Markets fall after new inflation data and presidential uncertainties

Dow dropped 45, decliners slightly ahead of advancers & NAZ was off 126.  The MLP index edged up 1+ to the 288s & the REIT index was added 1+ to the 377s.  Junk bond funds fluctuated & Treasuries had selling which increased yields.  Oil continued a little lower in the 81s & gold remained steady at 2336 (more on both below).

Dow Jones Industrials 

Pres Biden's raspy, unfocused, often inarticulate & widely panned debate performance stoked deep anxiety among Dem, & caused some commentators & fundraisers to openly call for a new nominee to run against former Pres Trump.  But replacing Biden as the party's pick less than 5 months out from Election Day carries enormous political risks, & would be difficult, if not impossible, to pull off.  Right now, the only likely way Biden could be replaced is if he willingly ends his campaign.  Biden's aides & top Dem officials say the 81-year-old incumbent has no plans to do so.  If he did drop out, Dems have yet to identify a clear alternative candidate to swap in.  But the panic among donors & party officials after watching Biden falter last night in his debate against Trump has led some of them to take steps to get Biden out of the race.  There are already discussions among Dem fundraisers about trying to convince congressional leaders, Senate Majority Leader Chuck Schumer in particular, to urge Biden to announce to drop out, according to people familiar with the matter.  Schumer is a top target for donors making that pitch because he privately has voiced concerns about Biden's standings in presidential election polls.  Schumer was worried before the debate that Biden & Trump were in statistical tie nationally, despite the Rep challenger's conviction in his New York trial.  A spokesman for Schumer declined to comment, but pointed to a social media post the majority leader published after the debate.  Schumer in that X post wrote: “Tonight’s debate made the choice clear: Four more years of progress, or four more years of attacks on our fundamental rights and our democracy.”  “We’ve got to get out the vote for Joe Biden, Kamala Harris, and a Democratic Senate and House!” the post said.  That spin has not alleviated the post-debate anxiety of some of the pres's top fundraisers.  Some of those wealthy donors have lost trust in Biden's team, believing they were given false assurances about Biden's ability to take on Trump.

Biden debate flop leads Democrats to call for new nominee — but replacing him is tough to do

Shares of Nike (NKE), a Dow stock plunged after the retailer cut its full-year guidance & said it expects sales to drop 10% during its current qtr as it warned of soft sales in China & “uneven” consumer trends across the globe.  The expected 10% first-qtr slump is far below the 3.2% drop that had been expected.  The sneaker giant now expects fiscal 2025 sales to be down mid-single digits, compared to estimates of a 0.9% increase.  NKE previously expected sales to grow.  The company also expects sales in the first ½ to be down in the high single digits, compared to previous guidance of declines in the low single digits.  “A comeback at this scale takes time,” CFO Matthew Friend said.  “Although the next few quarters will be challenging, we are confident that we are repositioning Nike to be more competitive with a more balanced portfolio to drive sustainable, profitable, long-term growth.”  The company cut its guidance as it contends with slower online sales, planned declines in classic footwear franchises, “increased macro uncertainty” in the Greater China region & “uneven consumer trends” across NKE's markets, Friend said.  It also expects sales into wholesalers to be slower as it scales new innovations & pulls back on classic franchises.  For the fiscal 4th qtr, the company handily beat earnings estimates as its cost-cutting efforts continue to bear fruit, but NKE fell short on revenue.  EPS was 99¢, compared with 66¢ a year earlier.  Sales dropped to $12.6B, down about 2% from $12.8B a year earlier.  In fiscal 2024, sales were $51.4B, which is flat compared to the prior year.  It's the slowest pace of annual sales growth the company has seen since 2010, excluding the Covid-19 pandemic.  NKE stock tumbled 18.83 (20%).

Nike says quarterly sales will fall 10%, warns on China weakness

Pfizer (PFE) had a “phenomenal” first qtr & CEO Albert Bourla told thousands of employees during a town hall on May 2.  A day earlier, its quarterly results topped estimates & it hiked its full-year outlook.  Few companies benefited from the pandemic as much as PFE did.  Profits boomed, fueled by its Covid vaccine & antiviral pill Paxlovid.  After PFE German company BioNTech (BNTX) rapidly developed & deployed a lifesaving shot that helped the world emerge from the pandemic, PFE drew widespread praise.  PFE may be on its way toward stabilizing its business & winning back investor's favor after the strong first qtr.  But the company is struggling to balance that with the fears of its employees, some of whom said they feel uncertain about their future & unmotivated after the sudden reversal of fortune.  In Oct PFE launched a multibillion-$ cost-cutting program, slashing research & development spending & laying off hundreds of employees, including in the once-lauded Covid vaccine unit.  In May the company said it's on track to deliver $4B in savings by the end of the year.  Now, as PFE appears poised to turn a corner, the company is trying to boost employee morale to match investor's optimism.  PFE stock went up 19¢.

Pfizer struggles to claw back faith with Wall Street and employees as it recovers from Covid decline

Gold prices steadied & were headed for a 3rd straight quarterly gain after a key US inflation report came broadly in line with expectations, boosting hopes that the Federal Reserve may cut interest rates by Sep.  Spot gold was steady at $2328 per ounce & prices have gained over 4% for the qtr.  US gold futures rose 0.1% to $2339.  Gold was also supported by a decline in the Treasury yields which makes the non-yielding bullion more attractive for investors.  Market bets rose today that the Federal Reserve will cut interest rates by Sep & do so again in Dec after a gov report showed inflation by the personal consumption expenditures index (PCE) did not rise at all from Apr to May.  PCE last month followed an unrevised 0.3% gain in Apr data, while consumer spending rose moderately.  Traders are currently pricing in about a 68% chance of a rate cut in Sep, compared with 64% before the release of the inflation data, according to CME FedWatch tool.

Gold gleams on rate cut hopes after inflation data, en route quarterly gain

West Texas Intermediate (WTI) closed lower even as a report showing US inflation slowed last month revived hopes the Federal Reserve will be able to speed expected cuts to interest rates, while the threat of a spreading Middle East war is rising.  WTI crude for Aug closed down 20¢ to settle at $81.54 per barrel, after earlier touching $82.72.  Aug Brent crude, the global benchmark, was last seen up 8¢ to $86.47.  The US Bureau of Economic Analysis reported the Personal Consumption Expenditures (PCE) Index fell to 2.6% annualized in May from 2.7% in Apr, matching expectations.  The core measure, which excludes volatile food & energy, fell to 2.6% annualized from 2.8% in Apr, also matching expectations.  The slowing pace of inflation is raising hopes the Fed will be able to speed interest rate cuts, with the CME Fedwatch tool now showing a 59.5% probability the central bank will make a 25 basis point cut to rates at its Sep meeting.  Despite rising inventories showing demand remains moderate, geopolitical risks are on the rise, as Israel continued its war on Hamas in Gaza while increasing attacks on Israel by the Iran-backed Hezbollah militant group in Lebanon threatens a wider war.

WTI Closes Lower Even as U.S. Inflation Slowed in  May While Geopolitical Risks Rise

The news about Biden's weak showing at the debate last night & all the tumult today about his & Dems in general has brought on selling.  The odds that Pres Biden would would win re-election took a nosedive after his widely panned debate performance.  Dow began trading today with a solid gain, but then sellers took it down over 400.  The presidential election & Biden's future will be a major factor in the stock market for several months.  Dow finished up 1439 YTD & up 2442 in Q2.

Markets rise as Fed’s preferred inflation gauge shows slowing inflation

Dow advanced 250, advancers over decliners better than 2-1 & NAZ was up 102.  The MLP index remained in the 287s & the REIT index stayed in the 376s.  Junk bond funds inched higher & Treasuries crawled higher, reducing yields slightly (more below).  Oil slid lower in the 81s following recent strength & gold was steady at 2336.

Dow Jones Industrials 

An inflation measure closely watched by the Federal Reserve held steady in May as elevated prices continue to weigh on Ms of Americans.  The personal consumption expenditures (PCE) index showed that prices were unchanged from the previous month, according to the Labor Dept.  On an annual basis, prices climbed 2.6%.  Both of those figures are in line with expectations.  In another sign that inflation remains stubbornly high, core prices, which strip out the more volatile measurements of food & energy, climbed 0.1% from the previous month.  From a year ago, prices are up 2.6%, the slowest annual rate since Mar 2021.  While the Fed is targeting the PCE headline figure as it tries to wrestle consumer prices back to 2%, Chair Jerome Powell previously told reporters that core data is actually a better indicator of inflation.  Both the core & headline numbers point to inflation that is still running well above the Fed's preferred 2% target.  A 0.4% decline in the prices of goods helped to offset a 0.2% increase in the cost of services.  Food prices rose 0.1% over the course of May, while energy prices tumbled 2.1%.  High inflation has created severe financial pressures for most US households, which are forced to pay more for everyday necessities like food & rent.  The burden is disproportionately borne by low-income Americans, whose already-stretched paychecks are heavily affected by price fluctuations.  Other figures showed that consumer spending increased just 0.2% in May, below both the 0.3% estimate.  The lower-than-expected figure suggests that Americans are pulling back on spending as they face steeper prices.  Many economists anticipate that spending will slow further in the coming months as consumers continue to grapple with expensive goods, high interest rates & the resumption of federal student loan payments.

Inflation measure closely watched by the Fed rises 2.6% in May

US GDP increased at an annual rate of 1.4% in the first qtr of 2024, data from the Bureau of Economic Analysis (BEA) found.  This increase is a sign the economy is solid, but not growing at a substantial pace.  This is a slight slowdown from the previously estimated 1.6% GDP increase for the first qtr.  Last year, in the 4th qtr of 2023, GDP increased by 3.4%.  Compared to last year, economic growth is slowing.  The slowdown is largely due to more cautious consumers.  Consumers haven't had the freedom to spend in recent months, with rising debt levels & high inflation squeezing wallets.  Compared to the 4th qtr, the deceleration in GDP reflected slowdowns in exports & gov spending, on top of less consumer spending.  This decrease was offset by imports & an acceleration in residential fixed investment.

Q1 GDP slows more than previously estimated as inflation concerns linger

The 10-year Treasury yield was little changed as investors digested a key inflation measure that came in as expected.  The 10-year Treasury yield was down by 2 basis points at 4.267% & the 2-year Treasury yield was last at 4.681% after falling more than 3 basis points.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  The May personal consumption expenditures price index, which is the Federal Reserve's preferred inflation gauge, showed a gain of 0.1% for the month, & an increase of 2.6% from a year ago, the Commerce Dept reported.  The data comes as uncertainty about what could be next for interest rates has persisted.  Federal Reserve policymakers have frequently indicated they would only move to cut rates once data showed that inflation was easing toward the 2% target.  Markets were last pricing in the chance of 2 qtr-percentage point rate cuts this year, with the first likely to come in Sep, according to CME Group's FedWatch tool.  Earlier in the week, Fed Governor Michelle Bowman also suggested that she was open to a further rate increase, depending on how inflation developed.

10-year Treasury yield falls slightly after May inflation measure comes in as expected

The inflation news was good, but short of great.  Going forward, modest levels of inflation should be expected.  What is influencing consumer spending are prices that are substantially higher than just a few years ago.  That hurts.  The chart above shows Dow has been trending sideways for 3 months.

Markets wobble as traders await key inflation data

Dow finished 36 higher, advancers ahead of decliners 5-4 & NAZ went up 53.  The MLP index drifted 1 lower to the 286s & the REIT index added 1+ to the 374s.  Junk bond funds remained mixed & Treasuries had limited buying which reduced yields slightly.  Oil was up nearly 1 to the high 81s & gold jumped 21 to 2334 (more on both below).

Dow Jones Industrials 

US consumer confidence teetered slightly in Jun as Americans grew a little warier about the future.  The Conference Board's latest consumer confidence index dipped to 100.4 in Jun from a downwardly revised level of 101.3 in May.  Jun's reading landed in line with what was expected but reinforced what's become a running theme: Despite continued economic growth & a historically strong labor market, Americans say their confidence has grown increasingly threadbare after a prolonged stint of high inflation & interest rates.  Measurements of Americans' confidence are typically closely watched, as consumer spending accounts for nearly 70% of US economic activity.  But that significance is even more heightened now with the presidential election just months away.  The Conference Board's latest report showed that Americans felt better about the labor market, which outweighed concerns about the future.  However, consumers' feelings on current business conditions cooled, noted Dana Peterson, chief economist of the business membership & research organization.  “However, if material weaknesses in the labor market appear, confidence could weaken as the year progresses,” she said.  Consumers felt different levels of confidence around different parts of the economy.  The present situations index ticked up to 141.5 (its highest level since Mar) from 140.8; however, the expectations index dropped to 73, marking the 5th consecutive month below 80, which the Conference Board considers as a threshold signaling a recession is ahead.  The expectations index has been at or above that potential recession threshold only 6 months since Mar 2022, when escalating inflation forced the Federal Reserve to start a historic rate-tightening campaign.  Inflation has cooled considerably during the past 2 years but is still above the central bank's 2% target & interest rates remain at a 23-year high which have helped to tamp down demand.

Americans felt shakier about the economy in June

Mortgage rates were mixed this week with the standard 30-year note declining slightly for the 4th consecutive reading, while shorter-term rates ticked up a bit.  Freddie Mac's latest Primary Mortgage Market Survey, showed that the average rate on the benchmark 30-year fixed mortgage ticked down to 6.86% this week from 6.87% last week.  The average rate on a 30-year loan was 6.71% a year ago.  The average rate on the 15-year fixed mortgage, on the other hand, actually increased to 6.16% from 6.13% last week.  1 year ago, the rate on the 15-year fixed note averaged 6.06%.

Mortgage rates fall slightly to 6.86%

Some of the heat is coming out of home prices, even though they're still higher than they were a year ago.  Several new reports show the price gains are shrinking & home sellers are starting to give in after a stagnant spring market.  For the first time since the start of the Covid-19 pandemic, when home sales ground to a halt, the typical house sold for slightly less than its asking price, 0.3% lower, during the 4 weeks ended Jun 23, according to real estate brokerage Redfin.  A year ago at that time the typical home was selling at list price & 2 years ago it was selling at about 2% above list price.  That's not to say that the housing market is crashing.  A little less than 2/3 of homes still sold over asking price in the last month; that is, however, the lowest share since Jun 2020.  While most sellers are still listing their homes at higher prices than comparable homes sold for a year ago, some are conceding that they simply can't command those prices.  Mortgage rates remain stubbornly high, with the average rate on the 30-year fixed mortgage stuck just above 7% for the 3rd straight month, according to Mortgage News Daily.  The much-watched S&P Case-Shiller index showed home prices in Apr up 6.3% from Apr 2023.  May's prices continue that trend.  Home prices are now 47% higher than they were in early 2020, with the median sale price now 5 times the median household income.  A different index by ICE Mortgage Technology shows annual home price growth slipped to 4.6% in May from 5.3% in Apr, the slowest growth rate in 7 months.  Supply is starting to build, which is leading to the cooling in prices.  Total active listings are now 35% higher than they were at this time a year ago, according to Realtor.com.  To put that in perspective, however, even after the recent growth, inventory is still down more than 30% from typical pre-pandemic levels.  “Some buyers think they can get a deal because they’re hearing the market is cool, and some sellers think every home will sell for top dollar no matter the condition,” said Marije Kruythoff, a Los Angeles Redfin agent.  “In reality, everything depends on the house and the location.”

Home prices begin to cool as active listings jump 35%

Gold prices rose 1% from an over 2-week low hit in the previous session as the $ softened, with the market spotlight on key US inflation data for more cues on the Federal Reserve's interest rate path.  Spot gold was up 1.2%, at 2324 per ounce after falling to its lowest level since Jun 10 yesterday.  US gold futures settled 1% higher, at $2336.  Some of the data that came out was supportive to the gold market.  It was essentially the wholesale inventories that came in lower than expected. The final GDP figure is significantly lower & gold futures are getting a boost on $ index coming off.  Ebbing economic momentum was underscored by data showing business spending on equipment declined in May, while a slump in exports pushed up the goods trade deficit.  In its 3rd estimate of Gross domestic product (GDP) for the Jan-Mar qtr, the gov confirmed that economic growth moderated sharply in the first qtr.

Gold Gains 1% on Dollar Weakness as Eyes Turn to U.S. PCE Data

West Texas Intermediate (WTI) crude oil closed higher as traders continue to bet on solid summer demand even as US inventories of oil & gasoline rose last week, while Mideast tensions are rising again.  WTI crude oil for Aug closed up 84¢ to settle at $81.74 per barrel, while Aug Brent crude, the global benchmark, was last seen up 80¢ to $86.05.  The rise comes even after the Energy Information Administration reported US oil inventories climbed by 3.6M barrels, while the estimate called for a drop of 2.8M barrels & the 5-year average draw for the week is 6.3M barrels.  Gasoline inventories rose by 2.7M barrels, against expectations for a 1M barrel draw.  An unexpected rise in US crude stockpiles while implied demand for the 3 main fuels (gasoline, diesel & aviation fuels) fell for the first time in 2 months.  Despite the weak demand, geopolitical risk is offering support for the market as Israel continues to carry out its war against Hamas in Gaza while increasing its conflict with the Iran-backed Hezbollah militant group in Lebanon.

WTI Oil Closes Higher on Demand Hopes and Geopolitical Tensions

Bullishness around AI has helped lift the stock market this year.  But concerns are growing that the rally could be at risk if the handful of tech companies driving most of those gains stop topping already lofty expectations.  Meanwhile investors are weighing new economic data & waiting for tomorrow's PCI data.  While it's not expected to solve economic problems, it could make investors feel better about the future.  Amid all this uncertainty, demand for gold continues to be strong.

Markets edge higher on mixed economic data

Dow went up 86, advancers over decliners about 2-1 & NAZ added 26.  The MLP index was steady in the 287s & the REIT index rose 2+ to the 275s.  Junk bond funds inched higher & Treasuries saw a little buying which reduced yields (more below).  Oil rose about 1 to the 81s & gold jumped 25 to 2338.

Dow Jones Industrials 

Walgreens (WBA) announced plans to close a "significant" number of underperforming stores across the US due to ongoing challenges with profitability & declining margins.  The store closures are part of the company's multi-year footprint optimization program.  While WBA didn't specify how many of its more than 8700 stores will be affected, CEO Tim Wentworth said that a "meaningful percent" of the underperforming locations would shutter.  "We continue to face a difficult operating environment, including persistent pressures on the U.S. consumer and the impact of recent marketplace dynamics which have eroded pharmacy margins," Wentworth added.  Sales at stores open for at least a year slipped 2.3% compared with the year-ago qtr, which WBA blamed on a challenging retail environment.  The company also noted that its retail margin was negatively affected by increased promotional activity & higher shrink levels, which is the loss of inventory from things such as theft.  The company now expects fiscal 2024 full-year adjusted EPS of $2.80 - $2.95, down from its previous estimate of $3.20 - $3.35 a share.  This change reflects the challenging pharmacy industry trends & a worse-than-expected consumer environment, according to the company.  The stock tumbled 3.90 (25%).

Walgreens to close 'significant' number of underperforming stores, cuts profit forecast

Sales of new vehicles in the US are expected to be down this month compared to Jun 2023 due to the outage at software provider CDK Global that has affected dealerships across the country, according to a new report.  A joint forecast by JD Power & GlobalData said total new-vehicle sales in Jun are expected to land between 1.337M - 1.274M units, a 2.6% - 7.2% decrease from the same month a year ago.  Analysts pointed to the outages, which have caused some dealerships to return to conducting business using manual paperwork & others to even temporarily shut down operations, were a driving factor behind the projected decline.  "Because of the disruption to dealer software systems, June sales will not be reflective of actual consumer demand for new vehicles," said Thomas King, pres of the data & analytics division at JD Power.  "Instead, a significant number of sales that would have occurred in June are now likely to occur in July."  "However," King added, "it should be noted that a significant range of sales outcomes are possible due to the uncertainty about exactly when system outages will be resolved and what countermeasures dealers put in place to transact sales through the close."  CDK, which provides software to more than 15K retailer dealer locations across North America, reported being hit by 2 cyberincidents last week.  Many of the company's customers have been unable to fully operate since the firm took its systems offline on Jun 19..

US auto sales projected to slump in June due to disruption from CDK outage

Treasury yields were little changed as investors looked to economic data for hints about the outlook for the economy & monetary policy.  The yield on the 10-year Treasury was down by 1 basis point at 4.302% & the 2-year Treasury yield also dipped 1 basis point at 4.731%.  Yields & prices have an inverted relationship & 1 basis point equals 0.01%.  As uncertainty over the path ahead for interest rates & when they may be cut persists, investors looked to economic data for clues about what could be ahead for the economy & how this could affect monetary policy.  A flurry of economic data was just released.  Initial jobless claims edged lower, the Labor Dept reported.  Demand for long-lasting big-ticket items was better than expected.  While first-qtr economic growth rose a bit, according to the Commerce Dept's final GDP revision, inflation for the period also ticked up to 3.1% from 3% prior period.  New orders for “durable goods,” or long-lasting items such as aircraft, appliances & computers, unexpectedly increased 0.1% in May.  This figure came below the downwardly revised 0.2% increase in April but better than the estimate for a 1% decline, according to the Census Bureau.  Fed officials have frequently said that their decision-making regarding interest rates will depend on inflation & whether data shows that it is easing sustainably toward the central bank’s 2% target.

Treasury yields are little changed as investors look to key data

Real gross domestic product (GDP) increased at an annual rate of 1.4% in the first qtr of 2024, above the 3rd estimate of 1.3%.  Investors are weighing a new batch of economic data ahead of the PCE inflation data.  Trading could be choppy today.

Markets hesitate, waiting for inflation data on Friday

Dow edged up 15, decliners over advancers about 3-2 & NAZ added 87.  The MLP index stayed in the 286s & the REIT index was off 1+ to the 372s.  Junk bond funds drifted lower & Treasuries continued to see selling which increased yields.  Oil was about even just under 81 & gold pulled back 20 to 2310 (more on both below).

Dow Jones Industrials 

Nvidia (NVDA) CEO Jensen Huang said that the company’s advantage in artificial intelligence chips was thanks to a bet it made over 10 years ago, centering on Bs of $s in AI investment and a team of thousands of engineers.  His comments came during the question-&-answer period of NVDA's first shareholder meeting since the company's stock began to surge.  Since last year's meeting, the company has been on a historic run: NVDA stock is up 193%, its shares split 10-1, the company passed a $3T valuation & it briefly reached the status of most valuable company in the US.  The first question Huang answered was about the company's competition, as traditional chipmakers & startups release products intended to challenge NVDA's more than 80% market share in AI chips.  Huang laid out the company's overall strategy to maintain its position, leading with the idea that NVDA has already “transformed” into a data-center focused company from its previous gaming focus.  The company is also looking to create new markets for its AI, such as in industrial robotics, & it aims to partner with every computer maker & cloud provider to do so.  Huang said that its AI chips provide the “lowest total cost of ownership,” suggesting that while other chips may be less expensive, NVDA's are more economical considering their performance & cost to run.  Ultimately, Huang said NVDA had achieved a “virtuous circle,” a term in the technology industry that refers to when a platform has the most users, which allows it to make the improvements it needs to attract even more users.  “The NVIDIA platform is broadly available through every major cloud provider and computer maker, creating a large and attractive install base for developers and customers, which makes our platform more valuable to our customers,” Huang added.  The stock rose 31¢.

Nvidia CEO Jensen Huang addresses rising competition at first shareholder meeting since stock surge

Apple (AAPL), a Dow stock, announced that its self-service repair program is now available in Europe.  The program, dubbed Apple Diagnostics for Self Service Repair, gives consumers the ability to test products for optimal parts functionality & identify parts that may need repair without assistance from AAPL or an independent repair provider.  First launched in the US in Dec 2023, the tool now supports 42 AAPL products & is available in 32 European countries, including the UK, France & Germany.  The program will now support iPhone, Mac & Studio Display models in 33 countries & 24 languages.  AAPL said it also plans to expand the service to Canada in 2025.  The company said the self-service repair tool is part of an ongoing effort to extend the lifespan of its products.  “While Apple is committed to providing safe and affordable repair options, designing and building long-lasting products remains the top priority,” AAPL said.  “The best type of repair for customers and the planet is one that is never needed.”  Customers can begin an Apple Diagnostics session on a 2nd product to check the status & performance on a device that may need repair.  After following a series of onscreen prompts, they will learn whether their product needs repairing & which parts may need to be replaced.  The stock rose 4.18.

Apple expands its self-service repair program to Europe

Google (GOOG) is testing facial recognition technology for office security “to help prevent unauthorized individuals from gaining access to our campuses,” according to a description of the program.  The initial test is taking place at one of Alphabet's (GOOG) sites in Kirkland, Washington, a Seattle suburb.   Interior security cameras have been collecting facial data & comparing it to images stored from employee badge images, which includes the extended workforce, to help determine if there are unauthorized people on the premises.  Google’s Security & Resilience Services (GSRS) team will use the data to help identify people “who may pose a security risk to Google’s people products, or locations,” the document says.  “There are protocols in place for identifying, reporting, and potentially removing known unauthorized persons to maintain safety and security of our people and spaces,” it says.  At the Kirkland testing site, people entering the building will not be able to opt out of the facial screening.  However, the document says the data is “strictly for immediate use and not stored,” & that employees can opt out of having their ID images stored by filling out a form.  GOOG said that while ID badge photos were part of the test, they won't be used going forward.  “For many years our security team has been testing and implementing new systems and protections to help keep our people and spaces as safe as possible,” a GOOG spokesperson said.  GOOG stock slid back 21¢.

Google is testing facial recognition technology for campus security, starting at site near Seattle

Gold prices slipped 1% to their lowest level in more than 2 weeks, weighed by a stronger $ & higher bond yields, while traders looked forward to US inflation data due later this week.  Spot gold was down 0.8%, at $2301 per ounce (its lowest since Jun 10) & US gold futures settled 0.8% lower, at $2313.  At this point, market may very well be responding to the firmer $ & the possibility that the Federal Reserve is unlikely to move (interest rates) earlier in the summer.  The $ rose 0.4% to a near 2-month peak against its rivals, making gold more expensive for other currency holders, while benchmark US 10-year yields hit a near 2-week high.  The focus this week will be on the Personal Consumption Expenditures Price Index, the Fed's preferred inflation gauge, which could shed light on the central bank's interest-rate path.

Gold Falls to Two-Week Low as Higher Dollar, Yields Dent Appeal

West Texas Intermediate (WTI) crude oil closed higher, even as a report showed US oil inventories rose last week, on expectations that demand is on the rise.  WTI crude oil for Aug closed up 7¢ to settle at $80.90 per barrel, while Aug Brent crude, the global benchmark, was last seen up 37¢ to $85.38 per barrel.  In its weekly survey, the Energy Information Administration said US oil inventories rose by 3.6M barrels last week, while the consensus estimate called for a 3M barrel draw on stocks.  Gasoline inventories rose, while distillate stocks dropped by 0.4M barrels.  Despite the data. expectations summer demand is strong & rising amid OPEC+ production cuts remains the dominant theme in the market.  The current view is that demand will increase during the summer & with OPEC+ cuts fully in place until Oct global & OECD stocks ought to deplete.  Thus, convincing stock draws in the US would go a long way to bolster this optimism.  Last night's API data was unfavorable.  Both crude oil & gasoline went against forecasts & built, & distillate inventories recorded a surprise plunge.  If the data set is confirmed by the EIA today the retracement might last longer than anticipated.  A rising $ is checking oil prices, with the ICE dollar index last seen up 0.45 points to 106.05, the highest since Apr 30, ahead of the release of the Personal Consumption Expenditures Index (PCE) on Fri, the Federal Reserve's preferred inflation measure.

WTI Crude Oil Closes Higher Despite a Report Showing an Unexpected Rise in U.S. Inventories

Dow was down in early trading but then stayed near breakeven for the rest of the session.  The stock market is looking to economic statistics for cues ahead of the key PCE inflation data on Fri.  Monthly data will not solve problems, but all clues & signals about the future are welcomed by investors.

Markets slide as investors evaluate rate outlook into second half

Dow fell 80, decliners over advancers 2-1 & NAZ was off 8.  The MLP index dipped 1 to the 286s & the REIT index was fractionally lower to the 372s.  Junk bond funds fluctuated & Treasuries saw significant selling, raising yields (more below).  Oil slid back pennies remaining below 81 & gold dropped 23 to 2307.

Dow Jones Industrials 

Walmart's (WMT) CFO warned investors that the 2nd qtr was going to be the retailer's “most challenging quarter” for the year.  He isn't alone among chief financial officers (CFOs) sounding a little down about what's taking place in the economy right now, & uncertain about what comes next.  Fears among top corp CFOs about shaky consumer demand have hit a 6-qtr higher, according to the latest CNBC CFO Council survey, with the Q2 survey the first time since the beginning of 2023 that over ½ of CFOs cited consumer demand as the biggest external risk to their business.  Consumer demand fears among CFOs have been rising in recent qtrs & match evidence from the market across sectors, with fast-food chains rushing out value menus & car dealers having more difficulty moving inventory.  The 54% of CFOs who cited consumer demand as the biggest risk is up from 18% a year ago & 37% in the last qtr.  On a recent call of CFO Council members, a financial services CFO shared data that their firm collects showing that while consumers are still traveling & eating out, the transaction values for those activities are down.  “They’re not pulling back entirely, but they’re most certainly finding less costly ways to accomplish their goals,” the CFO said.  Food sector CFOs said they are heavily focused on value right now, with one specifically invoking the term “value war.”  The quarterly CFO Council survey reflects a sampling of views from CFOs across the market & sectors, with 24 respondents included in the Q2 survey, conducted Jun 3–20.  While elevated, a cautious view of the consumer has not been uncommon among this CFO group in recent years, given their knowledge of Federal Reserve policy history & the impact of higher rates on past economies, from weak demand to layoff spirals.  Still, their current view of the Fed & the interest rate environment has not changed to as significant a degree as their view of the consumer.  The percentage of CFOs who rate the job the Fed is doing as “good” is now at its highest level ever, 70%.  But there were a few notable moves in other survey numbers related to monetary policy & the rate outlook.  Last qtr, almost ½ of CFOs forecast a 10-year yield that would dip below 4% by the end of the year.  Not anymore, with nearly 92% expecting the 10-year to remain above 4% thru Dec 31.  CFOs' overall view of the economy has slipped, but isn't dire.  1/3 of CFOs still see a soft landing ahead, but that is down from 48% who felt good about the soft landing scenario last qtr.  While that has dropped, it's still twice the level of confidence in a soft landing compared to what CFOs expected in the year-ago survey.  54% say the economy is either in a recession or will enter 1 between the 2nd ½ of this year & 2nd ½ of 2025.  When asked to choose a trend for the stock market, more CFOs are now inclined to forecast a pullback, with just under 60% saying it is more likely the Dow falls back to 35K rather than reach 45K for the first time.

Top corporate CFOs are losing some confidence in economy

Treasury yields were higher as investors considered the latest comments from Federal Reserve officials about monetary policy & awaited key economic data.  The yield on the 10-year Treasury was up by 7 basis points to 4.308% & the 2-year Treasury yield was last at 4.739% after rising by almost 5 basis points.  Yields & prices move in opposite directions & 1 basis point is equivalent to 0.01%.  Investors digested remarks from Federal Reserve officials about the US economy and the outlook for interest rates.  Fed Governor Michelle Bowman said the central bank was not ready to cut rates, saying this would only be “appropriate” when data showed that inflation is sustainably easing towards the Fed's 2% target.  Bowman also did not take further interest rate hikes off the table.  “I remain willing to raise the target range for the federal funds rate at a future meeting should progress on inflation stall or even reverse,” she said.  Meanwhile, Fed Governor Lisa Cook said she only expects little change to inflation rates this year, but sees inflation “slowing more sharply” next year.  Investors also looked ahead to key economic data due later in the week, including the personal consumption expenditure (PCE) price index on Fri.  The PCE is the Fed's favored inflation gauge & could therefore inform policymakers' thinking on expectations for the economy & the timeline for potential interest rate cuts.

Treasury yields climb as investors weigh comments from Fed

Southwest (LUV) shares fell after the carrier cut its 2nd-qtr revenue forecast, citing changing booking patterns.  LUV expects revenue per available seat mile, the amount the airline brings in for every seat it flies 1 mile, will fall 4-4.5% in the 2nd qtr over last year, after previously estimating a 1.5% - 3.5% decline.  It also said its unit expenses, excluding fuel, would be up as much as 7.5% over the year-earlier period, after previously expecting no change.  It said capacity would rise as much as 9% instead of the flat growth it had previously expected in how much it flies.  LUV still expects record quarterly operating revenue in the 2nd qtr.  Airlines are raking in record numbers of passengers but higher costs & growth in capacity have weighed on fares & profits.  “The reduction in the Company’s RASM [revenue per available seat mile] expectations was driven primarily by complexities in adapting its revenue management to current booking patterns in this dynamic environment,” Southwest said in a filing.  The stock fell 37¢.

Southwest Airlines cuts revenue forecast as booking patterns change

The stocks market was a mixed bag after popular stock indices snapped a 3-day losing streak, as investors watched for signs of life in the tech-driven rally & weighed the prospects for rate cuts.  Stocks moved lower as Treasury yields inched off 3-month lows.  A wobbly last handful of sessions has left investors wondering whether the drag on stocks is temporary or the start of a more solid retreat.  The market is looking to economic prints for cues ahead of the key PCE inflation release on Fri.  Federal Reserve speakers this week have underlined their caution in deciding to make interest-rate cuts, dependent on the data.

Markets wobble witih tech stocks rebounding today

Dow retreated 300 (near session lows), decliners over advancers about 2-1 & NAZ rose 220.  The MLP index added 1 to the 287s & the REIT index remained weak, down 5+ to the 373s.  Junk bond funds slid lower & Treasuries were a tad higher & yields were flattish.  Oil fell about 1 to go below 81 & gold was off 12 to 2331 (more on both below).

Dow Jones Industrials 

US auto sales thru the first ½ of the year are expected to be up by 2.9% compared to a year ago, but there are concerns that the auto industry may not be able to continue the momentum during the last 6 months of the year.  Vehicle inventory levels are growing, incentives are increasing & there's growing uncertainty during the 2nd ½ of the year surrounding the economy, interest rates & presidential election, according to Cox Automotive.  The auto data & research firm expects sales growth to slow during the 2nd ½ of the year to end 2024 at 15.7M units, roughly a 1.3% increase compared to 2023.  And, unlike in recent years, growth is coming from commercial sales compared to more profitable sales to consumers.  “Overall, we’re expecting some weakness in the coming few months,” said Cox chief economist Jonathan Smoke.  “We basically are making some assumptions that we can’t quite hold the pace that we’ve been seeing. But we’re not expecting a collapse either.”  Such circumstances are largely good for consumers, some of whom have been waiting years to purchase a new vehicle amid unprecedented supplies of new vehicles & record high pricing during the coronavirus pandemic.  They're a headwind for automakers, many of which posted record profits due to the high demand & low availability of new vehicles during the global health crisis.  Analysts have been predicting vehicle pricing & profit challenges for most automakers compared to the record or near-record levels of years past.  “There’s a lot of uncertainty that lies ahead, and it may make recent sales successes hard to build upon,” Charlie Chesbrough, Cox's senior economist, said.  “We are concerned that the second half of the year cannot maintain the growth we’ve seen so far.”  Underperformers included Tesla (TSLA), with sales estimated to be down 14.3%, & Stellantis (STLA), which is forecast to be down by 16.5% through Jun.  Honda beat STLA in US sales during the first ½ of the year, pushing the Chrysler & Jeep parent to #6 in sales, down from its recent #4 rank.  TSLA rose 4.50 & STLA was off 8¢.

U.S. auto sales are expected to slow during the second half of 2024

Home prices set another record in Apr, even as mortgage rates rose and the supply of homes for sale increased.  Usually, under those circumstances, prices would weaken, but today's housing market is unlike any other in recent history.  Prices in Apr rose 6.3% compared with the year-earlier month, according to the S&P CoreLogic Case-Shiller National Home Price Index.  It marks the 2nd straight month that the national index jumped at least 1% over its previous all-time high.  Although this is a 3-month moving average, it's important to note that those price gains come even as the average rate on the 30-year fixed mortgage jumped sharply in April, from 6.9% to 7.5%, according to Mortgage News Daily.  “2024 is closely tracking the strong start observed last year, where March and April posted the largest rise seen prior to a slowdown in the summer and fall,” said Brian Luke, head of commodities, real & digital assets at S&P Dow Jones Indices.  “Heading into summer, the market is at an all-time high, once again testing its resilience against the historically more active time of the year.”  The only potential sign of relief is that the annual & monthly gains on the price index are slowing a little bit. Mar's annual gain was 6.5%.  Still, it feeds into what is now one of the least affordable housing markets in US history for both homeownership & renting.  The housing cost burden has hit a record, according to a new report from Harvard’s Joint Center for Housing Studies (HJCH).  Home prices are now 47% higher than they were in early 2020, with the median sale price now 5 times the median household income, according to the study.  For homeowners, 20M are considered cost burdened by their monthly payments.  All of those cost-burdened levels represent records.  Homeowners are also facing a sharp increase in insurance premiums, up an average 21% between 2022 & 2023, according to the HJCH report, & property taxes are also rising.

Here’s how bad housing affordability is now

The cost of living has risen to the point that most Americans are feeling the pressure. An astounding 80% of Americans have experienced a cost of living creep in the last few years, a Credit Karma study found.  This cost of living creep means that consumers are spending more money to afford the same amount of goods or services as they did in the past.  About 66% of those surveyed said the rising cost of living is holding them back from meeting their financial goals.  A lack of rising incomes & high interest rates are 2 of the biggest factors contributing to this cost of living creep.  Almost 60% of people believe their incomes won't ever catch up with the current cost of living.  Even those who have seen their incomes rise can't keep up with increased costs.  Paying down debt, saving for retirement & buying a new car are all being put on hold due to an inability for many Americans to keep up with their everyday expenses.  More than ½ of those surveyed have taken on extra debt or are unable to save now that they're dealing with costly bills & expenses.  Saving in general has taken a back burner, with 37% of respondents unable to set aside any of their income for savings goals.  Instead, their incomes go toward basic living costs, which are still difficult for many Americans to meet.

80% of Americans are dealing with a cost of living creep

Gold prices slipped, hurt by an uptick in the $ & Treasury yields as investors awaited US inflation data due later this week that could provide cues on the timing of interest rate cuts by the Federal Reserve this year.  Spot gold was down 0.6% at $2318 per ounce & US gold futures settled 0.6% lower to $2330.  The $ rose 0.2% against its rivals, making gold more expensive for other currency holders, while benchmark 10-year yields also edged higher.  There's still a lot of physical demand from central banks & there's Asian demand on the expectation that the Fed will cut rates, so investors are reluctant to go short on gold.  Global physically backed gold exchange-traded funds (ETFs), a crucial category of demand, saw inflows last week of $212M (2.1 metric tons) according to the World Gold Council.

Gold Slips as Dollar, Yields Gain; Traders Await More US Data

West Texas Intermediate (WTI) crude oil closed lower, pausing gains that have seen the commodity rise 11% over the past 3 weeks on expected strong summer demand & geopolitical risks.  WTI crude for Aug closed down 80¢ to $80.83 per barrel, while Aug Brent crude, the global benchmark, was last seen down 74¢ to $85.07.  The drop comes as the market pauses its bullish run, even as geopolitical risk is on the rise as Ukraine increases attacks on Russian oil infrastructure & Israel continues to press its war on Hamas in Gaza.  As well, the EU is tightening sanctions on Russia & Houthi rebels are continuing missile attacks on Red Sea shipping.  At a time when there is an expectation of higher-to-be numbers in oil prices, such a sweeping under the carpet of the wider considerations of the conflict is starting to run out of space.  Coupled with some ugly developments in Ukraine/Russia, those that are arguing for another charge in oil prices can probably rely on geopolitical issues.  Traders are also awaiting US inventory data, with the American Petroleum Institute today, followed with official data from the Energy Information Administration tomorrow.

WTI Closes Lower Despite Expectations for High Summer Demand and Rising Geopolitical Risk

Dow looks to be finding its feet amid the shift from techs to value stocks, giving weight to the idea of a broadening in gains to other sectors.  As the qtr closes on Fri, some traders & investors are evening out positions in various stocks.  Everybody is concerned with high levels of interest rates which are expected to last for some time.

Markets slide but tech shares are higher

Dow fell 286, decliners over advancers 2-1 & NAZ rebounded 194.  The MLP index added 1+ to the 287s & the REIT index retreated 5+ to the 273s.  Junk bond funds were mixed & Treasuries had very limited selling which lifted yields only slightly (more below).  Oil slid back pennies in the 81s following recent strength & gold was up 6 to 2338.

Dow Jones Industrials 

Federal Reserve Governor Michelle Bowman said the time is not right yet to start lowering interest rates, adding she would be open to raising if inflation doesn't pull back.  “Should the incoming data indicate that inflation is moving sustainably toward our 2 percent goal, it will eventually become appropriate to gradually lower the federal funds rate to prevent monetary policy from becoming overly restrictive,” Bowman said.  “However, we are still not yet at the point where it is appropriate to lower the policy rate.”  Those comments reflect a prevailing sentiment at the central bank, in which most policymakers have said in recent weeks that, while they still expect inflation to get back to the Fed's 2% target, they need more evidence.  Recent readings have shown moderating inflation, with the Fed's preferred indicator running just under 3%.  However, the rate-setting Federal Open Market Committee noted after its last meeting that there has been only “modest further progress.”  Bowman noted that there are “a number of upside risks” prevailing that could accelerate her outlook, which is among the most hawkish of all policymakers.  “I remain willing to raise the target range for the federal funds rate at a future meeting should progress on inflation stall or even reverse,” she continued.  “Given the risks and uncertainties regarding my economic outlook, I will remain cautious in my approach to considering future changes in the stance of policy.”  Bowman said she still expects the Fed to hold its key overnight borrowing rate at 5.25%-5.50% “for some time.”  Moreover, she indicated she is not being swayed by rate reductions from the Fed's global counterparts such as the ECB, which recently lowered its key rates by a qtr percentage point.  Bowman said “it is possible over the coming months that the path of monetary policy in the U.S. will diverge from that of other advanced economies.”

Fed Governor Bowman says she’s still open to raising rates if inflation doesn’t improve

Home prices reached a new record in Apr amid an ongoing housing shortage, even as high mortgage rates pushed affordability out of reach for more Americans.  Prices increased 6.3% nationally in Apr when compared with the previous year, the S&P CoreLogic Case-Shiller index showed, down from the 8.3% pace recorded the previous month.  On a monthly basis, prices climbed 0.3%, according to the index.  "For the second consecutive month, we've seen our national index jump at least 1% over its previous all-time high," said Brian Luke, head of commodities, real & digital assets at S&P DJI, in a release.  "Heading into summer, the market is at an all-time high, once again testing its resilience against the historically more active time of the year."  "Last month’s all-time high came with all 20 markets accelerating price gains," Luke said.  "This month, just over half of our markets are seeing prices accelerate on a monthly basis."  The largest price gain once again took place in San Diego, which recorded a year-over-year increase of 10.3%, followed by New York & Chicago, with respective gains of 9.4% & 8.7%.  The Case-Shiller index reports with a 2-month delay, meaning it may not capture the latest ongoings in the market.   There are a number of driving forces behind the affordability crisis.  Years of underbuilding fueled a shortage of homes in the country, a problem that was later exacerbated by the rapid rise in mortgage rates & expensive construction materials.  Higher mortgage rates over the past 3 years have also created a "golden handcuff" effect in the housing market.  Sellers who locked in a record-low mortgage rate of 3% or less during the pandemic began have been reluctant to sell, limiting supply further & leaving few options for eager would-be buyers.  Economists predict that mortgage rates will remain elevated in 2024 & that they will only begin to fall once the Federal Reserve starts cutting rates.  Even then, rates are unlikely to return to the lows seen during the pandemic.

US home prices smashed another record high in April

Cisco (CSCO), a Dow stock, is “very optimistic” about its growing business with Chinese electric car companies as they expand overseas, the company's Greater China head said.  The EV segment is the US tech giant's 2nd-largest for the region, CSCO generates most of its revenue in Greater China from manufacturing companies, & within that, electric cars form the largest category, said Ming Wong, VP & CEO of Cisco Greater China.  Chinese EV-makers have ramped up their global expansion in the last year as domestic competition intensified.  However, trade tensions have escalated, with the US & likely the EU, increasing tariffs on imports of Chinese electric cars.  That doesn’t necessarily restrict their growth.  Chinese automakers, such as BYD, are investing in local factories.  CSCO, which provides networking equipment & software for businesses, is working with at least 10 electric car customers as they build factories, offices & research & development centers overseas, according to Wong.  “At least as of now, we don’t hear anything from the [EV] customers saying that, ‘Oh, because of this, we need to stop investing, or we need to slow down,’” he added.  “It’s actually the other way around. A lot of things happening. They will keep pushing, going forward, and we’ll see how this will evolve.”  The stock rose 33¢.

Cisco is ‘very optimistic’ about its growing business with China EVs

Investors were taking profits scored in AI-linked names as a stellar qtr draws to a close, raising the question of whether recent losses have further to go.  Bowman's comments above were not helpful to the bulls.  They were another reminder that high interest rates could persist for some time.

Markets climb while gold remains near its recent record high

Dow gained 260 (below early highs), advancers over decliners about 5-2 & NAZ fell 192.  The MLP index advanced 4+ to the 286s & the REIT index rose 3+ to the 378s.  Junk bond funds hardly budged & Treasuries had limited buying which lowered yields a little.  Oil was up almost 1 to the 81s & gold jumped 16 to 2347 (more on both below).

Dow Jones Industrials 

Novo Nordisk (NOVO) will spend $4.1B to build a new manufacturing plant in Clayton, North Carolina, in a bid to boost the supply of its blockbuster weight loss drug Wegovy, diabetes treatment Ozempic & other injectable therapies.  Demand for Wegovy & Ozempic has outstripped supply over the last year, spurring intermittent shortages in the US & forcing the Danish drugmaker to invest heavily to increase its manufacturing footprint.  The company  plans to invest $6.8B in production this year, up from roughly $4B last year.  The new manufacturing facility will be responsible for filling & packaging syringes & injection pens for the drugs.  “This investment really gives us the opportunity to serve more patients,” Doug Langa, Novo Nordisk’s head of North American operations, said.  “Importantly, I think the other key message here is it’s further investment in the U.S., so I think we’re very proud of that.”  Construction of the 1.4M-square-foot facility has begun & is expected to be completed in 2027 - 2029.  The company said 1000 workers will staff the site, adding to the 2500 employees already working at its 3 existing manufacturing plants in North Carolina.  3 lower, starter doses of Wegovy are currently in shortage in the US due to high demand, according to a Food & Drug Administration database.  Patients start Wegovy with lower doses & gradually increase the amount every 4 weeks until they reach a target dosage.  Wegovy & Ozempic are part of a class of medications called GLP-1s that mimic hormones produced in the gut to suppress a person's appetite & regulate their blood sugar.  Around 35K US patients on average start Wegovy each week today, up from roughly 27K in May.  The stock fell 25¢.

Novo Nordisk to build $4.1 billion North Carolina facility to boost output of Wegovy, Ozempic

Ferrari's (RACE) all-electric model won’t be launched for over a year, but early tests indicate it has all the driving traits & emotion of a true Ferrari, according to CEO Benedetto Vigna.  “The final judge will be the client,”  Vigna said during the opening of its new E-Building in Maranello, Italy.  “More people have started to drive our electric Ferrari, and they have a good feeling. The driving traits are there.”  Vigna added the defining characteristic of a Ferrari is the emotional experience. Having driven the all-electric Ferrari himself.  “I had this kind of emotion.”  Ferrari's plan to build an electric model marks a bold & expensive bet for a luxury automaker famed for its roaring, powerful combustion engines.  Little is known about the electric model, which is not scheduled for launch until the 4th qtr of 2025.  Yet the notion of an electric Prancing Horse has already set off a vigorous debate in the auto community & among wealthy car collectors.  Much of the debate is focused on engine sound.  Ferrari powertrains are prized for their symphony of roars, rumbles, pops & high-pitched whines.  Electric motors are largely silent.  Vigna said Ferrari's power acoustics will always be “authentic,” meaning the company won't try to recreate the sound of a combustion engine through fake audio programs.  He hinted, however, that it could amplify or better showcase the natural sound of an electric motor.  “The electric engine is not silent,” he said.  “There is a way to let it play in a unique way.”  Vigna declined to give projections for the price or overall sales of the all-electric Ferrari.  The stock rose 7.05.

Ferrari CEO says all-electric model preserves the ‘emotion’ of the supercars

Federal Reserve Bank of San Francisco Pres Mary Daly warned the US labor market is nearing an inflection point, where further slowing could mean higher unemployment.  Daly, who votes on monetary policy this year, said restrained demand will likely be needed to return inflation to the central bank’s 2% target.  That may stress a labor market that while good, is no longer “frothy.”  “So far, the labor market has adjusted slowly & the unemployment rate has only edged up.  But we are getting nearer to a point where that benign outcome could be less likely,” Daly said.  “Future labor market slowing could translate into higher unemployment, as firms need to adjust not just vacancies but actual jobs,” she added.  “At this point, inflation is not the only risk we face.” The San Francisco Fed chief said the bumpiness of inflation data this year has not inspired confidence, though recent readings showing a step down in price growth have been more encouraging.  Still, Daly said it's hard to know if the economy is truly on track to price stability.  Her remarks followed comments last week from several Fed officials who emphasized the need for more evidence of cooling inflation before lowering interest rates.  Policymakers have held borrowing costs at a 2-decade high for nearly a year now & they appear in no rush to lower them.  Earlier this month Fed officials penciled in just 1 rate reduction for 2024, down from the 3 projected in Mar.  Daly urged policymakers to remain vigilant & open to various scenarios the economy could take.  “To be appropriate, policy has to be conditional,” she said.

Fed’s Daly Warns of Labor Market Risks, Nearing Inflection Point

Gold prices rose, helped by a pullback in the $, while investors looked forward to US inflation data due later this week that could offer more clarity on the Federal Reserve's monetary policy.  Spot gold was last up 0.5% to $2332 per ounce & US gold futures rose 0.6% to $2345.  The $ fell 0.5% against its rivals, making gold attractive for other currency holders.  Gold is in consolidation mode & there is active buying on dips.  Investors are looking for the trajectory of interest rates moving forward & the timing of those potential rate cuts.  Focus this week will on the US Personal Consumption Expenditures (PCE) data, the Fed's preferred measure of inflation, which is due on Fri.

Gold Gains on Dollar Retreat, Focus on U.S. Inflation Data

West Texas Intermediate (WTI) crude oil closed higher on solid demand & a falling $.  WTI crude for Aug closed up 90¢ to settle at $81.63 per barrel, while Aug Brent crude, the global benchmark, was last seen up 83¢ to $86.07.  Oil is benefiting from expectations summer demand is on the rise. with a rising call on US gasoline inventories & healthy aviation demand, while supply remains tight amid OPEC+ production cuts.  The underlying reason behind the price strength is the growing confidence that global oil inventories will inevitably plunge during the summer in the northern hemisphere.  Estimates greatly diverge, yet the view of declining stocks is becoming prevalent.  Prices are also benefiting from a weakening $ which was unable to hold at a 7-week high reached on Fri after data showed solid growth for the manufacturing & service sectors.  The ICE dollar index was last seen down 0.29 points to 105.51.

WTI Crude Oil Moves Higher on Summer Demand and a Lower Dollar

AI stocks, largely traded on NAZ, have lost some sex appeal in the last week or so.  Investors have switched their interest into traditional companies.  Thoughts about high interest rates persisting for a long period of time are troubling for investors.  Summer could be a challenging time for the stock market.

Markets rise as investors rotate out of hot chip stocks

Dow shot up 402, advancers over decliners better than 3-1 & NAZ slid back 49.  The MLP index went up 2+ to the 283s & the REIT index rose 5+ to 381.  Junk bond funds inched higher & Treasuries had limited selling, allowing yields to edge higher (more below).  Oil was fractionally higher to the 81s & gold gained 12 to 2343.

Dow Jones Industrials 

Treasuries were muted entering the final week of Jun, with investors set to zero in on Fri's key inflation report.  The 10-year Treasury yield was flat at 4.259% & the 2-year Treasury yield was 1 basis point higher at 4.743%.  Yields & prices move in opposite directions & 1 basis point is equivalent to 0.01%.  With a summer interest rate cut from the Federal Reserve seemingly off the table, markets are hunting for more signs that Sep may be the month.  That may come in the form of Fri's personal consumption expenditures price index, the Fed's preferred inflation gauge.  The annual rate of price rises is expected to cool to 2.6% in May from 2.8% in Apr.  Traders are currently pricing in a roughly 66% chance of a Sep cut, CME's FedWatch tool showed.  A final reading will confirm the rate of first-qtr growth in the US economy, initially estimated at 1.6%.

Treasury yields are flat as investors gear up for inflation data

Prospective homebuyers in the US are keeping a close eye on the Federal Reserve as they eagerly await interest rate cuts that could offer relief from painfully high borrowing costs.  But there is another factor that could keep mortgage rates elevated in the coming months & years: the US national debt.  "As mortgage rates remain near 7%, a lot of attention is being paid to the timing of Federal Reserve interest rate cuts," said Lisa Sturtevant, Bright MLS chief economist.  "But a delay in Fed rate cuts is not the only reason mortgage rates will remain higher for longer. A record-high federal debt is also contributing to persistently high mortgage rates."  That's because the federal gov has to pay a massive amount of interest on the debt that it owes.  To do so, the gov will issue more Treasury bonds, which it needs to pay out a good return to attract investors, to raise capital, Sturtevant said.  But mortgage-backed securities are competing for the same investors & also need to offer a high rate of return.  "Consequently, the mortgage loans bundled up to form those mortgage-backed securities must have a relatively high interest rate attached to them," she added.  In its latest budget & economic outlook, the Congressional Budget Office projected that the nation's publicly held debt will surge from 99% of GDP at the end of 2024 to 122% of GDP by the end of 2034, the highest level ever recorded.  "Then it continues to rise," the report said.  The risk is that if the US continues to grow its debt at such an unsustainable rate, foreigners, including private investors & central banks, holding Treasury bonds will start to sell them down, Desmond Lachman, a senior fellow at the American Enterprise Institute, said.  Foreigners currently own about 30% of all outstanding Treasury securities, according to data from the Securities Industry & Financial Markets Association.  If foreigners were to sell their bonds, the US gov would likely struggle to finance itself & pay down the mounting interest costs on the debt.  Should that happen, the Federal Reserve would most likely step in & print the money, driving inflation & long-term interest rates higher, Lachman said.  "That'll send long-term interest rates high. Irrespective of what the Fed's doing at the short end, the long rates can go very high if you get a dollar crisis, and you get all these people dumping their bonds," he said.  "That's really where the risk is."

How the US national debt is keeping mortgage rates elevated

The DOJ said Boeing (BA), a Dow stock, broke the agreement by "failing to design, implement and enforce a compliance and ethics program to prevent and detect violations of the U.S. fraud laws throughout its operations." Under the 2021 agreement, the DOJ said it would not prosecute BA so long as it overhauled its compliance practices & submitted regular reports.  The company also agreed to pay $2.5B to settle the investigation.  BA declined to comment & the DOJ did not respond to a request for comment before publication.  The company previously said that it had received notice from the DOJ & added they "believe that we have honored the terms."  The DOJ has until Jul 7 to decide whether it will bring criminal charges against BA.  The report comes as the embattled company faces intense scrutiny from US prosecutors, regulators & lawmakers after a panel blew off 1 of its jets operated by Alaska Airlines (ALK)in early Jan.  BA stock rose 3.70.

US prosecutors reportedly recommend criminal charges against Boeing

Stocks opened higher & the bulls keep buying more stocks.  Dow is up 82 in Jun, & is not bothered by wars & war threats raging around the world.  Meanwhile gold remains near its record highs.

Markets falter and gold sells off

Dow edged up 15, decliners over advancers about 5-4 & NAZ was off 32.  The MLP index stayed in the 281s & the REIT index barley budged in the 375s.  Junk bond funds fluctuated & Treasuries hardly budged keeping yields flattish.  Oil fell chump change to go under 81 & gold sank 33 to 2335 (more on both below).

Dow Jones Industrials 

More built-for-rent single-family homes are being constructed in the US, according to the National Association of Home Builders (NAHB), & experts say this is in part due to the housing affordability crisis.  “When mortgage rates move higher, and it’s harder to buy a home, renting becomes more of an option,” said Robert Dietz, chief economist at the NAHB.  Construction began on about 18K single-family, built-for-rent homes in the first qtr of 2024, a 20% jump compared with the first qtr of 2023, according to NAHB, which analyzed data from the Census Bureau's Quarterly Starts & Completions by Purpose & Design.  “People need somewhere to live, and they have a choice to make,” said Molly Boesel, principal economist at CoreLogic, a real estate data firm.  “And if they can’t find what they need in the for-sale market, they’re going to go to the rental market,” she added.  As a share of all housing starts, single-family built-for-rent starts grew to 10% in 2023 from 5% in 2021, almost doubling in 2 years, according to the National Association of Realtors (NAR), which analyzed data from the Survey of Construction Data by the Census Bureau.  Single-family built-for-rent starts grew to 90K units in 2023, up from 81K units in 2022, the National Association of Realtors reported.  “We are seeing this growing move towards having built-for-rent properties in the U.S.,” said Jessica Lautz, deputy chief economist at the NAR.  The growing share of built-for-rent single-family homes is a response to demand from “people who can’t afford today’s very expensive, out-of-reach housing market,” Lautz said.  Homebuyer affordability declined in Apr, according to the Mortgage Bankers Association's Purchase Applications Payment Index.  NAHB's Dietz said builders are noticing “an expansion” among renters in their 30s & 40s.  Young adults are interested in built for rent “as a growing share who can’t afford to purchase a home today,” Lautz added.

More single-family built-for-rent homes are under construction in the U.S.

Apple (AAPL), a Dow stock, said it won't release several upcoming features unveiled this month, including its flagship “Apple Intelligence” AI product, in the EU this year due to “regulatory uncertainties” stemming from the bloc's Digital Markets Act (DMA) anti-trust regulation.  AAPL said that 3 features — Apple Intelligence, iPhone Mirroring & enhancements to its SharePlay screen-sharing product — won't be available to EU customers due to its belief that “that the interoperability requirements of the DMA could force us to compromise the integrity of our products in ways that risk user privacy and data security.”  The EU passed the DMA in 2023, spurred by concerns that a handful of major technology companies were acting as “gatekeepers” in preventing smaller firms from competing.  Among other things, DMA requires that basic functionalities work across competing devices & ecosystems.  The interoperability requirements apply to iPhones & iPads products.  But Macs are impacted by the DMA because iPhone Mirroring allows users to replicate their iPhone onto the screen of their Mac.  The loss of the company's AI product could be a disappointment to consumers.  Apple Intelligence can proofread your writing or even rewrite it in a friendly or professional tone.  It can create custom emoji called “Genmoji,” search through your iPhone for specific messages from someone, summarize & transcribe phone calls or show you priority notifications.  The company also announced a partnership with OpenAI & a roadmap to other models being added to the platform.  The company says it will work with the EU “in an attempt to find a solution that would enable us to deliver these features to our EU customers without compromising their safety.”  The stock fell 2.19.

Apple Intelligence won’t launch in EU this year due to antitrust regulation

The stock market's climb to record highs has come with conspicuously little volatility.  The S&P 500 has gone 377 days without a 2.05% sell-off.  That's the longest stretch for the benchmark since the great financial crisis.  The index hasn't experienced a gain of at least 2.15% in that time either.  This market lull comes as investors pile into megacap tech stocks amid bets that artificial intelligence will boost profits.  YTD, the S&P 500 is up more than 14%.  Expectations of Federal Reserve rate cuts have also buoyed the broad market index in 2024 as new data shows inflation moving closer to the central bank's 2% goal.  Many investors consider the CBOE Volatility Index (VIX) the de facto fear gauge on the Street.  Last month, it hit its lowest level going back to Nov 2020.  Today, it traded around 13, near historically low levels.  It’s unclear how long this low-volatility period will last.  In 2017, the S&P 500 recorded just 8 daily moves of more than 1%, while the VIX fell to historic lows below 9.  The following year, however, volatility came back into the market & the VIX surged above 50 before easing.

Stocks are in longest stretch without a 2% sell-off since the financial crisis

Gold prices dropped more than 1%, weighed down by a stronger $ higher bond yields after data showed strong US business activity.  Spot gold was down 1.7% at $2319 per ounce & US gold futures settled 1.6% lower to $2331.  US business activity crept up to a 26-month high in Jun amid a rebound in employment.  Data yesterday showed first-time applications for US unemployment benefits fell moderately last week.  The $ rose 0.2% to its highest level in more than 7 weeks, making gold more expensive for other currency holder, while yield on 10-year Treasury notes edged higher after US data.

Gold Slides as US Dollar, Yields Rise

West Texas Intermediate (WTI) crude oil closed lower despite a report showed US inventories fell last week on improving summer demand & tight supply.  WTI crude oil for Jul closed down 56¢ to $80.73 per barrel, while Aug Brent crude, the global benchmark, was last seen down 65¢ to $85.06.  Still, since dropping to the lowest since early Feb on Jun 4, prices have since climbed 10% on improving summer demand & a drop in US oil inventories reported yesterday by the Energy Information Administration.  Crude oil reached a 7-week high after a US report showed declines in crude & fuel stocks, as the expected summer deficits amid strong demand is starting to show.  US implied demand for gasoline reached last year's level while jetfuel demand has reached a 5-year high.  However there are expectations that prices may not have much further to climb over the summer, even as supply remains light amid 2.2M barrels per day of voluntary OPEC+ production cuts continuing thru the 3rd qtr.

WTI Crude Oil Closes With a Loss Despite Lower U.S. Inventories

Today was an unexciting time for the stock market.  Dow stayed near breakeven for the entire session & NAZ has slid lower for 3 days after following an impressive rally this year.  The stock market continues to be heavily overbought while interest rates continue at elevated levels.  And high interest rates could be a drag on for many  months.  This week Dow finished up 560.