Markets advance as cooler inflation revives Fed rate cut hopes

Dow shot up 349 (a new record), advancers over decliners 2-1 & NAZ jumped 235 (another record).  The MLP index stayed close to 280 & the REIT index rose 5+ to the 379s on lower interest rates.  Junk bond funds remained in demand & Treasuries were in heavy demand, sharply reducing yields.  Oil went higher in the 78s & gold soared 32 to 2391 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Pres Biden's plan to quadruple tariffs on China-made electric vehicles is unlikely to stave off the threat of more Chinese cars & trucks on US roadways.  The 100% tariff announced yesterday, up from a current import tax of about 25%, covers EVs imported from China but could still leave room for the often-cheap Chinese models to undercut domestic prices & leaves loopholes for imports made by Chinese automakers in other countries, like neighboring Mexico.  It also does nothing to address current or future gas-powered vehicles imported from the Communist country to the US.  Automotive & trade experts say the increased tariffs are a near-term protectionism act that may delay, but won't stop, Chinese automakers from coming to the US with EVs.  “They’re going to be here. It’s inevitable. It’s just a matter of time,” said Dan Hearsch, Americas co-leader of automotive & industrial practice at consulting firm AlixPartners.  “Western automakers, Western suppliers really ought to be upping their game and preparing to take this on or play with them. It’s one or the other.”  The EV tariffs, including other increases regarding battery materials, were among new tariff rates on $18B worth of Chinese imports.  For decades, Chinese auto companies have said they will begin selling vehicles in the US under their own brands, but none have succeeded.  The quality & build of vehicles by Chinese automakers have gotten significantly better in recent years, as the Chinese gov has subsidized their operations to grow domestic production.  The increase in domestic automakers has led to a rapid deterioration of market share in the country for global automakers such as General Motors (GM).  Their market share in the US has come under fire, too, threatened by global players.  The Big 3 US. automakers — GM, Ford (F) & Chrysler, now owned by Stellantis (STLA) — have watched their US market share deteriorate from 75% in 1984 to about 40% in 2023, according to industry data.

Biden’s EV tariffs may not be enough to stave off the threat of Chinese vehicles in the U.S.

Dell (DELL) shares rose to an all-time high after it predicted the company would rake in sales from the insatiable demand for artificial intelligence servers.  DELL is seeing accelerating momentum, especially in winning business to build AI servers, unlocking a new bull case for the stock.  Most AI servers are built around Nvidia's (NVDA) chips which have become prized in the technology industry because they are used to build & deploy advanced AI models from companies.  DELL sells servers using the newest NVDA AI chips, including its H100 GPU & the latest Blackwell-generation chips.  At NVDA's annual conference in Mar, CEO Jensen Huang appeared to send customers who want the latest AI chips to DELL for orders.  “You’re going to need an AI factory,” Huang said.  “And nobody is better at building end-to-end systems of very larges scale for the enterprise than Dell.”  “Michael [Dell] is here and he’s happy to take your order,” Huang continued.  DELL's other business, building PCs for consumers & businesses running Microsoft (MSFT), a Dow stock, Windows, could get a boost next week when it reveals new capabilities at its conference, including long-awaited AI features that many analysts expect to drive demand for new PCs.  DELL stock jumped 15.06 (11%) & NVDA stock advanced 32.74 (3.6%). 

Dell surges 9% on optimism it has secured big AI server orders

Walmart (WMT), a Dow stock & Dividend Aristocrat, is laying off hundreds of corp workers across the country as it relocates many employees to its Arkansas headquarters.  The big-box retailer confirmed the layoffs & relocations in a memo sent to employees yesterday.  Chief People Officer Donna Morris said the move is meant to bring more of its employees back to the office after the Covid-19 pandemic.  The company brought corp employees back to its Bentonville, Arkansas, headquarters in Feb 2022.  Now, she said, WMT is taking that a step further.  The majority of employees working remotely & in offices in Dallas, Atlanta & Toronto have been asked to relocate.  Most will be moved to the company's Arkansas headquarters, but some will also relocate to offices in the San Francisco Bay Area or Hoboken, New Jersey, she added.  “In addition, some parts of our business have made changes that will result in a reduction of several hundred campus roles,” she continued.  “While the overall numbers are small in percentage, we are focused on supporting each of our associates affected by these changes.”  WMT did not say how many people were affected by the cuts.  The stock fell 2¢.

Walmart is laying off, relocating hundreds of corporate workers

Gold prices traded higher as a report showed US inflation rose less than expected last month, reviving hopes the Federal Reserve will be able to begin lowering interest rates this year & pushing down the $ & yields.  Gold for Jun was last seen up $35 to $2395 per ounce.  The Bureau of Labor Statistics reported the Apr consumer-price index rose by 0.3% from Mar, down from a rise of 0.4% a month earlier & under the estimate for a 0.4% rise.  The core index, which excludes volatile food & energy prices, rose 3.6% annualized, matching expectations & down from a 3.8% pace in Mar.  Retail sales in the US were unchanged in Apr from Mar, well under the consensus estimate for a 0.4% rise, adding evidence of a slowing economy & raising hopes interest rates could be lowered this year, despite a day-prior report that showed producer prices rose more than expected last month.  The $ fell following the reports, making gold more affordable for intl buyers.  The ICE dollar index was last seen down 0.68 points to 104.32, the lowest since Apr 9.  Treasury yields also fell on expectations lower interest rates are on the horizon, bullish for the metal since it offers no interest.  The 2-year note was last seen paying 4.741%, down 7.6-basis points, while the yield on the 10-year note was down 9.4 basis points to 4.348%.

Gold Trading Higher as the Dollar and Yields Drop as US Inflation Rose Less Than Expected Last Month

West Texas Intermediate (WTI) crude oil closed with a gain as the US reported a key inflation measure eased last month & a report showed a drop in US inventories, while the Intl Energy Agency lowered its 2024 demand forecast.  WTI crude oil for Jun closed up 61¢ to settle at $78.63 per barrel, while Jul Brent crude, the global benchmark, was last seen up 37¢ to $82.75.  The Bureau of Labor Statistics reported the Apr consumer-price index rose by 0.3% from Mar, down from a rise of 0.4% a month earlier & under the estimate for a 0.4% rise.  The core index rose 3.6% annualized, matching expectations & down from a 3.8% pace in Mar.  Retail sales in the US were unchanged in Apr from Mar, well under the consensus estimate for a 0.4% rise, adding evidence of a slowing economy & raising hopes interest rates could be lowered this year, despite a day-prior report that showed producer prices rose more than expected last month.

WTI Rises as US Inflation Rose Less than Expected and Inventories Fell Last Week; IEA Lowers its Demand Forecast

The inflation data warmed the hearts of investors today.  New data fueled hopes that the Federal Reserve could cut interest rates sooner than expected.  Dow is up about 2100 in May so far, close to a new record.  In the meantime, economic data is coming in somewhat cool & nervous investors keep buying safe haven gold (near its record  last month) & Treasuries.

Dow Jones Industrials