Markets struggle after 3 Fed officials warned of higher rates for longer

Dow went up 38 (but under 40K), decliners ahead of advancers 5-4 & NAZ was off 44.  The MLP index was steady in the 279s & the REIT index hardly budged in the 379s after yesterday's advance.  Junk bond funds slid lower & Treasuries saw a little selling which allowing yields to rise.  Oil finished up fractionally to the 79s & gold fell 9 to 2384 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Walmart (WMT), a Dow stock & Dividend Aristocrat, topped quarterly earnings & revenue expectations, as the discounter made significant e-commerce gains, drove profits with newer businesses like advertising & won over more high-income shoppers.  The big-box retailer said it expects to hit the high end or slightly top its previous full-year guidance.  WMT had expected net sales growth of 3-4% & adjusted EPS of $2.23-2.37.  CFO John David Rainey said one of the factors boosting the grocery business is the widening gap between the price of cooking at home & buying food at fast-food chains or restaurants.  He added, shoppers appreciate the convenience that WMT offers.  For the first time, its delivery business surpassed its store pickup in terms of volume.  “We’ve got customers that are coming to us more frequently than they have before and newer customers that we haven’t traditionally had, and they’re coming into a Walmart whether it’s a virtual store online, or whether it’s one of our physical stores,” Rainey said.  EPS rose to 63¢, in the 3-month period that ended Apr 30, compared from 21¢ in the year-ago period.  Revenue climbed 6% from $152.3B in the year-ago qtr.  That increase includes a benefit of roughly 1% from an additional selling day in the period.  Same-store sales for the US climbed by 3.8%, excluding fuel.  The industry metric includes sales from stores & clubs open for at least a year.  At Sam's Club, same-store sales rose 4.4% year over year, excluding fuel.  The stock rose 4.71.

Walmart surges to all-time high as earnings beat on high-income shopper, e-commerce gains

Under Armour (UA) announced a broad restructuring plan as it said sales in its largest market, North America, plunged 10% & predicted the trend will get worse throughout its current fiscal year.  The athletic apparel retailer also saw profits sink by more than 96% during its fiscal 4th qtr, compared with the year-ago period.  It's unclear how many employees UA will lay off as part of the restructuring, but the plan is expected to cost $70-90M, a portion of which will be used for employee severance & benefits costs.  EPS for the 3-month period that ended Mar 31 was 2¢ compared with 38¢ a year earlier.  Excluding one-time items, the company reported EPS of 11¢.  Sales dropped to $1.33B, down 5% from $1.4B a year earlier.  During the qtr, sales in North America declined 10% to $772M, worse than the $780M that analysts had expected.  UA expects sales to continue to worsen in North America.  The company anticipates they will drop 15-17% in its current fiscal year.  “Due to a confluence of factors, including lower wholesale channel demand and inconsistent execution across our business, we are seizing this critical moment to make proactive decisions to build a premium positioning for our brand, which will pressure our top and bottom line in the near term,” founder & CEO Kevin Plank said.  “Over the next 18 months, there is a significant opportunity to reconstitute Under Armour’s brand strength through achieving more, by doing less and focusing on our core fundamentals,” he added.  Across its business, the company is expecting revenue to be down “at a low-double-digit percentage rate” in its current fiscal year, while analysts had expected sales to grow by 2.1%.  It's expecting diluted EPS to be 2-5¢ & adjusted diluted EPS of 18- 21¢ for the year while analysts had expected EPS of 52¢.  The stock fell 3¢.

Under Armour is laying off workers, retailer says North America sales will plunge

Mortgage rates declined for a 2nd consecutive week but remain above 7% as a home affordability crisis maintains its grip on the housing market.  Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate on the benchmark 30-year fixed mortgage dropped to 7.02% this week from 7.09% last week. The average rate on a 30-year loan was 6.39% a year ago.  The average rate on the 15-year fixed mortgage also fell to 6.28% from 6.38% last week. One year ago, the rate on the 15-year fixed note averaged 5.75%.

Mortgage rates drop for second straight week to 7.02%

Gold prices eased off a 3-week high as the $ & yields rebounded after a day-prior drop as a report showed the US consumer price index eased in Apr.  Gold for Jun was last seen down $9 to $2385 per ounce.  The precious metal looked set to retest the $2400 mark yesterday for the first time since Apr 19, as the $ & yields weakened following tepid CPI & retail sales reports that revived hopes for a cut to US interest rates this year.  Gold prices should remain strong as speculators continue to anticipate the start to the Fed cutting cycle.  We are projecting nominal & real bond yields to head lower in the back ½ of the year, & coupled with strong demand, we've raised our gold forecast to $2250/oz in 2024 with elevated levels expected to persist into 2025.  The $ rose off a month low, with the ICE dollar index last seen up 0.12 to 104.46.  Treasury yields also strengthened, bearish for gold since it offers no interest.  The 2-year note was last seen paying 4.791%, up 5.3 basis points, while the yield on the 10-year noted was up 3.1 basis points to 4.375%.

Gold Moves Lower as the Dollar and Yields Rebound From Day-Prior Losses

West Texas Intermediate (WTI) crude oil closed higher on firming demand expectations following a day-prior report showing a larger than expected drop in US oil inventories & revived hopes for lower US interest rates.  WTI crude for Jun closed up 60¢ to settle at $79.23 per barrel, while Jul Brent crude, the global benchmark was last seen up 46¢ to $83.21.  The rise comes as the Energy Information Administration reported US oil inventories fell by a more than expected 2.5M barrels last week, showing firm demand ahead of the start of the summer driving season on the Memorial Day long weekend & offsetting a bearish demand forecast from the Intl Energy Agency.  Revived hopes around a cut to US interest rates is also offering support for the commodity after yesterday's data showed the consumer price index rose less than expected last month.  The CME Fedwatch tool now shows a 51% probability the Federal Reserve will cut rates by 25 basis points at its Sep policy meeting, potentially adding some stimulus to the economy there.

WTI Oil Rises as Lower US Inventories, Revived Hopes Around a US Rate Cut Raise Expectations for Firm Demand

The breather in the PM came after 3 Fed officials warned of higher for longer interest rates while speaking separately today.  That dimmed enthusiasm for today's rally.

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