Markets slide as the recent rally stalls

Dow declined 181, decliners over advancers more than 3-1 & NAZ slid back 22.  The MLP index was off 1+ to the 276s & the REIT index fell 1+ to the 375s.  Junk bond funds inched higher & Treasuries saw more buying which took yields a little lower again (more below).  Oil was a little lower in the 78s (more below) & gold gained 24 to 2342.

Dow Jones Industrials 

Crude oil futures rose for a 5th day, on pace for the best week in more than 2 months as analysts see a tighter market heading into the 3rd qtr.  Oil prices are up more than 4.5% for the week, the strongest gains since early Apr, when futures rose on boiling geopolitical tensions in the Middle East.  West Texas Intermediate   The Jul contract was $78.93 per barrel, up 25¢ (0.3%) & YTD, US oil is up 10%.  Brent Aug contract was $83.14 per barrel, up 39¢ (0.5%) & YTD, the global benchmark is ahead 7.8%.  Though the market has largely shrugged off geopolitical risk & refocused on fundamentals, RBC Capital Markets cautioned investors to keep a close eye on an increasingly precarious situation on the Israel-Lebanon border.  Though the market has largely shrugged off geopolitical risk &d refocused on fundamentals, RBC Capital Markets cautioned investors to keep a close eye on an increasingly precarious situation on the Israel-Lebanon border.  “We are closely watching whether Benny Gantz’s departure from the Israeli wartime cabinet will tip the scales in favor of a ground operation aimed at pushing Hezbollah back from the border,” Helima Croft, head of global commodity strategy, said.  Oil remains well below annual highs set in Apr but has regained ground after a sell-off last week that pushed prices to 4-month lows after a decision by OPEC+ to increase production later this year.

Oil prices on pace for best week in more than two months as forecasts point to tighter market

Treasury yields fell again as data released this week pointed to easing inflation.  The 10-year Treasury yield was trading around 4.211%, down nearly 3 basis points, & the 2-year Treasury note yield was marginally higher at 4.692%.  Yields & prices move in opposite directions & 1 basis point is equivalent to 0.01%.  The moves come after the producer price index, a measure of inflation at the wholesale level, slipped 0.2% in May, lower than expectations of a 0.1% uptick & a 0.5% rise in Apr.  The figures added to other data releases this week, with weekly initial jobless claims hitting a 10-month high & consumer prices coming in flat for May, 0.1 percentage point below expectations.  The Fed on Wed opted to hold rates steady at 5.25%-5.50% & indicated that there would be just 1 cut this year.  Data due today includes the University of Michigan consumer survey for June & US. import & export data for May.

Treasury yields slide again as traders weigh this week’s U.S. inflation data

Automotive companies in China sold more cars than their US counterparts for the first time last year, boosted BYD & growth in emerging markets, researcher Jato Dynamics said in a report published yesterday.  Chinese brands, led by Shenzhen-based BYD, sold 13.4M new vehicles last year, while American brands sold about 11.9M, the data showed.  Japanese brands led with 23.6M sales.  China's sales growth also outpaced the US, up 23% from the previous year compared to the US's 9%.  “Negligence from legacy automakers, which has resulted in consistently high car prices, has inadvertently driven consumers toward more affordable Chinese alternatives,” Jato senior analyst Felipe Munoz said in the report.  Chinese carmakers, like its leading car brand BYD, have expanded globally as an electric-vehicle price war at home has pushed down prices & weighed on profit margins.  Brands from China have made particular inroads in emerging economies, where Jato said 1 in 5 new car sales were made last year amid increased global demand.  “Over 17.5 million new cars were sold in the emerging economies in 2023. That is more than the total sales in the U.S. or Europe during the year,” said Munoz.  Chinese car makers picked up sizable market share across the Middle East, Eurasia & Africa while also posting growth in Latin America & Southeast Asia.  Meanwhile, some Chinese brands also picked up share in developed economies, including Europe, Australia, New Zealand & Israel.  The growth came despite increased trade animosity between China & the West & other factors like conflicts in Europe, high interest rates & high vehicle prices.

Chinese automakers overtake U.S. rivals in sales for the first time, report shows

The thought of just 1 interest rate cut this year & only a few next year are disturbing for investors.  Growth in Chinese autos is a new development & very interesting.