPS) are all digesting new labor contracts that gave raises to tens of thousands of workers & drove costs higher.  Companies in years past could get away with passing on higher costs to customers who were willing to splurge on everything from new appliances to beach vacations.  But businesses' pricing power has waned, so execs are looking for other ways to manage the budget, or squeeze out more profits.  But cost reductions unveiled in even just the first few weeks of the year amount to tens of thousands of jobs & Bs of $s.  In Jan, US companies announced 82K job cuts, more than double the number in Dec, while still down 20% from a year ago, according to Challenger, Gray & Christmas.  The tightening of months prior is already showing up in financial reports.  So far this earnings season, results have indicated that companies have focused on driving profits higher without the tailwind of big price increases & sales growth.  As of mid-Feb, more than ¾ of the S&P 500 had reported 4th-qtr results, with far more earnings beats than revenue beats.  The qtr's earnings, measured by a composite of S&P 500 companies, are on pace to rise nearly 10%.  Revenues, however, are up a more modest 3.4%.  Overall, divs paid by companies in the S&P 500 rose 5.05% last year & they could increase 5.3% this year.

Companies — profitable or not — make 2024 the year of cost cuts

Intuitive Machines' (LUNR) surged today to an intraday high of $12.05, north of the $10.03 a share price that shares traded at after the company completed its SPAC merger in Feb 2023.  Since its inaugural moon mission launched last week, the company's share price has more than doubled.  The mission, known as IM-1, launched on a SpaceX rocket & has since completed several of the 16 milestones that LUNR identified as key to the mission's success.  One of the key milestones came when the lander, named “Odysseus,” successfully fired its engine for the first time.  The lander has used the engine to adjust its trajectory and remain on target.  In a series of daily updates since Fri, the company said its cargo lander “continues to be in excellent health” & is preparing to enter the moon's orbit tomorrow.  The company noted that entering lunar orbit, also known as “lunar orbit insertion,” will be the mission's “largest challenge to date.”  The company is on track to make its moon landing attempt at 5:49 PM ET.  Today the stock soared 3.67 (50%).

Intuitive Machines’ stock surges again as lander approaches the moon

Gold prices closed higher for a 3rd-straight session as the $ & yields slipped ahead of the release of the minutes of the last meeting of the Federal Reserve's policy committee coming tomorrow.  Gold for Apr closed up $15 to settle at $2039 per ounce.  The drop comes ahead of the release of the minutes of the last meeting of the Federal Open Market Committee tomorrow, which ended with interest rates unchanged but offered little indication of when rates will be lowered, despite market hopes for near-term cuts.  The $ moved lower, making gold more affordable for intl buyers.  The ICE dollar index was last seen down 0.25 points to 104.04.  Treasury yields also narrowed, lowering the carrying cost of owning gold.  The 2-year note was last seen paying 4.597%, down 4.2 basis points, while the yield on the 10-year note was down 2.3 basis points to 4.261%.

Gold Closes Higher Again as the Dollar and Yields Ease

West Texas Intermediate (WTI) closed lower as geopolitical worries amid violence in the Middle East were more than offset by demand concerns.  WTI crude oil for Mar closed down $1.01 to settle at $78.18 per barrel, while Apr Brent crude, the global benchmark, was last seen down $1.37 to $82.19.  Traders are weighing concerns over the health of China's economy, as a debt crisis for the real-estate sector continues to weigh on the #1 importer.  Rising US inventories & record production is also checking prices, as is a bearish demand forecast issued last week by the Intl Energy Agency.  Still, Middle East tension continue to run hot, with Israel threatening to push in the crowded Gaza city of Rafah in its war against Hamas despite intl concern over the safety of civilians, while Yemen's Houthi militants continue attacks on Red Sea shipping, with a crew abandoning a cargo ship after a missile strike.

WTI Crude Oil Closes Lower as Demand Worries Trump Middle East Tensions

Traders are uneasy about the Fed minutes which will be released tomorrow.  As usual, they probably will not reveal a lot about what to expect at the Mar meeting.

Dow Jones Industrials