Dow rose 176, advancers over decliners better than 3-1 & NAZ was up 192. The MLP index stayed near 281 & the REIT index stayed near 363. Junk bond funds traded higher & Treasuries had modest buying which reduced yields slightly. Oil's limited gain was reduced in the 78s after Hamas agreed to a cease-fire & gold soared 25 to 2334 (more on both below).
AMJ (Alerian MLP Index tracking fund)
Hamas said it told Egyptian & Qatari negotiators that it has approved a cease-fire proposal to halt the war in Gaza. Israel did not confirm whether it would accept or reject the deal that Hamas approved. “We are exploring every single thing that we hear and we are exhausting the potential about negotiations and bringing back the hostages and that is our main mission to bring them home as quickly as possible,” Israel Defense Forces Officer Daniel Hagari said at a press briefing following Hamas' announcement. “But in parallel, we are continuing to act in an operational manner, in the Gaza Strip and we will continue to do so.” Negotiations intensified over the weekend, with facilitation from US CIA Director William Burns, alongside mediators from Egypt & Qatar. The negotiations came amid Israel’s ongoing threats to invade Gaza's southernmost city of Rafah, which appeared imminent if a temporary cease-fire agreement was not reached. US officials have repeatedly warned Israel against an offensive in Rafah, where millions of civilians have taken refuge. Pres Biden reiterated that stance on a call today with Israeli Prime Minister Benjamin Netanyahu. Last week, the US paused a shipment of weapons to Israel, including 2000-pound bombs, as Israel continued to signal that a ground invasion of Rafah could be coming soon, 2 senior administration officials confirmed. Today, Israel ordered civilians in eastern Rafah to evacuate, adding to fears that Israel plans to invade the southern city.
Natural gas demand will likely outpace expectations as electricity consumption surges from artificial intelligence and data centers, Chevron (CVX), a Dow stock & Dividend Aristocrat, CEO Mike Wirth said. “It’s a little hard to quantify right now because this is evolving so quickly on the AI side,” Wirth added. “But I think demand for natural gas is likely to be higher than what people have been estimating up until now.” Wirth said the move to electrify the nation's vehicle fleet, heating & manufacturing as well as the increase in demand from data centers will require reliable & affordable backup power generation. Wind & solar offer affordable power in some regions, but they still face challenges in generating enough electricity to meet peak demand because they rely on variable weather conditions, he said. “Data centers don’t shut down when the sun goes down,” Wirth said. “We need to have the ability to provide baseload supply for all of these needs. I think natural gas will be a big part of that equation going forward.” Wirth added that coal plants are being phased out in the US, nuclear power is expensive & geothermal energy is not as proven as other power sources. “You come back to natural gas as the most likely source of that reliable baseload supply,” the CEO said. Electricity demand in the US is expected to surge by as much as 20% by 2030.
Chevron CEO says natural gas demand will outpace expectations on data center electricity needs
The share of renters in the US who believe they will someday own a home has plummeted over the past year, as the home affordability crisis continues to make the American dream appear too far out of reach. The New York Federal Reserve's 2024 SCE Housing Survey found renters' perceptions about the ease of obtaining a home mortgage have "deteriorated substantially" since 2023. The percentage of renters who say that obtaining a mortgage is somewhat or very difficult jumped to 74.2%, a more than 8 percentage point increase from last year & far above the low of 50.5% in 2021. At the same time, the percentage of renters who said they believe they will eventually become homeowners fell to 40.1%, a drop of 4.3 percentage points from last year & a new series low in the survey that has been conducted for a decade. The data also indicates Americans expect housing affordability to become even worse. The housing survey, which is part of the New Fed's broader Survey of Consumer Expectations, saw rent price growth expectations for the next year increase by 1.5 percentage points to 9.7%, which is the 2nd-highest reading in the series since 2022. US households also anticipate mortgage rates to continue their upward climb, with respondents saying on average they expect mortgage rates to rise to 8.7% a year from now & to 9.7% in 3 years. Both of those averages, the Fed's analysts noted, are also series highs. The findings serve as further evidence that the housing affordability crisis in the US is weighing on aspiring homeowners & continues to escalate with no end in sight. The average 30-year fixed-rate mortgage has sat above 7% for weeks, according to Freddie Mac, & a recent report from Redfin found that the combination of steep mortgage rates & elevated home prices has pushed the median monthly housing payment to a new record of $2775, an 11% increase from the same time last year. The high costs have pushed homeownership out of reach for many Americans & have left the housing market stalled for months as many would-be buyers & sellers remain on the sidelines waiting for affordability to improve. The survey also found that Americans increasingly plan on staying put rather than moving in the near future. The authors wrote that "Average expectations of residential mobility, the percent chance of moving to a different primary residence, fell to new series lows at both the one-year (13.4%) and three-year (24.5%) horizons, continuing a declining mobility trend since 2014."
Renters fear they’ll never own a home: Fed survey
Gold prices climbed more than 1% as the $ weakened after softer-than-expected US jobs data fueled expectations of potential interest rate cuts by the Federal Reserve later this year. Spot gold rose 1% to $2325 per ounce & US gold futures for Jun also gained 1.1% to $2334 per ounce. The US $ was a touch lower, after hovering near its lowest level in about a month on Fri, following the employment report. Chances of rate cuts in Sep were more than 69% today, as per CME's FedWatch Tool. Gold also found support from ongoing tensions in the Middle East, with Israel's military operation in Rafah adding a layer of uncertainty to the market.
Gold gains on soft dollar, rate cut hopes
WTI crude oil for Jun closed up 37¢ to settle at $78.48 per barrel, after earlier touching $79.09, while Jul Brent crude, the global benchmark, closed up 37¢ to $83.33. The rise comes even as hopes for a cease-fire agreement between Israel & Hamas rose after Hamas said it will accept a cease fire proposal put forward by Egypt to prevent an Israeli incursion into the city of Rafah in Gaza. Israel has not yet provided a formal response, however a spokesman for the country's armed forces said it is examining the proposal while continuing "to act in an operational manner." Prices were also supported by a rise in Saudi Arabia's official selling price for the European & Asian markets, which may signal the kingdom expects strong summer demand as OPEC+ continues 2.2M barrels per day of voluntary production cuts that are scheduled to expire at the end of Jun, but could be extended into the 3rd qtr.
WTI Crude Oil Closes With a Gain, But Drops Off Session Highs as Hamas Says It Accepts a Cease-Fire Proposal
Stocks rose as traders looked set to build on an end-of-week surge precipitated by a softer-than-expected jobs report that helped spur bets toward an earlier rate cut from the Federal Reserve. The prospects for a cease-fire in the Mid-East added to the enthusiasm from stock buyers. But it's important to remember that the cease-fire was made by Hamas & reviewed by Egypt & Qatar. Now Israel is studying what was proposed. In other words, it is not a done deal.
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