Dow retreated 190, advancers over decliners 5-4 & NAZ was off 155. The MLP index added 2+ to the 277s & the REIT index fell 1+ to the 378s. Junk bond funds fluctuated & Treasuries had very limited selling which raised yields slightly. Oil slid back to below 81 & gold was off 4 to 2162 (more on both below).
AMJ (Alerian MLP Index tracking fund)
Rolf Habben Jansen, CEO of Hapag-Lloyd, the world's 5th-largest ocean carrier, said he has an improved view on trade for the rest of 2024. Conversations with clients & other logistics companies have led the shipping CEO to a more optimistic view on demand in the 2nd ½ of the year than projected in previous forecasts. “We also see that inventories are depleted in many cases and so far we’ve seen a good recovery after Chinese New Year,” Jansen said. “So we’ve been fairly happy with that.” The company reported a steep drop in its 2023 net profit this week & slashed its div, which led to a stock decline. It was the 3rd-best group profit in company history, albeit significantly lower than 2022, which was fueled by container congestion & high freight rates. “The last quarter of 23 was difficult because rates were at unsustainable levels,” Jansen said. “I think everybody noticed that. We saw them coming up a bit towards the end of the quarter, and then of course, the Red Sea crisis ... which again changed the market.” While the Red Sea issues have resulted in a shipping container rate spike, Hapag-Lloyd is forecasting a decrease in its earnings this year as costs increase related to the trade diversions from the Red Sea. According to SONAR, the price of 40-foot containers started its run-up in the US on Jan 3, ranged from $3063-$3763 to a peaked on Feb 9 from $5353-$7329. While rates have now declined, US companies are paying more, with rates from Asia to West Coast ports up 155% YTD; Asia to East Coast up 129% YTD; & Asia to the Gulf Coast up 71.2% YTD. Attacks by the Houthis on commercial shipping interests in the Red Sea continue, with a tanker attacked in the Red Sea today while underway northbound in the Red Sea, though the tanker was empty at the time & continued on its journey, with no crew injuries reported. The day prior, the tanker was assessed to have been the subject of a near miss 47 miles southeast of Aden, Yemen. “It’s a concerning situation and I think the [Red Sea] outlook is very difficult,” Jansen said. “We hope that it will be over in a couple of months. But I’m very well aware that despite all the efforts that many countries are undertaking, some also believe that it might last quite a bit longer. In the end, we will do whatever we can to keep our people safe, even if that means that transit times are going to be a little bit longer.” The route around the Horn of Africa is longer & more fuel is being burned by container vessels. In addition to the added costs, according to Sea-Intelligence, the Red Sea diversions could increase carbon dioxide emissions by 260%–354%. As a result, ocean carriers with Europe-bound vessels will be paying higher emissions liabilities under the EU Emissions Trading System. According to maritime technology firm OceanScore's calculations, with the diversions increasing fuel consumption & sailing speed from 16-20 knots to make up some time, the emissions trading system imposes a 50% liability for voyages either originating from the EU or traveling to it, & 100% liability for ships docked at an EU port or completing transits from one EU bloc port to another. The longer voyages are creating a challenging & costly environment for Hapag Lloyd which has a goal of being net-zero carbon by 2045.
Under Armour's (UA) shares plunged after the retailer announced that CEO Stephanie Linnartz would be stepping down after barely a year on the job & Plank would replace her on Apr 1. Following the announcement UA was downgraded & analysts lowered their price targets. Linnartz is the 2nd CEO the company has cycled thru in less than 2 years. Former Aldo Group CEO Patrik Frisk replaced Plank as US's chief exec in Jan 2020 only to suddenly announce plans to resign a little over 2 years later, in May 2022. Last Dec, UA announced plans to hire Linnartz on a bet that her experience would offset her lack of experience in the retail industry. Since she started at UA, Linnartz had been focused on rehauling the company's C-suite, building out its loyalty program, UA Rewards, & pivoting the brand's assortment to a more athleisure-focused offering that had more stylish options for women. The stock fell 4¢ following recent selling.
Wall Street isn’t pleased that Kevin Plank is returning as Under Armour’s CEO, shares plunge 12%
Apple (AAPL), a Dow stock, reached a $490M settlement to resolve a class-action lawsuit
that alleged Chief Exec Tim Cook defrauded shareholders by
concealing falling demand for iPhones in China. A preliminary
settlement was filed today with the US District Court in Oakland,
California, & requires approval by US District Judge Yvonne Gonzalez
Rogers. It
stemmed from AAPL's unexpected announcement on Jan 2, 2019, that the
iPhone maker would slash its quarterly revenue forecast by up to $9B, blaming US-China trade tensions. Cook had said in Nov 2018, that although AAPL faced
sales pressure in markets such as Brazil, India, Russia & Turkey,
where currencies had weakened, “I would not put China in that category.” AAPL told suppliers a few days later to curb production. The lowered revenue forecast was its first since the iPhone launch in 2007. Shawn Williams, a lawyer for the shareholders, called the settlement
an “outstanding result” for the class, which includes shareholders who
bought AAPL shares in the 2 months between Cook's comments & the
revenue forecast. AAPL posted $97B of net income in its latest fiscal year, & its payout equals a little under 2 days of profit. The stock was off 1.28.
Apple reaches $490 million settlement over Tim Cook’s China sales comments
Gold prices fell for a 2nd day as the $ continues to push higher after a day-prior report added to pessimism interest-rate cuts are on the way. Gold for Apr closed down $6 to settle at $2161 per ounce. The price of the metal fell off a record high this week after the US consumer price index & producer price index rose more than expected last month, staying well off the Federal Reserve's 2% inflation target, dashing hopes the central bank is ready to begin cutting interest rates. Gold remains resilient, holding onto most of its recent strong gains despite $ & yield strength following stronger-than-expected CPI & PPI data this week. The $ traded higher early, with the ICE dollar index last seen up 0.13 points to 103.49. Treasury yields edged higher, with the 2-year note last seen up 1.7 basis points to 4.732%, while the 10-year note was paying 4.309%, up 0.9 basis points.
Gold Closes Lower as Hopes for Interest Rate Cuts Wane, Pushing the Dollar Higher
West Texas Intermediate (WTI) crude oil closed lower, dropping off from a 4-month high set as the Intl Energy Agency (IEA) warned it expects global inventories to tighten over this year due to OPEC+ production cuts. WTI crude for Apr closed down 22¢ to settle at $81.04 per barrel, after rising to the highest since Nov 6 a day earlier, while May Brent crude, the global benchmark, was last seen down 6¢ to $85.36. The drop comes as traders take profits ahead of the weekend following yesterday's bullish outlook from the Intl Energy Agency, which raised its demand forecast while warning if OPEC+ continues its 2.2M barrels per day of voluntary production cuts thru 2024, global inventories will fall thru the year, but could begin to rise if lifted at the end of Jun. WTI & Brent reached 4-month highs, breaking key resistance levels after the IEA flipped their 2024 supply/demand forecast to a deficit amid prolonged production cuts from OPEC+. Along with OPEC+ cuts, geopolitical risk is also supporting prices as violence in the Middle East continues along with Russia's war on Ukraine. Ukraine has continued its attacks on Russian refineries, potentially cutting into that country's refined product exports.
WTI Crude Oil Closes Down From a Four-Month High on Profit Taking
The chart below shows Dow has pretty much been going sideways in Feb & Mar. That has happened on growing awareness that rate cuts will be postponed to Jun, if not later. At the same time the economy is getting soggier. The latest forecast from the Atlanta Fed: The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first qtr of 2024 is 2.3% on Mar 14, down from 2.5% from Mar. And after a major rally, gold is still being bought in record territory by nervous investors. Dow fell all of 8 last week.
Dow Jones Industrials
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