Markets fall on growing doubts the Fed will cut rates in June

Dow sank 427, decliners over advancers about 4-1 & NAZ retreated 233.  The MLP index added 1+ to the 286s & the REIT index dropped 4 to the 375s on higher interest rates.  Junk bond funds slid lower & Treasuries were sold, raising yields (more below).  Oil gained another 1 to the 84s (more below) & gold surged 22 to 2279 for a new record high!

AMJ (Alerian MLP Index tracking fund)

Tesla (TSLA) published its first-qtr vehicle production & deliveries report for 2024 that showed deliveries fell 8.5% from the year-ago qtr & about 20% from the 4th qutr.  Total deliveries for Q1 2024 387K & total production in 2024 was 433K.  Vehicle production declined 1.7% year over year & 12.5% sequentially.  TSLA doesn't break out sales by model but reported that it produced 412K Model 3/Y cars & delivered 370K.  It also produced 21K of its other models & delivered 17K.  In the same period last year, the electric automaker reported 423K deliveries & production of 441K vehicles.  In the 4th qtr of 2023, TSLA reported 485K deliveries & production of 495K vehicles.  Deliveries fell below even the lowest analyst estimate.  “Decline in volumes was partially due to the early phase of the production ramp of the updated Model 3 at our Fremont factory and factory shutdowns resulting from shipping diversions caused by the Red Sea conflict and an arson attack at Gigafactory Berlin,” TSLA said.  Houthi militia attacks on shippers in the Red Sea disrupted its component supply & temporarily suspended production at its German factory outside of Berlin in Jan.  In Mar, environmental activists set fire to infrastructure near that same factory, depriving TSLA of sufficient operation power & again causing a pause in production.  In China, TSLA faced an onslaught of competition from domestic EV makers, including BYD & newcomers such as the phone maker Xiaomi.  After sluggish sales numbers for its China-made cars in Jan & Feb, TSLA reduced production of its Model 3 & Model Y at its Shanghai plant & slashed workers' schedules to 5 days a week from 6½ days.  The stock sank 10.68 (11%).

Tesla shares fall after deliveries drop 8.5% from a year ago

Oil prices rose to their highest level since Oct as investors closely monitored fresh supply threats amid an escalating conflict in the Middle East & a Ukrainian drone strike on a major Russian oil refinery.  Intl benchmark Brent crude futures for Jun traded at $88.58 per barrel, up $1.20 per barrel from the previous session & US West Texas Intermediate (WTI) futures with May expiry stood at $84.97 per barrel, $1.30 per barrel higher.  Brent prices haven't closed above $90 per barrel since Oct 27 last year.  Brent futures have largely been trading in a narrow interval $75 - $85 per barrel since the start of the year, but heightened geopolitical risk & robust economic data appear to have prompted a move higher.  “The new week, the new month and the new quarter was greeted with escalating tension in the Middle East with indirect Iranian involvement,” Tamas Varga, analyst at oil broker PVM, said.  OPEC member Iran has blamed Israel for a deadly air strike yesterday on its consulate in the Syrian capital of Damascus that reportedly killed 7 of its officers.

Oil prices climb to five-month high on escalating Middle East tensions and fresh supply threats

The 10-year Treasury note yield jumped, 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 nearly 7 basis points at 4.397%, trading at the highest level since Nov 28. The 2-year Treasury note yield was up nearly 1 basis point at 4.726%. 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 in 17 months, according to data released yesterday by the Institute for Supply Management (ISM).  The ISM manufacturing index rose to 50.3, up from 47.8 in Feb & was significantly better than the 48.1 estimate.  The index measures the percentage of companies reporting expansion against contraction, anything over 50 indicates growth.  Odds for a Jun rate cut based on fed futures trading are now down to about 58.8%, off from about 70% a week ago, as investors remain cautious about the direction of rate cuts moving forward.  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

Investors have been betting heavily on rates cuts starting in Jun.  Now they are becoming more cautious with all the news being reported.  Dreary news from TSLA & rising oil prices adds to uncertainties for investors.

Dow Jones Industrials