Dow fell 306 (with a high over 40K), decliners over advancers 2-1 & NAZ was up 26. The MLP index lost 2+ to the 282s & the REIT index dropped 4+ to the 378s. Junk bond funds fluctuated & Treasuries saw strong buying which lowered yields. Oil was slid back fractionally to go under 81 & gold dropped 21 to 2163 (more on both below).
AMJ (Alerian MLP Index tracking fund)
Nike (NKE), a Dow stock, China sales continued to slow during its holiday qtr, but the
retailer beat estimates on the top & bottom line, helped by better
than expected growth in North America & price changes. For the 3-months ended Feb 29 was 77¢ compared with 79¢ a year earlier. Excluding 21¢ per share related to
restructuring charges, EPS would have been 98¢. Sales rose to $12.43B, up slightly from $12.39B a year earlier. In
North America, where demand has been unsteady, sales rose about 3% to
$5.07B, compared with estimates of $4.75B. Meanwhile, sales in the rest of its regions came
in below estimates. In China, sales reached $2.08B, just below
the $2.09B expected. Revenues in the region climbed
5%, but growth there has decelerated as demand normalizes after Covid-19
lockdowns. In Europe, the Middle East & Africa, revenue fell 3%
to $3.14B, worse than the $3.17B that had
expected. Excluding restructuring charges, the company reiterated its sales
outlook for fiscal 2024 & said it expects revenue to grow 1%, in
line with expectations of up 1.1%. For the current
qtr, it expects revenue to be up slightly, compared to estimates of
up 2%. For fiscal 2025, NKE expects revenue & earnings to grow versus the
prior year, but it didn't say by how much. Analysts had expected revenue
guidance of up 5.6%. The stock dropped 6.21.
Nike shares slide on lackluster outlook, slowing China sales
Stubbornly high inflation could push the Federal Reserve into a more cautious stance this year regarding interest rate cuts, the central bank's former vice chair said. Richard Clarida, who served as Fed governor until Jan 2022 & is now a global economic advisor at asset management giant Pimco, said his former colleagues need to be on guard against sticky prices that could thwart plans to ease monetary policy this year. At its meeting this week, the rate-setting Federal Open Market Committee indicated it would likely decrease rates 3 times this year, assuming qtr percentage point intervals. Chair Jerome Powell said receding inflation & a strong economy give policymakers room to cut. “This may be more of a hope than a forecast,” Clarida said. “I do hope that the Fed really moves into data-dependent mode, because there can be a very good case if inflation is sticky and stubborn that they shouldn’t deliver three cuts this year.” Markets also are expecting 3 cuts this year, though that pricing has been scaled back after data to start the year showed inflation higher than expected. Fed officials are banking that elevated shelter inflation is on its way down, paving the way to lower their key borrowing rate from its highest level in more than 23 years. Clarida, however, said the extent to which the Fed can cut is unclear. “Under a pretty broad range of scenarios, they’re going to get at least one cut in this year,” he said. However, the calculus gets different as inflation data provides mixed signals. “If the Fed were targeting CPI right now, we wouldn’t even be discussing rate cuts,” Clarida added. He also noted that even though Powell on Wed said financial conditions are tight, they in fact are “a lot easier than they were in November.” A Chicago Fed measure of financial conditions is at their loosest since Jan 2022. “What I think is going on here is a delicate balance that [Powell is] trying to navigate,” Clarida continued. “Financial conditions will very naturally start to ease when they get the sense the Fed is done and [will start] cutting. Then of course that improves the economic outlook and potentially makes it harder to get inflation down to 2%.”
Former Fed vice chair Clarida sees possibility of fewer rate cuts this year
Treasury Secretary Janet Yellen has admitted that Pres Biden "doesn’t have a plan" – only "principles" – when it comes to preventing Social Security from going insolvent around a decade from now. Yellen made the remark during a Senate Finance Committee Hearing on Biden's fiscal year 2025 budget. Gov projections last year estimated that the Social Security retirement fund could run out of money as soon as 2033, & Biden has floated raising taxes on top earners to make up for the shortfall. "I'll note that there's already been $4.9 trillion in new taxes proposed for those making over $400,000 a year. It seems to be the go-to place, fill in the blank, we're going to tax those over 400,000 a year for whatever," Sen. Bill Cassidy told Yellen. "Of that $4.9 trillion, none of that has been dedicated to Social Security." Cassidy then asked Yellen what the tax rate would have to be on those earners to address "the unfunded accrued liability for Social Security," because the "president theoretically has a plan." Yellen first said "I don't have that computation to offer you" before saying that "The president doesn't have a plan. He has principles. "He wants to work with Congress to find a way to protect Social Security and extended its solvency beyond 2034," she added. Yellen, when asked by Cassidy how Biden could "justify not having a plan" for Social Security "when he's been in office for three years already," said the pres "believes it's important to work with Congress." However, Cassidy argued that he & other members on the Senate Finance Committee have not heard "one peep" from Biden on that matter. "Secretary Yellen made clear in her testimony that President Biden has put forward an approach that would strengthen Social Security by protecting seniors from benefit cuts and extend solvency by asking the highest-income Americans to pay their fair share," Treasury Principal Deputy Secretary for Public Affairs Michael Gwin said following the hearing.
Biden 'doesn't have a plan' on Social Security solvency, Treasury secretary says
Gold prices fell off from a record high as the $ rose to a month high. Gold for Jun closed down $24 to settle at $2181 per ounce, a day after closing above the $2000 mark for the first time. The price of the metal is being buoyed by expectations lower interest rates are on the way after the Federal Reserve this week forecast rate cuts of 75 basis points this year, even as it left its benchmark rate at a 23-year high. The expectation of central banks starting to cut policy rates later this year will continue to underpin gold. The ICE dollar index was last seen up 1.01 points to 104.45, the highest since Feb14, making gold more expensive for intl buyers.
Gold Falls Off a Record as the Dollar Rises to a Month High
West Texas Intermediate (WTI) crude oil closed lower, falling for a 3rd day as the $ rose to the highest in more than a month. WTI crude for May closed down 44¢ to settle at $80.63 per barrel, while May Brent crude, the global benchmark, closed down 35¢ to $85.43. A rising $ is checking prices as the ICE dollar index pushes to a month high following the Federal Reserve's decision this week to keep interest rates at a 23-year high while forecasting 75 basis points of cuts this year. The index was last seen up 1.01 points to 104.44, the highest since Feb 14. Crude oil prices are under some pressure due to the strong $, but Brent Crude remains above $85 a barrel as rate outlook & supply tightness concerns continued to underpin prices. Still, supply remains tight on 2.2M barrels per day of voluntary production cuts from OPEC+ members that are scheduled to expire at the end of Jun, though they could be extended thru year end.
May WTI Crude Oil Closes Lower as the Dollar Surges, Offsetting Supply Concerns
The strong stock market has risen on the prospect of a reversal from interest rate hikes buoying investors' spirits. The popular stock averages continue in record territory with Dow up a staggering 8K since Nov. That is a staggering rally without any significant pullback. This week Dow rose 761.
Dow Jones Industrials
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