Thursday, March 21, 2024

Markets advance to new records while gold also reaches a new record

Dow rose 269 (close to today's high), advancers over decliners better than 2-1 & NAZ was up a more modest 32.  The MLP index stayed in the 283s & the REIT index went up 1+ to the 382s.  Junk bond funds crawled higher & Treasuries were little changed near elevated levels.  Oil slid lower, taking it below 81, & gold surged 24 to 2185 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Target (TGT), a Dividend Aristocrat, will double its bonus payments to salaried employees this year, as profits recover from a bumpy nearly 2-year stretch.  Salaried employees receive an annual bonus, based on company performance& the eligible amount set as part of their compensation.  The retailer will pay 100% of employees' eligible annual bonus amounts for the most recent fiscal year, an increase from 50% in the prior year.  The annual bonus payout is based on how the retailer performs against sales & profit goals set at the beginning of the fiscal year.  “Based on Target’s performance in 2023, including the $2 billion in additional profit growth our team delivered that exceeded the goals we set at the beginning of the year, we’re rewarding our team accordingly,” the company said.  TGT will pay out the annual cash bonuses in late Mar.  The amount paid out won't be as high as it could be, however.  It tops out at 175% of each employee's eligible bonus amount.  The vast majority of approximately 415K employees, such as those at its stores & warehouses, are paid hourly & do not qualify for the bonuses.  Yet it does offer bonuses to store & supply-chain leaders, along with many corp employees.  Top execs have a different bonus structure.  The stock fell 30¢.

Target doubles bonuses for salaried employees as profits recover

Microsoft (MSFT), a Dow stock, is releasing its first Surface PCs featuring a dedicated Copilot button on the keyboard for quickly accessing the chatbot, following through on a promise that it made in Jan.  The addition of the button, to the left of the arrow keys, represents the biggest change to the computer keyboard in decades.  While MSF is not the largest PC seller, that distinction belongs to Lenovo, it does run the most popular operating system with Windows.  Lenovo has announced its own PCs featuring Copilot keys, as have Dell (Dell) & HP (HPQ).  But the Surface has in the past been a showcase of what a Windows machine can be, & MSFT is trying to articulate the convenience of having generative artificial intelligence one keystroke away with the 2 new PCs: its new convertible Surface Pro 10 for Business & Surface Laptop 6 for Business.  When people type a few words in to the Copilot, which draws on AI models from MSFT-backed OpenAI, servers in faraway data centers perform the necessary computing work to craft a response.  MSFT calls these new machines AI PCs.  The new key, which allows users to open the Copilot panel any time on the right side of the screen, helps matters, along with the silicon inside.  Each computer comes packed with an Intel (INTC), a Dow stock, Core Ultra processor containing a special neural processing engine, or NPU.  Surface computers have featured NPUs since 2019.  MSFT stock rose 4.14.

Microsoft debuts first Surface PCs with dedicated Copilot AI button

The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, suggesting that job growth remained strong in Mar.  The Federal Reserve yesterday left interest rates unchanged.  Fed Chair Jerome Powell said he did not see "cracks" in the labor market, which he described as "in good shape," noting that "the extreme imbalances that we saw in the early parts of the pandemic recovery have mostly been resolved."  Initial claims for state unemployment benefits dropped 2K to a seasonally adjusted 210K last week, the Labor Dept said.  The forecast called for 215K claims.  Unadjusted claims decreased 12K to 190K last week.  Applications in California plunged by 5369, while filings in Oregon fell 2580.  They more than offset notable increases in Michigan & Missouri.  Fed officials indicated that they still expected to trim the central bank's policy rate by 3-qtrs of a percentage point by the end of the year.  The central bank has raised its benchmark interest rate by 525 basis points to the current 5.25%-5.50% range since Mar 2022.  Labor market resilience is helping to underpin the economy, which continues to outshine its global peers.  Despite a flurry of high-profile layoffs at the start of the year, employers have largely been hoarding labor after struggling to find workers during & after the COVID-19 pandemic.  The claims data covered the period during which the gov surveyed business establishments for the nonfarm payrolls portion of Mar's employment report.  Claims rose marginally between the Feb & Mar survey weeks.  The economy added 275K jobs in Feb.

US Weekly Jobless Claims Unexpectedly Fall

Gold surged to a new record, rising above the $2200 mark for the first time as the Federal Reserve's policy committee ended their 2-day meeting yesterday leaving interest rates steady while maintaining expectations for cuts of 75 basis points this year.  Gold for Jun closed up $24 to settle at $2206 per ounce, topping the prior record of $2188 set on Mar 11, but down from the session high of $2246.  The rise follows on the end of the Federal Open Market Committee's meeting, which closed with interest rates remaining at a 23-year high while forecasting up to 3 25 basis point cuts before the end of the year, a bullish note for gold since it pays no interest.  The Fed followed thru on what was widely expected & left interest rates unchanged (the benchmark is still at its highest since 2001).  The Fed maintained their outlook for 3 qtr point cuts this year, but fewer in 2025 than previously & stronger economic growth is expected.  The rate narrative for gold is just a bit more positive.  The $ traded higher, with the ICE dollar index last seen up 0.61 points to 104.04, making gold more expensive for intl buyers.  Treasury yields were higher, with the 2-year note last seen paying 4.638%, up 2.7 basis points, while the yield on the 10-year note was up 0.2 basis points to 4.278%.

Gold Climbs to a Record on Expectations Lower Interest Rates are on the Way

Oil prices settled slightly lower, pressured by weaker US gasoline demand data and reports of a UN draft resolution calling for a ceasefire in Gaza.  Brent crude futures for May settled down 17¢ to $85.78 a barrel, while US West Texas Intermediate futures for May settled own 20¢ to $81.07 a barrel after a fall of about 1.8% in the previous session.  Crude inventories in the US, the world's biggest oil consumer, unexpectedly declined last week, the Energy Information Administration (EIA) reported yesterday.  Though gasoline inventories fell for a 7th week, down 3.3M barrels to 230.8M, gasoline product supplied, a proxy for product demand, slipped below 9M barrels.  The fall suggested that gasoline markets, which had underpinned a recent market rally, may have been overbought.  Oil prices also were pressured by confirmation that the US drafted a UN resolution calling for a ceasefire that would allow the release of 40 Israeli hostages in return for hundreds of Palestinians detained in Israeli jails.

Oil Settles Lower on Weaker US Gasoline Demand, Gaza Ceasefire Hopes

Stocks were bid higher in the first hour of trading & remained at those elevated levels for the rest of the session.  This week is shaping up as a highly unusual week.  Stocks & gold are at record levels even though they represent opposite views about the financial future for the economy, positive versus negative.  With interest rates at high levels, even after 3 rate cuts the bulls will still be challenged.

Dow Jones Industrials 

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