Markets slide while gold soars to go over $2300

Dow was off 43, advancers over decliners 4-3 & NAZ was up 37.  The MLP index rose 2 to the 289s & the REIT index remained steady in the 384s.  Junk bond funds slid lower & Treasuries were little changed, keeping yields at high levels.  Oil finished higher in the 85s & gold advanced a hefty 36 to 2316 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Federal Reserve Chair Jerome Powell said it will take a while for policymakers to evaluate the current state of inflation, keeping the timing of potential interest rate cuts uncertain.  Speaking specifically about stronger-than-expected price pressures to start the year, the central bank leader said he & his fellow officials are in no rush to ease monetary policy.  “On inflation, it is too soon to say whether the recent readings represent more than just a bump,” Powell said.  “We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward 2 percent,” he added.  “Given the strength of the economy and progress on inflation so far, we have time to let the incoming data guide our decisions on policy.”  The remarks come 2 weeks after the rate-setting Federal Open Market Committee (FOMC) again voted to hold benchmark short-term borrowing rates steady.  In addition, the post-meeting statement on Mar 20 included the “greater confidence” qualifier needed before cutting.  Markets widely expect the FOMC to start easing policy this year, though they have had to recalibrate their outlook for the timing & extent of cuts as inflation has held stubbornly higher.  Other economic variables, particularly in the labor market & consumer spending, have held up as well, giving the Fed time to assess the current state of affairs before moving.  The Fed's preferred inflation measure, the personal consumption expenditures price index, showed a 12-month rate of 2.5% for Feb & 2.8% for the pivotal core measure that excludes food & energy.  Virtually all other inflation gauges show rates in excess of 3%.  “Recent readings on both job gains and inflation have come in higher than expected,” Powell said.  “The recent data do not, however, materially change the overall picture, which continues to be one of solid growth, a strong but rebalancing labor market, and inflation moving down toward 2 percent on a sometimes bumpy path.”  Other Fed officials speaking this week have made remarks consistent with the Fed's patient approach.  Powell reiterated that decisions are being made “meeting by meeting” & noted only that cuts are “likely to be appropriate ... at some point this year.”  The uncertainty about rates has caused some consternation in markets, with stocks falling sharply earlier this week as Treasury yields moved higher.  The market stabilized today, but traders in the fed funds futures market again repriced their rate expectations, casting some doubt on a Jun cut as the market-implied probability moved to about 54% at one point, according to CME Group data.

Fed’s Powell emphasizes need for more evidence that inflation is easing before cutting rates

Amazon (AMZN) cloud computing division is laying off hundreds of employees in its physical stores technology & sales & marketing units, the company confirmed.  “We’ve identified a few targeted areas of the organization we need to streamline in order to continue focusing our efforts on the key strategic areas that we believe will deliver maximum impact,” an AMZN Web Services spokesperson said.  “We didn’t make these decisions lightly, and we’re committed to supporting the employees throughout their transition to new roles in and outside of Amazon.”  The lucrative AWS unit has seen its sales growth decelerate in recent qtrs as companies trimmed their cloud spend amid rising interest rates.  Execs expressed some optimism in Feb when they said the market is starting to show signs of a reacceleration.  The cuts to AWS' store technology team come after the company said it would remove cashierless checkout systems in its US Fresh stores.  The AWS unit includes teams overseeing the cashierless tech, called Just Walk Out, as well as its Dash smart carts & AMZN One palm-based payment technology.  The store technology team was moved out of AMZN's retail group & folded into its cloud computing division in 2022.  The AWS spokesperson said the company decided to make cuts to the store technology division “as a result of a broader strategic shift in the use of some applications in Amazon’s owned as well as in third-party stores.”  The stocks rose 1.72.

Amazon cuts hundreds of jobs in cloud computing unit

Tesla's (TSLA) quarterly deliveries declined for the first time in nearly 4 years & fell short of estimates amid a challenging competitive landscape in the EV market & questions regarding the company's direction.  The Elon Musk-led automaker's stock is down nearly 33% on the year.  That followed its announcement that it delivered roughly 387K vehicles in the first qtr, well below expectations of about 443K & an 8.5% decrease compared to the first qtr of last year.  "Let's call this as it is: While we were anticipating a bad 1Q, this was an unmitigated disaster 1Q that is hard to explain away," Dan Ives, managing director & equity analyst of Wedbush Securities, wrote.  He added that the firm remains "bullish on the long term story given the prospects for growth" but described the delivery figures as a "train wreck into a brick wall quarter" for TSLA.  TSLA faced an escalating price war in China, a key market for the EV maker, as low-cost competitors like BYD forced it to reduce prices & cut into its margins.  High interest rates in the US, a byproduct of the Federal Reserve's fight against inflation, have also made it more expensive for American car buyers, a dynamic TSLA has sought to counteract with temporary discounts to entice customers.  Having faced a variety of headwinds in the latest qtr, Ives said Musk needs to right the ship to regain investors' confidence in his leadership of the world's most valuable automaker.  "For Musk, this is a fork in the road time to get Tesla through this turbulent period, otherwise troubling days could be ahead. With the ongoing debacle around margins, production and ongoing macro events, Musk will need to quickly take the reins back in to regain confidence in the eyes of the Street with a big few quarters ahead."  The stock rose 1.75.

Tesla's weak first-quarter deliveries an 'unmitigated disaster' for Musk

Gold prices raced to a record high yet again, after Federal Reserve Chair Jerome Powell reiterated that recent readings on job gains & higher-than-expected inflation do not materially change the overall picture of economic policy this year.  Spot gold rose 0.5% to $2292 per ounce after hitting a record high of $2294 earlier in the session.  US gold futures settled 1.5% higher at $2315.  Investors still expect a first rate cut at the Fed's Jun 11-12 policy meeting, even as stronger recent economic data has sown investor doubts about that outcome.  Gold, a hedge against inflation & a safe haven during times of political & economic uncertainty, has climbed over 11% so far this year, helped by strong central bank buying & safe-haven demand.  The US jobs report for Mar is due Fri, with new inflation data coming next week.

Gold plows to record high after Powell's remarks

West Texas Intermediate (WTI) crude oil closed at its highest level in more than 5 months, but gave up some early gains after a report showed an unexpected rise in US oil inventories.  WTI crude for May closed up 28¢ to settle at $85.43, the highest since late Oct, but down from session highs of $86.20 & Jun Brent crude, the global benchmark, was last seen up 46¢ to $89.38.  In its weekly survey, the Energy Information Administration reported US oil inventories rose by 3.2M barrels last well, while the estimate expected a drop of 1.5M barrels.  Gasoline inventories fell by 4.3M barrels, while distillate inventories fell by 1.3M barrels.  The report contradicted the American Petroleum Institute's weekly inventory survey released yesterday, which showed oil stocks fell by 2.29M barrels last week.  OPEC+ held a ministerial meeting today that ended as expected with no changes to the cartel's production policy, sticking to voluntary cuts of 2.2M barrels per day that have kept supply under demand, cutting into inventories & supporting high oil prices.  Geopolitical risk is also supporting prices amid rising concerns over a wider Middle East war after Israel attacked Iran's embassy in Syria on the weekend, killing key members of Iran's military leadership.  Iran said it will retaliate for the attack.

WTI Crude Oil Closed at Highest Level in More than Five Months, But Off Day Highs As US Inventories Unexpectedly Rose

Stocks began the new qtr with a fair amount of selling.  While there are plenty of problems to worry about, the threat of slower rate cuts is rattling investors.  Many have become addicted to low rates & can't wait to see those low rates again.

Dow Jones Industrials