Markets rise while tech stocks lag

Dow rose 568 (with buying into the close), advancers over decliners 5-2 & NAZ inched up pennies after being in the red all day.  The MLP index gained 3+ to the 275s & the REIT index gained 6+ to the 372s,  Junk bond funds were slightly higher & Treasuries were purchased which lowered yields.  Oil was off 1 to the high 76s & gold dropped 20 to 2345 (more on both below).

Dow Jones Industrials 

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Dell (DELL) fiscal first-qtr results that beat expectations & offered rosy guidance.  The company said revenue for the period was $22.2B, which was up from the $21.6B the estimate.  For its 2nd qtr, DELL expects EPS of $1.65 & expects sales to come of $23.5-24.5B.  Analysts were expecting $23.3B.  DELL guided for $93.5-97.5B in sales in the full fiscal year.  The beat wasn't enough to appease investors, & shares tumbled.  Bernstein analysts said the “principle disappointment” in DELL's results was that operating margins for its Infrastructure Solutions Group compressed year over year.  Additionally, operating profits were flat compared with the same period last year, even though the company brought in around $1.7B in incremental AI server revenues.  They said this resurfaced concerns that DELL's AI servers are being sold at “near-zero margins.”  In other words, the company's AI initiatives are not translating into profits yet.  “On net, relative to very high expectations, Dell’s Q1 25 results were disappointing,” the analysts wrote.  The stock tumbled 30.23 (18%).

Shares of Dell fall 16% as AI servers are sold at ‘near-zero margins’

The Food & Drug Administration approved Moderna’s (MRNA) vaccine for respiratory syncytial virus for adults ages 60 & above, the company's 2nd-ever product to enter the US market.  The decision is a win for MRNA, which desperately needs another revenue source amid plunging demand for its Covid jab, its only commercially available product.  The approval of this shot is based on a late-stage trial on older adults, who are more vulnerable to severe cases of RSV.  The virus kills 6-10K seniors every year & results in 60K - 160K hospitalizations, according to data from the Centers for Disease Control & Prevention.  MRNA's shot will be marketed under the brand name mRESVIA & is the first messenger RNA vaccine to get approved for a disease other than Covid.  The company’s shot is also the only RSV vaccine to be available in a pre-filled syringe, which is designed to make it easier to administer to patients.  An advisory panel to the CDC will vote in Jun on recommendations for the use & intended population of MRNA's shot.  The stock sank 8.92 (6%).

FDA approves Moderna’s RSV vaccine for seniors, the company’s

Pfizer (PFE) said its drug (Lorbrena) for an advanced form of lung cancer showed promising long-term results in a late-stage trial, which may help establish it as the new standard treatment for the condition.  The medicine helped patients live longer without seeing their cancer progress & most people experienced that benefit for over 5 years.  Lorbrena, also cut the risk of the cancer progressing in patient' brains.  Lorbrena is already approved in the US for treating adults with advanced non-small cell lung cancer who have a mutation in a gene called ALK.  Only about 5% of all non-small cell lung cancer patients have the mutation, which causes cancer cells to grow & spread abnormally.  But that translates to 72K people who are diagnosed with that specific form of lung cancer each year worldwide, according to PFE.  That cancer is typically aggressive & often affects younger people.  More broadly, non-small-cell lung cancer is a common form of the disease.  Lorbrena is specifically approved as a first-line treatment for that form of lung cancer, meaning patients who take it have not received any other therapy.  But the drug isn't currently considered the standard, or the most appropriate & widely used, treatment for the condition.  The company thinks the new 5-year data on the drug will change that.  “In cancer medicine in general, you always want to give the best medicine upfront first. So that’s why we believe this data … will lead to [Lorbrena] becoming a standard” first-line treatment in this specific form of lung cancer, Chris Boshoff, PFE's chief oncology officer, said.  The stock rose 47¢.

Pfizer’s drug for advanced lung cancer shows promising long-term trial results

Gold prices eased as investors digested US inflation report that was largely in line with estimates, although expectations that the Federal Reserve will cut interest rates this year kept bullion on track for its 4th straight monthly gain.  Spot gold gave up earlier gains to trade down 0.7% at $2325 per ounce & US gold futures settled 0.9% lower at $2346.  However, bullion was up 1.8% for the month.  On May 20, prices hit an all-time high of $2449.  Gold is down despite the friendly PCE report & softer consumer spending, which could suggest near-term exhaustion in what has been a remarkable rally in 2024.  Data showed the Personal Consumption Expenditures (PCE) Price Index rose 0.3% in Apr, in line with forecasts.  In the 12 months thru Mar, PCE inflation gained 2.7% as expected.

Gold Posts Fourth Monthly Rise on Fed Rate Cut Hopes

West Texas Intermediate (WTI) crude oil fell for a 3rd-straight session as US inflation data met the forecast ahead of this weekend's OPEC+ meeting, which is expected to roll into the 3rd qtr or beyond production cuts slated to expire at the end of Jun.  WTI crude for Jul closed down 92¢ to settle at $76.99 per barrel, while Jul Brent crude, the global benchmark, was last seen down 23¢ to $81.63.  The Bureau of Economic Analysis released the Apr Personal Consumption Expenditure (PCE) Index, the Federal Reserve's preferred inflation measure.  The index rose by 2.7% annualized last month, matching expectations, unchanged from Mar.  Core PCE, excluding volatile items, rose 0.2% from Mar, matching expectations & down from 0.3% a month earlier.  While coming in as expected, the index shows inflation remains stuck above the Federal Reserve's 2% target, though the $ & treasury yields weakened following the data.  OPEC+ will meet virtually on Sun to decide on the future of 2.2M barrels per day of voluntary production cuts, with the cartel expected to roll the cuts forward.  The group is looking to support prices that have been mostly stuck in a tight range since the beginning of the month despite the start of the high-demand US driving season.

WTI Crude Oil Closes Lower as U.S. Inflation Data Matches Expectations Ahead of Weekend OPEC+ Meeting

There was selling in stocks today after the inflation report was released at the opening.  But bulls returned in the PM to give Dow an advance.  However this was a tough week for tech stocks after NAZ set a new record of 17K on Tues.  Dow finished the month up 864 (helped by today's rally in the last hour of trading).  The bulls are having a tough time selling their message while high interest rates drag on.

Markets hesitate as Fed's favored inflation gauge slows

Dow slid back 17 after opening higher, advancers ahead of decliners 2-1 & NAZ went up 56.  The MLP index was up 1+ to the 273s & the REIT index added 1+ to 370.  Junk bond funds inched higher & Treasuries were purchased which lowered yields (more below).  Oil was lower in the 77s & gold fell 8 to 2358.

Dow Jones Industrials 

Inflation rose about as expected in Apr, with markets on edge over when interest rates might start coming down, according to a measure that is followed closely by the Federal Reserve.  The personal consumption expenditures price index (PCE) excluding food & energy costs increased just 0.2% for the period, in line with the estimate, the Commerce Dept reported.  On an annual basis, core PCE was up 2.8%, or 0.1 percentage point higher than the estimate.  Including the volatile food & energy category, PCE inflation was at 2.7% on an annual basis & 0.3% from a month ago.  Those numbers were in line with forecasts.  Fed officials prefer the PCE reading over the more closely followed consumer price index, which the Labor Dept compiles.  The measure accounts for changes in consumer behavior such as substituting less expensive items for costlier alternatives & has a wider scope than the CPI.  Since then, there has been some evidence that inflation is starting to ease again, albeit slowly.  The Apr consumer price index showed that inflation had cooled slightly to 3.4%, down from 3.5% the previous month, alleviating investor concerns that prices were heating up again.  A 1.2% rise in energy prices helped push up the headline increase.  Food prices posted a 0.2% decline on the month.  Goods prices rose 0.2% while services saw a 0.3% increase, continuing a normalization trend for an economy in which services & consumption provide much of the fuel.  Personal income increased 0.3% on the month, matching the estimate, while spending rose just 0.2%, below the 0.4% estimate & off Mar's downwardly revised 0.7%.  Adjusted for inflation, the spending numbers showed a 0.1% decline, due in large part to a 0.4% decrease in spending on goods & just a 0.1% rise in services expenditures.

The Fed’s preferred inflation measure rose 0.2% in April, as expected

Atlanta Federal Reserve Pres Raphael Bostic said that central bankers are unlikely to deliver an interest rate cut in Jul amid signs that inflation progress has slowed.  Asked whether there is a scenario in which the Fed would start to ease rates in Jul, Bostic said,  "I'm keeping my eyes on the short-run trajectory, and if we can continue to see that trajectory move forward, I think we will be in a good place. I don't think that's going to be in July."  He added that he is looking for economic data that shows the economy is "sufficiently strong" & inflation has moved closer to the Fed's 2% target before supporting any rate reductions, but he noted, "That's not my outlook today."  Still, Bostic, who is a voting member of the 12-person Federal Open Market Committee this year. said he would not wait until inflation falls to 2% in order to start loosening monetary policy.  "That would really cause inflation to overshoot, and that wouldn't be ideal," he added.  Bostic anticipates that inflation will come down "very slowly" over the course of the year & eventually settle around 2% in 2025 or even later.  Bostic said that he does not expect to raise rates again this year unless there is evidence that price pressures are heating up again within the economy.  "I've been on the record for more than a year now saying, 'I don't think that's going to be required for us to get to our 2% target,'" he continued.  "I still believe that today.  But if it were the case that inflation moved in the other direction, and we started to see some reacceleration in pricing power, I'd have to take on board the likelihood that a rate increase is appropriate. But I don't see that happening today."

Fed's Bostic signals central bank unlikely to cut interest rates in July

Treasury yields were slightly lower after the Federal Reserve's preferred inflation data (PCE) came in mostly in line with expectations.  The benchmark 10-year Treasury yield fell more than 3 basis points to 4.518% & the 2-year Treasury yield was down more than 1 basis point to 4.912%.  Yields & prices have an inverted relationship & 1 basis point equals 0.01%.  The PCE release comes after another key inflation measure, the consumer price index, came in at 3.4% for Apr on an annual basis.  Core CPI increased 3.6% on a 12-month basis.  Inflation has proven stickier than previously thought this year, pushing back expectations for when interest rates may be cut. CME Group's FedWatch tool last showed that traders were not pricing in rate cuts for the Fed's Jun or Jul meetings & chances of a cut in Sep were at around 50%.  The next Fed policy meeting is scheduled for Jun 11-12.  Fed officials have repeatedly indicated that they are looking for more data evidence that inflation is easing before moving to cut rates & that patience would be required.

Treasury yields dip after inflation data roughly matches expectations

Inflation data continues to be more of the same, fairly good but no quite good enough to take Treasury rates lower.  This scenario could last for the rest of the year.  Investors used to much lower rates may get impatient while they wait for the Fed to cut rates.

Markets extend slide ahead of inflation data reported tomorrow

Dow declined 330 (session lows), decliners over advancers better than 3-1 & NAZ was off 183.  The MLP index fell 1+ to the 271s & the REIT index gained 5+ to the 365s on lower yields.  Junk bond funds were little changed & Treasuries continued in demand by investors, lowering yields.  Oil fell 1+ to 78 & gold was flat at 2363 (more on both below).

Dow Jones Industrials 

New York Federal Reserve Pres John Williams said inflation is still too high, but he is confident it will start decelerating later this year.  With markets on edge over the direction of monetary policy, Williams offered no clear indication of his position on possible interest rate cuts.  Instead, he reiterated recent positions from the central bank that it has seen a “lack of further progress” toward its goals as inflation readings have been mostly higher than expected this year.  “The honest answer is, I just don’t know,” Williams said during a Q-&-A session.  “I do think that monetary policy is restrictive and is bringing the economy a better balance. So I think at some point, interest rates within the US will, based on data analysis, eventually need to come down. But the timing will be driven by how well you achieve your goals.”  Williams called the policy “well-positioned” & “restrictive” & said it is helping the Fed achieve its goals.  Regarding potential rate hikes, he said, “I don’t see that as the likely case.”  Earlier this year, markets had expected aggressive rate cuts from the Fed this year.  But higher than expected inflation readings have altered that landscape dramatically & current pricing is pointing to just 1 decrease, probably in Nov.  “With the economy coming into better balance over time and the disinflation taking place in other economies reducing global inflationary pressures, I expect inflation to resume moderating in the second half of this year,” Williams said.  “But let me be clear: Inflation is still above our 2% longer-run target, and I am very focused on ensuring we achieve both of our dual mandate goals.”

Fed’s Williams says inflation is too high but will start coming down soon

The US economy grew more slowly than initially thought during the first qtr.  The Bureau of Economic Analysis's (BEA) 2nd estimate of first qtr US gross domestic product (GDP) showed the economy grew at an annualized pace of 1.3% during the period, down from a first reading in Apr of 1.6% growth & in line with estimates.  The update to the first qtr growth metric "primarily reflected a downward revision to consumer spending," per the BEA.  Personal consumption in the first qtr grew at 2%, down from a prior reading of 2.5%.  The reading came in significantly lower than 4th qtr GDP, which was revised up to 3.4%.  The slowdown in headline GDP comes at a time when markets have been sensitive to any readings indicating that the economy may be running too hot for the Federal Reserve's liking, as inflation has proved stickier than expected.  The concern is red-hot growth would boost price increases.  Many forecasters don't see the first qtr economic growth slowdown as the start of a broader trend.  Prior to this reading, Goldman Sachs expected 3.2% annualized growth in the 2nd qtr.  Meanwhile, the Atlanta Fed's GDPNow forecaster is currently projecting 3.5% annualized growth in the 2nd qtr.

The US economy grew at a slower pace than initially thought in Q1

Foot Locker's (FL) turnaround is starting to bear some fruit.  The sneaker giant saw comparable sales decline 1.8% during its fiscal first qtr, far better than the 3.1% drop-off that had been expected.  The company also reaffirmed its fiscal year guidance, which projects sales to be between a 1% decline & a 1% gain, compared with a decline of 0.6% that analysts had forecast.  EPS for the 3-month period that ended May 4 was 9¢, compared with 38¢ a year earlier.  Adjusting for 1-time items, including impairments associated with certain store closures & restructuring, among other costs, EPS was 22¢.  Sales dropped to $1.88B, down about 3% from $1.93B a year earlier.  For the full year, FL expects adjusted EPS of $1.50 - $1.70, ahead of estimates of $1.57.  The company is expecting comparable sales growth of  1-3%, ahead of the 1.5% growth that analysts had expected.  “We had a solid start to the year in the first quarter, which demonstrates that our Lace Up Plan is working,” CEO Mary Dillon said.  “The reason I feel confident — we’re launching an enhanced FLX rewards program, so we have a lot of opportunity with rewards. We’re launching a revamped mobile app, which we know is a great way to drive customer engagement and commerce and we see growth opportunities ... with all of our brand partners throughout the year, including returning to growth with Nike in the holiday quarter.”  The stock went up 3.35 (15%, but off early highs).

Foot Locker stock surges 20% as turnaround shows signs of life

Gold prices trimmed some of yesterday's losses & rose 0.4% after the Gross Domestic Product (GDP) showed the economy is slowing, reigniting hopes that the Federal Reserve (Fed) may cut rates later in the year.  The XAU/USD trades at $2347, bouncing off daily lows of $2322.  The yield of the 10-year note collapsed almost 7 basis points (bps) to 4.548%, while the Greenback followed suit.  The US Dollar Index (DXY) lost 0.43%, at 104.67.  The US economy grew at a slower rate than in the 4th qtr of last year, indicating that higher borrowing costs set by the Fed are taking their toll on the economy.  Meanwhile, the Dept of Labor revealed an increase in the number of people applying for unemployment benefits.

Gold Price Rebounds Due to Soft US GDP Fueling Rate Cut Speculation

West Texas Intermediate (WTI) crude oil closed lower as inflation worries offset a report showing US inventories fell sharply last week.  WTI crude oil for Jul closed down $1.32 to settle at $77.91 per barrel, while Jul Brent crude, the global benchmark, was last seen down $1.60 to $82.00.  In its weekly survey, the Energy Information Administration reported US oil inventories fell by 4.2M barrels last week, well more than the consensus estimate for a drop of 1.9M barrels.  However gasoline inventories rose by 2M barrels while distillate stocks rose by 2.5M barrels.  The bullish inventory report failed to spur buying as the market turns risk adverse ahead of the tomorrow's release of the Personal Consumption Expenditure Index for Apr, the Federal Reserve's preferred inflation measure.  The estimate expects the report to show inflation at a 2.7% annualized rate, unchanged from Mar & still ahead of the Fed's 2% target.

WTI Crude Oil Falls Despite a Drop in U.S. Inventories as the Market Avoids Risk Ahead of Friday Inflation Data

Lingering concerns about higher-for-longer interest rates are making investors nervous.  The revised GDP data (see above) gives hopes for the Fed to cut rates sooner.  But the overriding sentiment remains gloomy.  Tomorrow's inflation data comes 11 days before the next Fed meeting.

Markets sell off on lackluster earnings and rate fears

Dow dropped 386, decliners over advancers 3-1 & NAZ declined 126.  The MLP index was off 1 to the 272s & the REIT index rose 4+ to 365.  Junk bond funds hardly budged & Treasuries were purchased, which lowered yields (still in high territory).  Oil slid back to the 78s (a low since early Mar) & gold inched up 1 to 2365.

Dow Jones Industrials 

US economic activity continued to expand from early Apr thru mid-May but firms grew more downbeat about the future amid weakening consumer demand while inflation continued to increase at a modest pace, a Federal Reserve survey showed, as central bankers mull how long they will need to keep interest rates at current levels.  The central bank's latest temperature check on the health of the economy also showed that the jobs market continues to gradually cool back down toward more normalized levels.  The survey, released roughly every 6 weeks, comes as policymakers remain uncertain on when to start a rate-cutting cycle after holding interest rates at 5.25-5.50% for the past 10 months.  They are keenly watching trends in activity, jobs & pricing pressures in order to make their decision.  "National economic activity continued to expand...however, conditions varied across industries and districts," the Fed said in its survey, known as the "Beige Book," which polled business contacts across the central bank's 12 districts thru May 20.  "Overall outlooks grew somewhat more pessimistic amid reports of rising uncertainty and greater downside risk."  Waning consumer demand was an ongoing concern for many firms, the Dallas Fed noted, while the continued conflict in the Middle East & further geopolitical tensions across the world were also cited as downside risks.  Most Fed districts reported slight or modest growth in economic activity, while 2 noted no change.  In particular, retail spending was described as flat to up slightly, echoing recent data that indicated consumers are pulling back on spending.  The Fed's benchmark interest rate is set to remain unchanged at the next policy meeting on Jun 11-12 & Fed officials, while all but ruling out another rate hike, have indicated they need consistent encouraging inflation data over a number of months before lowering borrowing costs after being stung by bigger-than expected price increases the first 3 months of the year.

Fed survey: US firms grow more pessimistic on economic outlook

Kohl's (KSS) shares plummeted after the company posted a surprise loss per share, coming in well below expectations for a slight profit.  The loss was 24¢ per share, compared with a year-ago EPS of 13¢.  Net sales decreased 5.3% to $3.18B compared with the year prior, with comparable sales down 4.4%.  The company also lowered its 2024 guidance.  It now expects full-year net sales to decline of 2-4%.  Analysts had been expecting its 2024 sales guidance to reflect a 0.2% gain.  KSS expects full-year diluted EPS of $1.25 - $1.85, far lower than the $2.34 per share expected.  “We recognize we have more work to do in areas of our business,” CEO Tom Kingsbury said.  “We are approaching our financial outlook for the year more conservatively given the first quarter underperformance and the ongoing uncertainty in the consumer environment.”  Kingsbury noted positive trends in the women's category & continued strong growth in the retailer's Sephora shop-in-shop partnership.  KSS announced in Mar that it would add similar in-store outposts of Babies R Us to about 200 locations.  “We continue to have high conviction in our strategy and believe that our key growth initiatives, including Sephora, home decor, gifting, impulse, and our upcoming partnership with Babies ‘R’ Us, will contribute more meaningfully going forward,” he added.  The stock tumbled 7.40 to 19.85.

Kohl’s stock plummets 25% after massive earnings miss

Signed sales contracts on existing homes dropped 7.7% in Apr compared with Mar, the slowest pace since Apr 2020, according to the National Association of Realtors (NAR).  The pending sales are a forward-looking indicator of closed sales 1-2 months later.  Pending sales were 7.4% lower than in Apr of last year & sales were expected to be flat compared with Mar.  Because the count is based on signed contracts, it shows how buyers are reacting to mortgage rates in real time.  The average rate on the 30-year fixed ended Mar at around 6.9% & then took off, hitting 7.5% by the end of Apr, according to Mortgage News Daily.  With home prices still climbing & supply very low, leading to increased competition, that jump in rates had a huge effect on sales.  “The impact of escalating interest rates throughout April dampened home buying, even with more inventory in the market,” said Lawrence Yun, chief economist for the NAR.  “But the Federal Reserve’s anticipated rate cut later this year should lead to better conditions, with improved affordability and more supply.”  Sales were down in every region of the country, but they fell hardest in the Midwest & West.  The former has some of the most affordable markets in the nation & the latter has some of the most expensive.  “The prospect of measurable home price declines appears minimal. The few markets experiencing price declines will be viewed as second-chance opportunities for buyers to enter the market if those regions continue to add jobs,” Yun added.  Perhaps in reaction to the slow sales pace in Apr, the share of sellers cutting prices in May hit 6.4%, the highest level since 2022, according to a new report from Redfin.  The median asking price also dropped for the first time in 6 months.  Active inventory in Apr was 30% higher than in Apr 2023, according to Realtor.com, which suggests the summer market could be more active than last year.  “Though inventory and prices are moving in a more buyer-friendly direction, lower mortgage rates will be crucial in bringing both buyers and sellers back into the market,” said Hannah Jones, senior economic research analyst with Realtor.com.

Pending home sales in April slump to the lowest level since the start of the pandemic

Stocks have lost steam amid renewed gloom about the odds for rate cuts.  Earnings are coming in sluggish at best & anxiety over high interest rates are keeping investors on the sidelines.

Markets slump as rising Treasury yields rattle investors' nerves

Dow dropped 407 (near session lows), decliners over advancers 5-1 & NAZ pulled back 99.  The MLP index was off 2+ to the 273s & the REIT index declined 3 to 361.  Junk bond funds dipped lower & Treasuries continued to be sold, bringing higher yields.  Oil slid down to just above 79 & gold was off 17 to 2338 (more on both below).

Dow Jones Industrials 

A Goldman Sachs exec & finance industry veteran will take over as the new pres of the Cleveland Federal Reserve.  The central bank district announced that Beth M Hammack, 52, will be the next leader of the central bank district when Loretta Mester steps down June 3.  Hammack assumes the office officially on Aug 21.  In the interim, Cleveland Fed First VP Mark S Meder will serve as the pres.  “It is a great privilege to serve the Fourth District, and the country, in fulfilling our mission of fostering a strong, stable economy in which all Americans have the opportunity to prosper,” Hammack said.  “I cannot wait to lead the Bank’s talented team, who deliver every day on our important mission.”  As the Fed contemplates its next moves with monetary policy, the Cleveland pres plays an important role this year as a voter on the rate-setting Federal Open Market Committee.  Mester mostly has been known for her more hawkish views, meaning she often has favored tighter economic policy to meet the central bank's inflation mandate.  In a recent speech, she offered several recommendations to her colleagues on improving communications, including more detailed post-meeting statements to provide greater explanation about the committee's actions.  Hammack comes to the Cleveland Fed after serving with Goldman Sachs since 1993 in multiple roles, having been a partner since 2010 after being named managing director in 2003.  Most recently, she served as global finance director.

Goldman Sachs partner Beth Hammack to succeed Mester as Cleveland Fed leader

Stellantis (STLA) plans to offer a $25K all-electric Jeep vehicle in the US “very soon” to better attract mainstream consumers amid slower-than-expected electric vehicle adoption, CEO Carlos Tavares said.  Tavares disclosed few details about the upcoming vehicle, saying it will be priced around $25K in the US to emulate STLA's pricing of the Citroen e-C3 SUV, a low-cost model starting at €23K, about $25K in Europe.  “In the same way we brought the 20,000 Euro Citroen e-C3, you will have a $25,000 Jeep very soon,” he said.  “We are using the same expertise because we are a global company and this is totally fluid across the engineering world of Stellantis.”  STLA currently offers an all-electric version of its Avenger SUV in Europe, starting at about €35K (about $38K).  The vehicle is not sold in the US, where the automaker has focused on plug-in hybrid electric Jeep vehicles.  Offering a new EV for around $25K has long been a target for automakers.  The importance of such a vehicle has grown more apparent as Chinese automakers such as BYD & Nio grow their sales of less-expensive EVs outside of China.  “If you ask me what is an affordable BEV, I would say 20,000 euros in Europe and $25,000 in the U.S.,” Tavares said.  “So our job is to bring the safe, clean and affordable BEV to the U.S., $25,000. We’ll do it.”  The stock fell 63¢.

Stellantis CEO says $25,000 Jeep EV coming to the U.S. ‘very soon’

Dick's Sporting Goods (DKS) said customers are spending more on new sneakers & athletic gear, leading the retailer to raise its full-year earnings guidance.  The big-box sports store's comparable sales grew 5.3% during its fiscal first qtr, well ahead of the 2.4% growth that was expected.  Growth was driven by a 2.7% increase in transactions, meaning more customers are shopping at DKS & a 2.6% jump in average ticket values, showing that shoppers are spending more, too. Its 3-month period that ended May 4 was $3.30 compared with $3.40 a year earlier.  Sales rose to $3.02B, up about 6% from $2.84B a year earlier.  “We saw growth across all of the different areas of our business. Footwear, apparel, total hard lines, all grew,” CEO Lauren Hobart said.  “The consumer is absolutely putting a priority on a healthy and active lifestyle. You see people running and walking, being outdoors. But I think the most important thing is that we are providing them with an experience that they’re clearly choosing and that’s both through the products that we have in our stores, as well as the experience that we provide in-store and online.”  The strong qtr led DKS to raise its full-year guidance, but the company is remaining cautious for the back ½ of the year.  The retailer is now expecting EPS of $13.35 - $13.75, up from its estimate of $12.85 - $13.25 & is ahead of the $13.25 that analysts had expected.  The retailer's caution was reflected in its sales guidance, which fell a bit flat after its first-qtr revenue beat.  DKS now expects comparable sales to rise 2-3%, compared with previous guidance of up 1-2%.  The low end of that range is only in line with the 2% growth that analysts had expected.  DKS is expecting full-year revenue of $13.1 - $13.2B, which is also in line with estimates of $13.16.  “What we have done today in terms of the full-year guidance, is it reflects the results that we posted here in Q1 and we maintained largely our expectations for Q2 through Q4,” finance chief Navdeep Gupta said.  “There’s a little bit of a disconnect with the external consensus expectation but I would say, you know, we are appropriately cautious as we think about Q2.”  The stock jumped 30.92 (16%).

Dick’s Sporting Goods stock surges 15%, as retailer says shoppers are spending on sneakers, apparel

Gold prices slumped amid rising Treasury yields, boosting demand for the Greenback due to hawkish comments by a Federal Reserve (Fed) official.  Consequently, sentiment shifted sour, the $ climbed & the XAU/USD is down 0.9%.  Stocks were in the red, while US yields from the belly to the long end of the curve rose 4-6 basis points.  Meanwhile, a scarce economic docket today kept traders digesting Minnesota Fed Pres Neel Kashkari's hawkish comments from yesterday.  He said that Fed officials hadn’t disregarded rate hikes while adding that if they cut borrowing costs, it would be twice toward the end of 2024.  Data-wise, the US Conference Board (CB) revealed that May's consumer confidence improved, yet Americans began to worry about a possible recession in the next 12-18 months, wrote Dana Paterson, The Conference Board's Chief Economist.

Gold Price Tumbles on Wednesday as Rising US Yields Boost Greenback

West Texas Intermediate (WTI) crude oil closed lower, dropping as the $ rose despite expectations OPEC+ will roll current production cuts into the high-demand 3rd qtr, squeezing global inventories.  WTI crude oil for Jul closed down 60¢ to settle at $79.23 per barrel, while Jul Brent crude, the global benchmark, was last seen down 48¢ to $83.74.  The drop came as the $ rose, with the ICE dollar index last seen up 0.44 points to 105.06.  OPEC+ will meet virtually on the weekend to decide on whether to extend voluntary quota cuts slated to expire at month's end into the 3rd qtr, with the cartel widely expected to roll the cuts forward.  The meeting comes as the US summer driving season is underway, raising demand for gasoline & supporting prices, though a strong $ supported by high interest rates could offset demand gains.  The market is waiting for further US inflation data coming on Fri that is likely to influence the Federal Reserve's rate policy.

WTI Crude Closes Lower Ahead of Expected Extension of OPEC+ Voluntary Production Cuts

Stocks began the day substantially lower & the bulls remained on vacation all day.  A spike in Treasury yields unsettled investors.  Stronger-than-expected consumer confidence indicates signals rate cuts are still down the road.  After raised expectations for rate cuts coming earlier this year, investors are getting impatient!!

Markets tumble as Treasury yields rise

Dow dropped 354, decliners over advancers a very big 6-1 & NAZ was off 70.  The MLP index was off 1+ to the 273s & the REIT index fell about 4 to the 359s on higher interest rates.  Junk bond funds edged lower & Treasuries were sold which raised yields.  Oil slid back jump change in the 79s after beginning the day higher & gold fell 14 to 2342.

Dow Jones Industrials 

After a brief pullback during much of May, mortgage rates began rising again last week.  That had an immediate impact on what had been several weeks of strengthening mortgage demand.  The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766K or less) increased to 7.05% from 7.01%, with points rising to 0.63 from 0.60 (including the origination fee) for loans with a 20% down payment.  That was the first increase in 4 weeks, & while it might not seem like a huge move, that is an average, & rates had fallen back into the high 6% range before shooting higher in the 2nd ½ of the week.  As a result, total mortgage application volume fell 5.7% last week compared with the previous week, according to the Mortgage Bankers Association's seasonally adjusted index.  “Both purchase and refinance applications fell, pushing overall activity to the lowest level since early March,” wrote Joel Kan, an MBA economist.  “Borrowers remain sensitive to small increases in rates, impacting the refinance market and keeping purchase applications below last year’s levels.  Refinance demand, which had been in a small recovery phase, plunged 14% for the week but was still 12% higher than the same week 1 year ago.  Applications for a mortgage to purchase a home fell 1% for the week & were 10% lower than the same week 1 year ago.  “There continues to be limited levels of existing homes for sale and many buyers are struggling to find listings in their price range that meet their needs,” Kan added.  Mortgage rates jumped sharply to start this week, rising 12 basis points yesterday, according to a separate survey from Mortgage News Daily.  This followed comments yesterday on the direction of interest rates from Minneapolis Federal Reserve Pres Neel Kashkari.  He said that he needs to see, “Many more months of positive inflation data, I think, to give me confidence that it’s appropriate to dial back.”

Weekly mortgage demand drops to three-month low, as rates begin climbing again

American Airlines (AAL) will slash its capacity growth in the 2nd ½ of the year & consider a host of other changes, CEO Robert Isom said, after the carrier cut its revenue & profit forecast & said it is parting ways with its Chief Commercial Officer, Vasu Raja.  AAL will grow capacity about 3.5% in the 2nd ½ of the year compared with the year earlier, down from roughly 8% year-over-year growth in the first 6 months of 2024.  Shares tumbled while investors weighed the airline's missteps as the peak travel season gets underway, with some analysts questioning whether how the carrier could capitalize on what rivals expect to be a record summer.  Isom said AAL is weighing changes to a plan Raja led to drive direct bookings at the airline in lieu of 3rd-party sites & travel agencies, a strategy that included gutting the airline's sales dept.  The changes angered some travel agencies who weren't able to access some of the carrier's fares as before, & Raja said last month that the airline's corp booking growth was coming in behind its big rivals.  Raja will leave the company next month.  “We’ve use a lot of sticks. We’ve got to put some more carrots in place and make sure that our product is available wherever customers want to buy it,” Isom said.  AAL in Feb said it would limit some travel agency bookings from being eligible to earn AAdvantage frequent flyer miles.  Isom said today that the airline would reverse that decision.  “That’s off,” Isom said.  “We’re not doing that because it would create confusion and disruption for our end customer.”  After the market closed yesterday, AAL said its unit revenues could fall as much as 6% in the 2nd qtr from a year earlier, down from its forecast last month of a no more than 3% decline.  Airlines make the bulk of their money during the 2nd & 3rd qtrs, but some areas have fared better than others.  The stock was off 2.04 (15%).

American shares tumble 15% after sales strategy backfires; carrier cuts growth

Abercrombie & Fitch (ANF) reported its strongest first qtr in its history, continuing a winning streak that again exceeded expectations.  The retailer's sales jumped compared with last year, while profits were nearly 7 times higher & well ahead of estimates.  EPS was $2.14, compared with 32¢ a year earlier.  Sales rose to $1.02B, up about 22% from $836M a year earlier.  “We successfully navigated seasonal transitions with relevant assortments and compelling marketing, leveraging agile chase capabilities and inventory discipline, driving sales above our expectations,” CEO Fran Horowitz said.  “Growth was broad-based across regions and brands with Abercrombie brands registering 31% growth and Hollister brands delivering growth of 12%.”  ANF has been one of the biggest winners in retail.  As it stares down a tough year of comparisons, the company is building on the double-digit sales growth it saw in 2023.  Comparable sales grew 21%, on top of the 3% growth it saw in the year-ago period.  ANF is expecting sales to rise again in the current fiscal year & increased its revenue guidance.  For the full year, the retailer now expects sales to grow about 10%, compared with a previous outlook of between 4-6%.  Analysts had expected growth of about 7%.  For the current qtr, ANF anticipates sales will increase by a mid-teens percentage, ahead of estimates of up 9%.  The stock jumped 28 (19%).

Abercrombie & Fitch shares jump more than 10% as retailer’s torrid growth continues

The 10-year Treasury yield topped the key 4.5% level yesterday & today the benchmark yield inched up further to trade around 4.57%.  Investors are trying to puzzle out what yesterday's stronger-than-expected consumer confidence print means for Fed policymaking, but they are braced for a long wait for a pivot to rate cuts after a litany of warnings from its officials.  Dow is down 1500 in just the last couple of weeks.

Markets fall while consumer confidence improves

Dow declined 244 (near session low), decliners over advancers about 2-1 & NAZ was up 89 (off earlier highs).  The MLP index slid fractionally to the 273s & the REIT index fell 2+ to the 363s.  Junk bond funds slid lower along with stocks & Treasuries ran into selling which raised yields.  Oil jumped 2+ to 80 & gold shot up 21 to 2356 (more on both below).

Dow Jones Industrials 

Nearly 6 months since McDonald's (MCD), a Dow stock & Dividend Aristocrat, opened its first CosMc's location, the hours-long drive-thru lines have died down, but the chain is just getting started.  The burger giant created the spinoff using one of its lesser-known McDonaldland mascots, CosMc, an alien who loves MCD's cheeseburgers.  While unveiling CosMc's at an investor event in Dec, CEO Chris Kempczinski said the company set out to create a brand that could sell customizable drinks & coffee popular in the PM segment to attract younger consumers.  The new brand rollout comes as beverages are increasingly “looked at now as part of that snack area — more affordable, indulgent & perhaps even a healthier treat,” said Katie Belflower, an editor at restaurant research firm Technomic.  “It’s a good profit margin for restaurants. With beverages, you can get really creative, without necessarily having the product lines that you would have to invest in with food.”  Since opening the initial location in the Chicago suburb of Bolingbrook, MCD's has opened 3 more CosMc's restaurants, all in Texas.  For now, the chain is planning to open 10 locations by the end of this year for a test run, with all but one located in the Lone Star State.  In another sign of the new brand’s expansion, it will launch its own mobile app & loyalty program, called CosMc's Club.  Customers can use the app to place orders that they pick up either inside the restaurant or in the drive-thru lane.  And loyalty program members earn 10 points for every $ they spend; once they rack up 400 points, they can redeem them for $2 rewards.  While the long-term fate of CosMc's is still too soon to tell, the gamble could pay off for MCD's even if the spinoff never makes it past the 10-location test phase.  The app & loyalty program will give the chain even more consumer insight.  The stock fell 4.56.

McDonald’s might never expand CosMc’s. But the spinoff could still pay dividends

Consumer confidence unexpectedly rose in May, ending 3 straight months of declines as Americans cheered a resilient labor market.  The latest index reading from the Conference Board was 102, above 97.5 in Apr & higher than had expected.  "Consumers’ assessment of current business conditions was slightly less positive than last month," Conference Board chief economist Dana Peterson said.  "However, the strong labor market continued to bolster consumers’ overall assessment of the present situation. Views of current labor market conditions improved in May, as fewer respondents said jobs were ‘hard to get.'"  Peterson added, "Fewer consumers expected deterioration in future business conditions, job availability, and income, resulting in an increase in the Expectation Index."  Just 13.5% of consumers said jobs were "hard to get," down from 15.5% in Apr.  Elevated prices remain a key sticking point for consumers & help explain why confidence hasn't fully rebounded.  Consumers cited prices, in particular those for food & groceries, as having "the greatest impact" on their view of the US economy.  The Conference Board's reading of 12-month inflation expectations ticked up to 5.4% from 5.3% the month prior.  This also came with a slight uptick in the percentage of consumers expecting higher interest rates over the next year.

Consumer confidence unexpectedly rebounds

When Starbucks (SBUX) & its baristas union resume contract bargaining this week, workers may have renewed momentum at their backs, courtesy of the company's own CEO.  The coffee giant last month found itself reporting an objectively challenging qtr.  US same-store sales fell 3% & traffic dropped 7% & the company cut its 2024 forecast.  CEO Laxman Narasimhan admitted SBUX was seeing a more cautious consumer when it came to spending, but also mentioned the need to make improvements to stores as the company saw troubling trends.  SBUX reported rates of incomplete mobile app orders in the mid-teens & said occasional customers came in less.  Narasimhan cited some of the challenges that union workers have been highlighting in their bid for better working conditions.  “Specifically in our U.S. stores, we’re focused on creating a more stable environment for partners through investments in equipment innovation, process improvements, staffing, scheduling and waste reduction, all things our partners value and prioritize creating a more satisfying work environment in our stores while de-risking our business,” Narasimhan said.  He added that throughput has improved & said the company's action plan will continue to build on that momentum with improvements to stores & better communication of value.  “We have improved speed of service quarter over quarter. If you look at the processes that we are rolling out, particularly around peak, what we are finding is that we have opportunities to improve that even further with changes in processes and tools that we provide to partners at peak,” Narasimhan said.  For Workers United, the union behind the SBUX organizing, his admission that more could be done was promising.  The stock fell 1.39.

Starbucks is set to resume union negotiations as it confronts issues at its stores

Gold prices gained, helped by a weaker $ as investors look forward to US inflation data due later this week for more clarity on interest rate cut timings.  Spot gold was up 0.3% at $2357 per ounce & US gold futures settled 0.9% higher at $2356.  The dollar index is down & the yield curve rated dropped a little bit.  Gold is coming off a correction & is hovering around resistance levels & now it's bouncing again.  The bulls continue to be fairly optimistic on gold.  Ambiguity of Federal Reserve monetary policy may very well keep gold from taking off & its moves may be very much data dependent.  The $ slipped to a more than 1 week low, making gold less expensive for other currency holders.  Focus this week will be on the US core personal consumption expenditures price index (PCE), the Fed's preferred inflation gauge, due on Fri.

Gold Moves Higher Midafternoon as the Dollar Weakens

West Texas Intermediate (WTI) crude oil closed higher on expectations the start of the US driving season will offer a boost to demand ahead of a weekend meeting of OPEC+ that is expected to keep supply restrictions in place.  WTI crude oil for Jul closed up $2.11 to settle at $79.83 per barrel, while Jul Brent crude, the global benchmark was last seen up 97¢ to $84.07.  The rise comes with the Memorial Day weekend start of the summer driving season, easing some concerns over weak demand amid high interest rates & rising US oil inventories.  OPEC+ will stage a virtual ministerial meeting over the weekend that is expected to end with a decision to roll 2.2-M barrels per day of voluntary production cuts slated to end on Jun 30 into the 3rd qtr as the cartel seeks to support prices.

WTI Crude Oil Closes Up 2.7% as The U.S. Driving Season Begins; OPEC+ is Expected to Keep Quota Cuts in Place

The bulls extended their long holiday, so the Dow was lower.  But the tech stocks on NAZ were still popular although early gains were trimmed in the PM.  Dow is already down 1200 from its record made 11 days ago & back to where it was in late Feb (on the way up).  The overbought rally looks to be tired.

Markets wobble as attention is on the next inflation reports

Dow retreated 131, decliners modestly ahead of advancers & NAZ rose 81 to another record.  The MLP index was steady in the 274s & the REIT index hardly budged in the 366s.  Junk bond funds inched higher & Treasuries had limited selling which raised yields (more below).  Oil gained 1+ to the 79s ( more below) & gold went up 20 to 2355.

Dow Jones Industrials 

The Federal Reserve should wait for significant progress on inflation before cutting interest rates, Minneapolis Federal Reserve Pres Neel Kashkari said.  Asked what conditions were needed for the Fed to cut rates once or twice this year, Kashkari said: “Many more months of positive inflation data, I think, to give me confidence that it’s appropriate to dial back.”  He said the central bank could potentially even hike rates if inflation fails to come down further.  “I don’t think we should rule anything out at this point,” Kashkari added.  He does not have a vote this year on the rate-setting Federal Open Market Committee, though he does get to have input during policy discussions.  He will vote next in 2026.  US inflation rose by a slightly less-than-expected 0.3% in Apr, providing some relief for policymakers.  Still, it remained up 3.4% on the year.  Kashkari said he was confident the Fed would ultimately reach its 2% inflation target, but added: “I’m not seeing the need to hurry and do rate cuts. I think we should take our time and get it right.”  He said the central bank may consider raising its target rate in the future but that it was not appropriate to “move the goal posts” at this stage.  Kashkari added  earlier this month that the Fed may need to hold interest rates steady for “an extended period” — possibly all year — in order to reach its target.

Fed’s Kashkari wants ‘many more months’ of positive inflation data before a rate cut

The 10-year Treasury yield edged higher to start the shortened trading week, as investors await fresh data releases on inflation.  The 10-year Treasury yield rose more than 1 basis point to 4.491%, while the 2-year Treasury yield shed 2 basis points to 4.933%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Investors are hungry for more data on the economic & inflationary picture after the minutes from the Federal Reserve's latest meeting, released last week, showed uncertainty among policymakers about when to ease policy.  On Fri, they'll parse the Apr personal income & expenditures report, which includes a measurement of price movements across a range of consumer expenses.  Also on Tues, Conference Board data showed consumer confidence unexpectedly increased.  However, expectations for inflation also climbed.

10-year Treasury yield inches higher to start shortened trading week

US crude oil gained more than 1% after booking a loss last week as the market focuses on an upcoming key OPEC+ meeting.  OPEC+ will hold a virtual meeting on Sun to review its production policy.  Several OPEC+ members are voluntarily holding 2.2M barrels per day off the market to support prices.  Deutsche Bank analyst Michael Hsueh said OPEC+ countries are unlikely to raise production given that the current price of Brent is closer to $80 per barrel than $90 per barrel.  Tamas Varga, analyst with oil broker PVM, said he expects “no changes in production will be forthcoming” because the meeting is virtual.  Deutsche Bank has maintained its current Brent forecast of $83 per barrel for the 2nd qtr & $88 in the 2nd ½ of the year, assuming OPEC+ will maintain its production policy on Sun.  But pressure will grow on the group after the Jun meeting to raise output, which could push Brent prices below $80 a barrel.  Saudi Arabia understands that maintaining a target price for oil significantly above a breakeven price of $75 per barrel for the broad US oil sector is unsustainable in the long term.  And the stabilization of US production since Sep has given OPEC some room to maneuver.

U.S. crude oil gains more than 1% as market looks to OPEC+ meeting on production levels

The stock market remains mixed, although investors keep bidding tech stocks on NAZ higher as it it flirts with a record 17K.  Meanwhile interest rates persist at high levels which are a drag on the economy.

Markets struggle to extend the rally while high inflation thoughts linger

Dow finished inched up 4, advancers over decliners about 5-2 & NAZ rose 175.  The MLP index was even in the 273s & the REIT index hardly budged in the 365s.  Junk bond funds fluctuated & Treasuries continued pretty much even.  Oil recovered 1 to the high 77s & gold was essentially even (more on both below).

Dow Jones Industrials 

A monthly gauge of US consumer sentiment fell in May on expectations of higher inflation.  The 2nd of 2 readings of the consumer-sentiment index was 69.1 in May, a sharp decline from 77.2 in Apr, the University of Michigan said.  The final reading was slightly higher than the initial estimate of 67.4 & was the lowest reading in 6 months.  The forecast called ofr a final May reading of 67.6.  According to the survey, Americans think inflation will average 3.3% in the next year, up from an expectation of 3.2% in the prior month.  The preliminary reading was 3.5%.  A gauge of consumers' views of current conditions fell to 69.6 in May from 79 in the prior month.  The preliminary estimate was 68.8.  The gauge of expectations for the next 6 months fell to 68.8 from 76 in Apr & the early May estimate was 66.5.  The plunge in sentiment in May has been taken by some economists to mean that consumers are worn down by inflation & might pull back on spending.  That could cause the economy to slow markedly.  This view was bolstered by the flat reading in retail sales in Apr.  Other economists dispute this gloomy outlook, saying that consumers remain resilient and some weakness might be the "pause that refreshes."  Federal Reserve officials are hoping that the economy cools so that inflation pressures abate.

U.S. consumer sentiment darkens in May on worries of higher inflation

New orders for key US-manufactured capital goods rebounded more than expected in Apr & shipments of those goods also increased, suggesting a moderate improvement in business spending on equipment early in the 2nd qtr.  Nonetheless, business investment on equipment continues to be hamstrung by higher borrowing costs.  That, together with a strong $ & weak global demand, is keeping manufacturing, which accounts for 10.4% of the economy, on the ropes.  Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, rose 0.3% last month after an upwardly revised 0.1% dip in Mar, the Census Bureau said.  The forecast called for the capital goods orders would edge up 0.1% after declining by a previously reported 0.2% in Mar.  The gov last week revised the orders, shipments & inventory data from Jan 2012 thru Mar 2024 after an annual review of the seasonal adjustment models, which it uses to strip seasonal fluctuations from the numbers.  The revision did not affect the unadjusted data.  Core capital goods orders jumped 1.2% on a year-on-year basis in Apr.  Shipments increased 0.4% after a 0.3% drop in Mar.  Non-defense capital goods orders fell 1.5% in Apr after advancing 1.3% in the prior month.  Shipments of these goods rose 2.4% after dropping 1.5% in Mar.  These shipments go into the calculation of the business spending on equipment component in the gross domestic product report.  They were partially flattered by higher prices, which could lessen the boost to GDP.

US core capital goods orders rise, inflation expectations improve

Inflation has steadily been rising in recent years.  The Consumer Price Index, a major measure of inflation, rose again in Mar, by 0.4% on all items.  Rising inflation is causing consumers to rely more heavily on credit cards for everyday expenses, a Varo Money survey found.  Almost to 65% of respondents to the survey blame their added credit card usage on inflated prices on essentials like groceries & utilities.  An additional 55% cite the increased cost of living as the reason behind their reliance on credit cards.  Gen Z has increased their credit card usage the most.  About 35% of Gen Zers reported using their credit cards more frequently, compared to 23% of millennials, 17% of Gen X & 21% of baby boomers.  Financial debts & struggles differ along gender lines.  More women (36%) reported being stressed about their financial situation compared to men (23%).  Most respondents want to address their debt & plan to use money they get back as tax refunds to better their financial situation.  42% of survey respondents plan to pay off debts with tax refund money & 34% plan to save for emergencies.

Credit card usage is up as inflation continues to rise

Gold prices rose as the $ slipped, but were headed for their worst week in 5½ months as hopes of interest rate cuts by the central bank tamed.  Spot gold rose 0.2% to $2332 per ounce as the $ index slipped 0.4%, making gold relatively less expensive for other currency holders.  US gold futures settled $1 lower to $2334.  Bullion hit a record high of $2449 on Mon, but has shed more than $100 since then & is on track for a 3% drop this week, its worst weekly dip since early Dec.  Minutes from the Federal Reserve's last meeting showed the central bank's path to 2% inflation could take longer than expected.  Traders' bets signaled growing doubts that the Fed will cut rates more than once in 2024, currently pricing in about a 63% chance of a rate cut by Nov according to the CME FedWatch Tool.  Higher interest rates make non-yielding gold a less appealing investment.  Despite uncertainty around US rate outlook, gold prices managed to gain 13% so far this year, largely on the back of strong Chinese demand & ongoing geopolitical uncertainties.

Gold Loses Momentum on Ebbing Rate Cut Speculation

Oil futures finished higher, but notched losses for the week as traders noted concerns that the Federal Reserve may keep interest rates elevated for longer than previously anticipated, posing a threat to demand if that causes a sharp economic slowdown.  WTI crude for Jul closed up 85¢ to settle at $77.72 per barrel as US oil prices continue going sideways around $80 a barrel.

Dow ended last week barely over 40K for a new record, but had only 2 up days this week & both were not impressive.  Today trading began with a solid gain, but that did not last.  Sellers returned to give it another loss.  For the week, Dow fell 948 from its previous record high.  People do not feel like the economy is doing well because inflation is a nagging problem that will not go away.  Maybe the shorten week next week will bring some relief.

Dow Jones Industrials 

Markets rebound after yesterday's biggest selloff in more than a year

Dow added 120, advancers over decliners 5-2 & NAZ gained 169.  The MLP index was steady at 274 & the REIT index crawled up 1+ to 367.  Junk bond funds went higher along with stocks & Treasuries were flattish, keeping yields little changed.  Oil rose fractionally to the 77s & gold inched up all of 1 to 2338.

Dow Jones Industrials 

Small business owners nationwide are sounding the alarm over another 4 years of Bidenomics as inflation chips away at their bottom lines.  "Biden should do something about it, and he should never continue because he only [cares] about himself and his family," Pluto Organic Cafe owner Maher Youssef said.  "We're all struggling]. Everybody is struggl[ing]. I don't know how we are going to continue like that."  According to RedBalloon & PublicSq's May Freedom Economy Index, 49% of surveyed business owners say they will "definitely" or "probably" not survive if Biden is re-elected in Nov.  One factor in the rising pessimism from business owners is skyrocketing prices for consumers & small businesses alike.  Since Pres Biden took office in 2021, prices are up nearly 20%.  Just last month, the consumer price index showed the cost of everyday goods was still on the rise, up 3.4% from Mar.  What's more, grocery prices have risen 21% in the last 3 years, according to the Bureau of Labor Statistics.  "So in 2020, when we first opened, we would pay around $15 a case for eggs, which is 15 dozen. Now it's upwards of $50, and sometimes it's $100 for a case of eggs," Just Baked Bakery & Deli co-owner Katlyn Swaffer also said.  "When you go buy little things, like salsa or bread or toast or anything, everything becomes very expensive. We can't put the prices too high because people can't afford to buy from you," Youssef added, also pointing to high gas prices.  Customers are also dwindling as business owners are faced with passing on costs.

Business owners fear another Biden term as inflation wreaks havoc

Tesla (TSLA) has cut output of its best-selling Model Y electric car by a double-digit percentage number at its Shanghai plant since Mar, according to industry data.  The move is aimed at addressing weakening demand for the US automaker's aged model in China, its 2nd largest market into which a majority of the cars produced at the Shanghai plant are sold & where a brutal price war has erupted among electric vehicle makers amid an economic slowdown.  The Shanghai plant, TSLA's biggest manufacturing hub globally, planned to cut Model Y output by at least 20% during the Mar-Jun period.  Data from the China Association of Automobile Manufacturers (CAAM) showed the output of Model Y in China stood at 49K units in Mar & 36K in Apr, 17.7% & 33% lower, respectively, compared to a year ago.  In total, TSLA produced 287K units of Model Y & Model 3 cars in China in the first 4 months, 5% lower than the same period in 2023, with Model 3 output 10% higher, CAAM data showed.  It was not immediately clear if the output cut would be extended to H2 or to Model 3 & if its plants in the US & Germany also adopted similar output cuts.  TSLA has left out its goal of delivering 20M vehicles a year by 2030 in its latest impact report, another sign the company was moving away from electric cars as it shifts focus to robotaxis.  The company has been accelerating its pivot to bet on a breakthrough in artificial intelligence to bring new revenue growth.  Despite the output cuts & recent layoffs at its China sales & charging service teams, the company still aims to sell 600-700K cars in China in 2024 out of 2M EVs it aims to sell globally, unchanged from the targets at the beginning of the year.  The stock rose 5.19 to 179.

Tesla slashes Model Y production in Shanghai, data shows

Treasury yields were little changed as investors weighed recent economic data releases.  The 10-year Treasury yield was higher at 4.478%, while the 2-year Treasury yield increased to 4.9375%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Although the University of Michigan's Consumer Sentiment Index for May beat estimates, the reading fell on a monthly basis to the lowest level since Nov 2023, according to survey results released today.  The final reading for May was 69.1 in May, down from 77.2 in Apr but above the forecast for 67.6.  Meanwhile, the 1-year inflation expectations came in at 3.3%, down from 3.5% in the preliminary mid-month results.  Demand for long-lasting items came in stronger than expected in Apr, according to data from the Commerce Dept.  Orders for durable goods such as appliances, cars & airplanes was rose 0.7% for the month.  While this was slightly below the 0.8% increase in Mar, it was far above the estimate for a 1% decline.  Excluding transportation items, orders still accelerated 0.4%.  However, new orders were flat excluding defense.  Services & manufacturing gauges for May both were higher than expected & showed expansion in both sectors, according to the purchasing managers' index from S&P Global.

Treasury yields higher on positive economic data

Traders are about evenly split on whether the central bank will slash rates in Sep.  A few days ago, only around 1 in 3 expected the Fed to hold steady thru the fall's first meeting.  The University of Michigan's consumer sentiment index for May revised an earlier reading which showed the index plunged this month, as inflation & interest rate concerns bite into Americans' views of the economy.  The outlook for stocks is not cheery when small businesses are struggling to survive.

 

Markets tumble as rate cuts may take longer than originally expected

Dow plummeted 605 to session lows, decliners over advancers 6-1 & NAZ slumped 65.  The MLP index gave back 3+ to the 273s & the REIT index sank 8 to the 365s.  Junk bond funds dropped along with the stock market & Treasuries were sold, bringing higher yields.  Oil was fractionally lower, going below 77, & gold dropped a very big 57 to 2335 (more on both below).

Dow Jones Industrials 

Nvidia (NVDA) shares jumped after the company reported earnings that topped estimates & showed that there's still ferocious demand for its artificial intelligence chips.  The company's data center revenue grew by a whopping 427% during the qtr.  First-qtr revenue came in higher than expected at $26.04B compared with the estimate of $24.65B & the demand isn't wavering.  The company issued strong guidance, saying it expects $28B in revenue for the current qtr, beating the estimate of $26.6B.  Shares passed $1000 for the first time, reaching an all-time high of $1051 during intraday trading, and are up about 111% this year.  Its previous high of $953 was set on May 21.  NVDA posted net income of $14.88B ($5.98 per share), a dramatic pop from the $2.04B (82¢ per share), it reported in the year-ago qtr.  NVDA announced a 10-for-1 stock split, with shares set to begin trading on a split-adjusted basis at market open on Jun 10.  The stock finished up an impressive 87.15 (9%).

Nvidia shares pop 10% to record high on unwavering demand for its AI chips

Sales of newly built homes dropped 4.7% in Apr compared with Mar & fell a larger 7.7% from the prior year, the Census Bureau said.  Mar sales were also revised significantly lower.  Higher mortgage rates are clearly hampering sales.  The monthly reading is based on signed contracts, so it reflects people shopping during the month & inking deals based on current rates.  The average rate on the 30-year fixed mortgage was in the high 6% range at the end of Mar, but then shot up to 7.5% during Apr, cutting into affordability.  Adding to that, the median price of a new home sold in Apr was $433K, 4% higher than it was in Apr 2023.  Some of that is due to the mix of homes selling, which is mostly on the higher end of the market.  Those buyers are not as influenced by mortgage rates, as they often use all cash.  Builders say they cannot lower prices due to high costs for land, labor & materials. The big production builders have been buying down mortgage rates to help boost sales, but they are able to do that because of their size.  In the first qtr of 2024, 38% of a median household income nationally was needed to make the mortgage payment on a median-priced new single-family home, according to a new index launched today by the National Association of Home Builders (NAHB) & Wells Fargo.  Low-income families, which it defines as those earning just 50% of the area's median income, would have to spend 77% of their earnings to pay for the same new home.  Prices continue to rise for both new & existing homes due to a lack of supply.  There is very little available for sale on the lower end of the resale market.  While the number of newly built homes continues to rise, up 12% year over year, new homes come at a price premium & are out of range for lower-income buyers.  “With a nationwide shortage of roughly 1.5 million homes, the lack of housing units is the primary cause of growing housing affordability challenges,” said Robert Dietz, NAHB's chief economist.  “Policymakers at all levels of government need to enact policy changes that will allow builders to construct more homes, such as speeding up permit approval times, providing resources for skilled labor training and fixing building material supply chains.”

Sales of newly built homes tank in April, as prices and interest rates rise

Boeing (BA), a Dow stock, will burn thru cash this year & deliveries of new planes won't improve in the 2nd qtr from the first, as the manufacturer deals with a host of production challenges tied to its bestselling planes, CFO Brian West said.  A month ago, West forecast BA would generate free cash flow “in the low single-digit billions.”  The new forecast shows the mounting costs of the plane maker's latest crises.  BA burned thru nearly $4B in cash in the first qtr & West said that figure could be similar or “possibly a little worse” in the 2nd qtr, but that the company would likely return to generating cash in the 2nd ½ of 2024.  Aircraft deliveries in the first qtr fell to the lowest level since the pandemic.  The bulk of a plane's price is paid when it's handed over to a customer.  “We have frustrated and disappointed our customers because of some of the production supply chain issues that we’re up against,” West said.  “And while I understand that frustration, the most important thing we can do for our customers and the supply chain in the industry is to focus on the actions that are underway as we speak so that we could stabilize this production system, improve quality, and get more predictable.”  CEO Dave Calhoun in Mar said he would step down by the end of the year, & the company replaced the chair & chief exec of its commercial airplane unit.  Leading up to the shake-up, CEOs of major airline customers complained about delivery delays & difficulty planning flights because of surprise disruptions.  Its latest production issues surfaced after a door plug blew out midair from a nearly new 737 Max 9 at the start of the year, just as the company was trying to repair years of reputational damage from 2 fatal Max crashes in 2018 & 2019.  The accident increased federal scrutiny of the company, whose execs have vowed to stamp out production flaws & regain the trust of regulators, airline customers & the public.  Next Thurs, BA leaders are set to meet with the Federal Aviation Administration to present the company's plan to improve its quality control.  The agency gave BA 90 days to complete the plan starting in late Feb.  Other problems have also sprung up, including a pause on deliveries of 737 Max planes to China to review batteries for the cockpit voice recorder.  BA said that it is working with “our Chinese customers on the timing of their deliveries as the Civil Aviation Administration of China completes its review of batteries contained within the 25-hour cockpit voice recorder assembly unit.”  The stock tumbled 14.50 (8%).

Boeing expects a 2024 cash burn, slow recovery of airplane deliveries amid crisis, CFO says

Gold fell to more than a week's low, extending its decline for a 3rd straight session, as investors grew apprehensive over US rate cut timings & on strength in US business activity.  Spot gold fell 1.8% to $2336 per ounce, its lowest since May 13.  US gold futures settled 2.3% lower to $2337 per ounce.  The non-yielding bullion hit a record high of $2449 on Mon & is up 14% YTD.  Making gold less attractive, the $ cut its losses for the day on US business activity accelerating to the highest level in over 2 years in May, suggesting that economic growth picked up halfway thru the 2nd qtr.  Advancing $ & a weakening US rate cut outlook have catalyzed a round of profit-taking in gold, but the downside may be limited.  While the policy response for now would involve maintaining interest rates at current levels, the latest Fed minutes reflected discussions of possible hikes.

Gold Slips to Over One-Week Low on Hawkish Fed, US Data

West Texas Intermediate (WTI) crude oil closed lower for a 4th-straight session on mild demand, rising inventories & fading hopes for a near-term cut to US interest rates.  WTI crude for Jul closed down 70¢ to settle at $76.87 per barrel, while Jul Brent crude, the global benchmark, was last seen down 87¢ to $81.03.  Oil has mostly traded within a tight range since the beginning of May as demand remains moderate ahead of the start of the US driving season on the Memorial Day weekend.  The Energy Information Administration yesterday reported an unexpected rise in US oil inventories, showing supply is more than meeting the call.  Commercial crude inventories rose 1.8M barrels last week (vs the 2.0-2.5M barrels 5year average), much worse compared to last year's strong crude draw of -12.5M barrels with stocks now tracking +1% above year-ago levels.  The bearish report may convince OPEC+ to roll its 2.2M barrels per day of voluntary cuts slated to end on Jun 30 into the 3rd qtr when it stages its ministerial meeting on Jun 1.  Hopes for the stimulus of lower interest rates faded after the minutes of the last meeting of the Federal Reserve's policy committee showed some members remain unconvinced high interest rates have been sufficient to pull inflation back to the central bank's 2% target.

WTI Crude Oil Closes Down for a Fourth Day on Bearish Signals

Stocks had heavy selling as interest rate worries dominated investor sentiment.  Extending the market's long rally is not on the minds of investors.   Fed officials are open to keeping rates higher for longer this year if inflation doesn't cool as projected.  On Mon Dow was well above 40k.  Now that seems a distant memory after it has fallen about 1000 in just 4 days!!