Markets edge lower ahead of tomorrow's Fed meeting

Dow retreated 146, decliners over advancers about 2-1 & NAZ rose 137 for another record.  The MLP index slid back 1+ to the 281s & the REIT index fell 1+ the 372s.  Junk bond funds inched higher & Treasuries were purchased which lowered interest rates (although still elevated).  Oil rose fractionally higher to the high 77s & gold crawled up 3 to 2330 (more on both below).

Dow Jones Industrials 

Wed is shaping up to be one of the most important days of the year for economic news, as investors will hear about the path of inflation & the manner in which the Federal Reserve plans to react.  In a 1-2 punch that starts in the AM with the pivotal consumer price index reading for May &ends with the Fed's policy meeting in the PM, vital signals will be sent about the direction of the economy & whether policymakers can soon take their foot off the brake.  Optimists are hoping that the moves fall largely within the realm of expected outcomes & don't do much to rattle the frayed nerves of market participants.  The measure of how much a broad basket of goods & services cost consumers in May is expected to show little month-over-month movement, just a 0.1% increase from Apr, though that still would equate to an aggregate annual rise of 3.4%.  Excluding food & energy prices, the core PCI is projected to show a 0.3% monthly gain & a 3.5% annual rate.  None of those numbers are dramatically different from the Apr readings & still show inflation running well above the Fed's 2% target.  Still, some economists say that a look under the hood at various important metrics such as insurance costs & core services excluding housing will show that inflation at least is trending in the right direction, albeit incrementally.  One important point about the CPI: While it gets a lot of focus from both the investing & general public, it is not the main metric the Fed uses.  Central bankers prefer the Commerce Dept's measure of personal consumption expenditures prices, a broader measure that also accounts for changes in consumer behavior.  While the BLS is disseminating the CPI report, the rate-setting Federal Open Market Committee members will be finalizing their projections for inflation, GDP & unemployment as well as indicating the expected rate path thru 2026 & beyond.  First & foremost, when it comes to interest rates, the Fed will do ... nothing.  Both market pricing & rhetoric from policymakers point to virtually no chance of a move either way on interest rates, with the central bank keeping its benchmark overnight borrowing rate at 5.25%-5.50%.  Instead, officials will take other action that markets will be watching closely.  FOMC members will release quarterly updates to their Summary of Economic Projections.  While the normal deadline for making changes to the estimates is 9 AM, the 19 meeting participants could get a little extra time to account for the CPI report.  The informal consensus in market commentary is that the Fed will adjust the path of its pivotal “dot plot” upward.  The impact of that would mean the grid likely will point to fewer than the 3 interest rate cuts indicated for 2024 in Mar, toward a path that most economists expect to show 2 reductions, though there is some worry the outlook could shrink to just 1.  Economists also expect the Fed to reduce its outlook for GDP growth & raise the expected inflation level from Mar's projections.

Fed meeting and inflation report both hit Wednesday, and the impact could be huge

Boeing (BA), a Dow stock, received orders for only 4 new planes in May, & for the 2nd straight month, none for its best-selling 737 Max, as fallout continues from the blowout of a side panel on a Max during a flight in Jan.  The results compare unfavorably with Europe's Airbus, which reported orders for 27 new planes in May.  BA also saw Aerolineas Argentinas cancel an order for a single Max jet, bringing its net sales for the month to 3.  The dismal results followed poor figures for Apr, when BA reported 7 sales — none of them for the Max.  BA hopes that the slow pace of orders reflects a lull in sales before next month's Farnborough Intl Airshow, where aircraft deals are often announced.  But the Federal Aviation Administration is capping BA's production of 737s after a door plug blew out from an Alaska Airlines (ALK) Max, allegations by whistleblowers that BA has taken shortcuts to produce planes more quickly, & reports of falsified inspection records on some 787 Dreamliner jets.  BA, based in Arlington, Virginia, delivered 24 jetliners in May, including 19 Max jets.  Ireland's Ryanair got & ALK took 3.  Airbus said it delivered 53 planes last month.  Despite the slow pace of recent sales, BA still has a huge backlog of more than 5600 orders.  The stock dropped 4.63.

Boeing sales tumble as the company gets no orders for the 737 Max for the second straight month

Warner Bros Discovery's (WBD) TNT Sports will be the new exclusive US broadcaster of the French Open, also known as Roland-Garros, beginning in 2025.  The entertainment company signed a 10-year contract with the French Tennis Federation for an average of about $65M per year.  The deal is set to make WBD the largest global broadcast partner to the Grand Slam tournament, which hosted 675K spectators this year.  WBD-owned Eurosport has been broadcasting the French Open to 55 countries outside the US since 1989.  “Roland-Garros perfectly aligns with our global sports strategy and our commitment to adding premium live sports content to our TNT Sports portfolio. We look forward to serving fans with a best-in-class content experience and providing them with direct access to more live Roland-Garros coverage than ever before,” TNT Sports CEO Luis Silberwasser said.  Per the agreement, the matches will be broadcast live on TNT, TBS & TruTV, including simulcasts on the company's streaming platform Max.  Adding the French Open is more evidence that the company wants to add live sports if the price makes sense for the investment.  In the past 3 years, TNT Sports has acquired rights for the National Hockey League, NASCAR, US Soccer, the College Football Playoffs (thru a sublicensing deal with ESPN) & now the French Open. The stock was off 8¢.

Warner Bros. Discovery strikes 10-year deal to broadcast the French Open in the U.S.

Gold edged higher as traders await US inflation data & the Federal Reserve's forward views on interest rates.  Bullion was trading at about $2310 an ounce today, clawing back some of the losses from the biggest daily drop since late 2020 at the end of last week.  The US central bank is widely expected to keep borrowing costs on hold this week, but there's less certainty on officials' rate projections.  41% of economists expect the Fed to signal 2 cuts, while an equal number expect the forecasts to show just 1 or no reductions at all.  Higher rates are generally negative for non-interest bearing gold.  US interest rates are likely to remain high for the foreseeable future, weighing on gold.  Spot gold added 0.1% to $2313 an ounce.  The Bloomberg Dollar Spot Index added 0.2% to near the strongest since the start of May, weakening the appeal of commodities, including gold, priced in the currency.

Gold Ticks Higher as Traders Count Down to Fed Rates Meeting

West Texas Intermediate (WTI) crude oil closed higher amid competing demand forecasts as the market turns cautious ahead of US inflation data coming tomorrow while the Federal Reserve's policy committee starts a 2-day meeting that is expected to end with interest rates unchanged.  WTI crude oil for Jul closed up 16¢ to settle at to $77.90 per barrel, while Aug Brent crude, the global benchmark, was last seen up 43¢ to $82.06.  OPEC maintained its 2024 demand forecast at 2.2M barrels per day over 2023 levels in its Jun Monthly Oil Market Report & its 1.2M bpd forecast for production gains from non-OPEC countries.  However the Energy Information Administration said in its monthly Short-Term Energy Outlook it expects 2024 demand to average 1.1M bpd.

WTI Crude Oil Closes Higher Ahead of Wednesday's U.S. Inflation Report and Fed Rate Decision

After the Dow tumbled at the opening, buyers returned & were able to pare those losses.  Tech stocks on NAZ remain popular with investors taking it to new heights.  Tomorrow will be a very busy time for investors with a lot of news to absorb even though there may not be a lot of drama.