Dow edged up 54 (below early highs), advancers over decliners 4-3 & NAZ was down 10. The MLP index crawled up to 282 & the REIT index went up 3+ to the 366s. Junk bond funds fluctuated & Treasuries had limited buying which reduced yields. Oil was up pennies in the 78s & gold fell 7 to 2323 (more on both below).
AMJ (Alerian MLP Index tracking fund)
Citigroup (C) CEO Jane Fraser said that consumer behavior has diverged as
inflation for goods & services makes life harder for many Americans. Fraser,
who leads one of the largest US credit card issuers, said she is
seeing a “K-shaped consumer.” That means the affluent continue to spend,
while lower-income Americans have become more cautious with their
consumption. “A lot of the growth in spending has been in the last few quarters with the affluent customer,” Fraser added. “We’re
seeing a much more cautious low-income consumer,” Fraser continued. “They’re
feeling more of the pressure of the cost of living, which has been high
and increased for them. So while there is employment for them, debt
servicing levels are higher than they were before.” The stock market has hinged on a single question this year: When will the Federal Reserve begin to ease
interest rates after a run of 11 hikes? Strong employment figures &
persistent inflation in some categories have complicated the picture,
pushing back expectations for when easing will begin. That means Americans must live with higher
rates for credit card debt, auto loans & mortgages for longer. “I
think, like everyone here, we’re hoping to see the economic conditions
that will allow rates to come down sooner rather than later,” Fraser
said. “It’s hard to get a soft landing,” the CEO added, using a
term for when higher rates reduce inflation without triggering an
economic recession. “We’re hopeful, but it is always hard to get one.” The stock fell 81¢.
Apple (AAPL)), a Dow stock, announced new versions of its iPad Air & iPad Pro tablets. “This is the biggest day for iPad since its introduction,” CEO Tim Cook said in a short video posted on the company's website. The new iPad models are the first AAPL has released since Oct 2022, marking the longest stretch between updates since the device launched in 2011. The iPad Pro, AAPL's most expensive & advanced tablet, will come in 2 sizes, an 11-inch model & a 13-inch model. The company called the product its thinnest ever, coming in at 5.1 millimeters thick. The smaller iPad Pro starts at $999 & the larger 13-inch model starts at $1299 with 256GB of storage, a slight price increase from its predecessor. The iPad Pro will snap into a new case that AAPL calls Magic Keyboard, which is made out of aluminum & pairs the tablet with a keyboard & trackpad. Using the case will make using an iPad Pro feel similar to a laptop experience, i.e., “just like a MacBook.” The Magic Keyboard will cost $249 or $299, depending on size. ASPL also announced an updated stylus called the Apple Pencil Pro for $129. The fresh iPad models use a new AAPL chip called the M4, an update from the M3 chips that currently power its laptops. The M4 chip is an “outrageously powerful chip for AI,” noting, as an example, its ability to help power software that isolates subjects from their backgrounds in videos. “This stunning design and breakthrough display required we make the leap to the next generation of Apple silicon,” John Ternus, an AAPL hardware exec, said. The stock rose 69¢.
Apple announces new iPad Pro with M4, iPad Air tablets
When it comes to America's oil use & production, one major producer
signaled that market uncertainty can't pump the pipeline brakes. "Markets are relatively balanced. Demand growth is strong. Last year
was all-time record demand. We'll see demand grow again this year,"
Chevron (CVX), a Dow stock & Dividend Aristocrat, CEO Mike Wirth said. "So, the end of the oil age is not yet upon us." AT the annual Milken Institute
Global Conference, he detailed expectations for positive financial
performance & increased oil production thru the rest of the year. Gas prices have risen by a few cents,
on average, in recent weeks. AAA reported the national average price
for last week was $3.67 per gallon, 14¢ higher than this time last
month & 8¢ more than last year. That
same week, gas demand rose from 8.42M barrels per day to 8.62M barrels per day, data from the Energy Information Administration
found. "It's important that we continue to meet that with new production, which is certainly what we've been doing," Wirth added. "In the short term, these risks due to geopolitical events," like the Russia-Ukraine, Israel-Hamas & Red Sea conflicts, respectively, "are things to pay attention to because they could impact markets." "We did see some impact on our supply of natural gas into Israel during
the early days of the conflict," he expanded. "We now have both
platforms online and are meeting all the needs not only for Israel's
domestic market, but also for Jordan and Egypt, where the gas goes as
well… the risks in a situation like this are that, through some sort of
an escalation [or] miscalculation, you could see impacts on physical
supply in an area that supplies so much of the world's oil. And that's a
real concern." By preparing for this "volatility"
with a balance sheet that can withstand an extended period of "very low
prices," he noted that the company predicts it will deliver
10% compound annual growth in free cash flow over the next several
years. "Driven by the Permian, driven by some other shale assets
in our portfolio, projects in the deepwater Gulf of Mexico," Wirth
pointed out, "we've got a number of other assets that are delivering
growth. And the combination with Hess only strengthens our cash flow
longer into the future, not only to the end of this decade, but well
into the next." The stock was up 32¢.
Gold traded lower despite falling treasury yields amid an uncertain geopolitical outlook as Israel & Hamas continue indirect talks for a ceasefire deal. Gold for Jun was last seen down $5 to $2325 per ounce. The drop comes on growing expectations for a deal in the war between Israel & the Hamas militant group rise after Israel rejected an Egyptian ceasefire proposal accepted by Hamas yesterday, but said it will send a representative to further indirect negotiations in Cairo, even as it stepped up attacks in the crowded city of Rafah in southern Gaza. The $ rose, with the ICE dollar index last seen up 0.24 points to 105.29. Treasury yields were lower as weak economic data released last week renewed hopes the Federal Reserve will lower interest rates this year, lowering the carrying cost of owning gold. The 2-year note was last seen paying 4.824%, down 1.3 basis points, while the yield on the 10-year note was down 4.3 basis points to 4.447%.
Gold Edges Down Despite Weakening Yields and Uncertain Geopolitical Outlook
West Texas Intermediate (WTI) crude oil closed lower amid hopes for a ceasefire deal in the war between Israel & the Hamas militant group while weak demand concerns continue to check prices. WTI crude for Jun closed down 10¢ to $78.38 per barrel, while Jul Brent crude, the global benchmark, was last seen up 6¢ to $83.39. Israel rejected an Egyptian ceasefire proposal accepted by Hamas yesterday, though it said it will send a representative to Cairo for further talks. Despite the promise of further negotiations, Israel is stepping up attacks on the city of Rafah in Gaza despite intl pressure from the US & other countries concerned about a yet higher toll on civilians crowded into the city. Demand concerns are tempering geopolitical risks after last week's inventory report from the Energy Information Administration showed a large & unexpected 7.3M barrel rise in US oil inventories.
WTI Crude Oil Closes Lower on Ceasefire Hopes and Weak Demand
The bulls gave another strong gain in the AM, but that did not last when the sellers took the averages down to around breakeven. Realization of high interest rates lasting for several months, at a minimum, limits enthusiasm for buying stocks.Dow Jones Industrials
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