Markets attempt to climb higher after sliding lower this month

Dow recovered 76, advancers modestly ahead of decliners & NAZ gained 69.  The MLP index went up 2 to the 289s along with rising oil prices & the REIT index was steady in the 374s.  Junk bond funds were mixed & Treasuries saw more selling, raising yields.  Oil rose fractionally to the high 85s (5 month highs) & gold continued climbing, up 13 to 2294.

AMJ (Alerian MLP Index tracking fund)

Hiring by US companies rose more than expected in Mar as the labor market remained resilient even in the face of higher interest rates, according to the ADP National Employment Report.  Companies added 184K jobs last month, beating both the upwardly revised Feb gain of 155K & the 148K increase that was predicted.  It marks the best month for job creation since Jul.  Wage growth also accelerated last month for workers who switched jobs, with annual pay rising 10% last month, the largest advance since Jul.  For workers who stayed in their job, wages climbed 5.1%, unchanged from the previous month.  "March was surprising not just for the pay gains, but the sectors that recorded them," said ADP chief economist Nela Richardson.  "Inflation has been cooling, but our data shows pay is heating up in both goods and services."  Job growth was broad-based across sectors last month.  The leisure & hospitality sector accounted for the most job gains in Mar, with the industry onboarding 63K new workers.  There were also substantial hiring gains in construction (33K0), trade, transportation & utilities (29K) & financial activities (17K).  Hiring fell in just one sector: professional & business services.  The stronger-than-expected report comes in the wake of an aggressive tightening campaign by the Federal Reserve, which has raised interest rates to the highest level since 2001.  Traders watch the labor market closely for signs that it is finally cooling, so the Fed can pivot to cutting interest rates.  Central bank officials have indicated in recent weeks that they anticipate rate cuts will begin later this year, but need to see more evidence that inflation is returning to their 2% target.

Private sector job growth rises more than expected in March

Intel (INTC), a Dow stock, said its foundry business recorded an operating loss of $7B in 2023 on sales of $18.9B.  That's a wider loss than the $5.2B reported in its foundry business in 2022 on $25.7B in sales.  This is the first time that INTC has disclosed revenue totals for its foundry business alone.  Historically, INTC has both designed its own chips as well as done its own manufacturing, & reported final chip sales to investors.  Much of its foundry revenue currently comes from its own operations.  INTC also restated its products divisions to report its costs as if it were a so-called “fabless” company that has to account for foundry as a cost.  INTC expected its foundry's losses to peak in 2024 & eventually break-even “midway” between this qtr & the end of 2030.  “Intel Foundry is going to drive considerable earnings growth for Intel over time. 2024 is the trough for foundry operating losses,” CEO Patrick Gelsinger said yesterday.  INTC said in a promo video that much of the lack of profitability for its foundry business was due to the “weight of past decisions,” & separately, Gelsinger cited the company’s past “slow” adoption of a technology called EUV, which is used to make the most advanced chips.  The stock dropped 3.01 (7%).

Intel shares fall after company reveals $7 billion operating loss in foundry business

The 10-year Treasury note yield jumped yesterday, adding to its gains from the previous session, as traders reassessed the possibility of the Federal Reserve cutting rates in Jun.  The benchmark rate was up 2.6 basis points at 4.355%.  It previously reached its highest level since Nov 28, briefly breaking above 4.4% & the 2-year Treasury note yield was down 2.5 basis points at 4.693%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  The moves come after manufacturing in the US expanded for the first time since Sep. 2022, according to data released Mony by the Institute for Supply Management (ISM). The ISM manufacturing index rose to 50.3, up from 47.8 in Febr & significantly better than the 48.1 estimate.  The index measures the percentage of companies reporting expansion against contraction, so anything over 50 indicates growth.  Odds for a Jun rate cut based on fed futures trading are now down to roughly 63%, off from about 70% a week ago, as investors remain cautious about the direction of rate cuts moving forward, according to the CME FedWatch Tool. Markets interpreted the unexpected return of manufacturing growth as reducing the chances of meaningful Fed rate cuts.  Last month, the central bank left interest rates unchanged for the 5th consecutive time, in line with expectations, keeping its benchmark overnight borrowing rate at 5.25%-5.50%.  The Fed also said at the time that it still expects 3 qtr-percentage point cuts by the end of the year.

10-year Treasury yield hits highest level since November as bets on June rate cuts cool down

Faith in rate cuts is fading.  Even though housing & auto industry are faltering, the rest of the economy is showing modest growth.  That signals rate cuts face more of an uncertain future.  Also, higher oil prices affect will be a drag on economic growth.  Strength in the gold markets is a dark cloud hanging over the stock market.

Dow Jones Industrials