Markets struggle after Nasdaq ends its 6 session winning streak

Dow added 299 (with selling in the last hour of trading), decliners modestly ahead advancers & NAZ pulled back 150.  The MLP index was up 2+ to 280 & the REIT index fell about 1 to the 374s.  Junk bond funds fluctuated & Treasuries continued to see selling which reduced yields.  Oil was fractionally higher to the 83s & gold advanced 25 to 2372 for a 2 week high (more on both below).

Dow Jones Industrials 

Darden Restaurants (DRI) reported mixed quarterly results as Olive Garden's same-store sales fell for the 2nd consecutive qtr.  The company has faced a “consistently weaker consumer environment,” as well as increased discounting & marketing pressure from its rivals, CEO Rick Cardenas said.  For fiscal 2025, DRI is forecasting that its same-store sales will grow just 1-2%.  In the qtr ended May 26 EPS was $2.65 adjusted vs $2.61 expected & revenue was $2.96B vs $2.97B expected.  Same-store sales were flat for the qtr, dragged down by weaker-than-expected sales at Olive Garden & its fine-dining restaurants.  Still, execs emphasized that their chains are outperforming the broader casual-dining segment.  “We’re not going to do things to buy sales, even with the increased discounting our competitors are doing. … Our focus is on profitable sales growth,” Cardenas added.  He noted that consumers are concerned about inflation, & growing more anxious about the job market.  Still, Olive Garden & LongHorn Steakhouse diners are more willing to spend on pricey entrees & alcoholic drinks than they had been over recent qtrs.  Olive Garden’s same-store sales fell 1.5%, despite a 1% rise in its menu prices compared with the year-ago period.  Analysts were expecting it to report flat same-store sales growths.  Last qtr, Olive Garden's same-store sales fell 1.8%, driven by a pullback from low-income consumers.  Looking to fiscal 2025, DRI is forecasting EPS from continuing operations of $9.40 - $9.60, in line with expectations of $9.55.  The company also anticipates net sales of $11.8-11.9B, on the low end of expectations of $11.94B.  DRI is projecting total inflation of 3% & same-store sales growth of 1-2% in fiscal 2025.  CFO Raj Vennam said the company expects that traffic will improve as the year progresses.  DRI expects to raise prices about 2-3%, mirroring overall inflation.  The stock rose 2.33.

Darden beats on earnings, even as Olive Garden, fine-dining sales drag

Mortgage rates are down for the 3rd straight week, remaining in the high-6% territory.  Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate on the benchmark 30-year fixed mortgage ticked down to 6.87% this week from 6.95% last week.  The average rate on a 30-year loan was 6.67% a year ago.  The average rate on the 15-year fixed mortgage also decreased to 6.13% from 6.17% last week.  One year ago, the rate on the 15-year fixed note averaged 6.03%.

Mortgage rates decline for third straight week

The number of Americans applying for unemployment benefits slipped last week as the US labor market remained resilient.  The Labor Dept reported that jobless claims fell by 5K to 238K from a 10-month high of 243K the week before.  The 4-week average of claims, which evens out weekly ups & downs, rose by 5K to 232K, highest since Sep.  Nearly 1.83M people were collecting unemployment benefits in the prior week, up by 15K the week before & the 7th straight weekly uptick.  The US economy & job market have proven remarkably resilient in the face of high interest rates.  Employers are adding a strong average of 248K jobs a month this year.  Unemployment is still low at 4%.  But the economy has lately showed signs of slowing, perhaps offering evidence that higher borrowing costs are finally taking a toll.  For instance, the Commerce Dept reported Tues that retail sales barely grew last month.  The Federal Reserve raised its benchmark interest rate 11 times in 2022 & 2023, eventually bringing it to a 23-year high to combat a resurgence in inflation.  Inflation has come down from a mid-2022 peak 9.1% but remains stubbornly above the Fed's 2% target.  Fed policymakers announced last week that they have scaled back their intention to cut the rate 3 times this year.  Now they are anticipating only 1 rate cut.

US jobless claims fall to 238,000 from 10-month high, remain low by Historical Standards

Gold futures climbed, with prices marking their highest settlements in 2 weeks, as US economic data raised prospects for Federal Reserve interest-rate cuts later this year.  While Federal Reserve officials lean towards a single cut, market speculation suggests there could be 2, driven by slowing inflation & cooling economic conditions.  These factors keep traders waiting for more definitive cues that may emerge from upcoming economic reports.  Precious metals like gold tend to attract buyers in a low interest-rate climate.  The Philadelphia Federal Reserve said its gauge of regional business activity inched down to 1.3 in Jun from 4.5 in the prior month, its lowest since Jan.  New US jobless claims, meanwhile, declined to 238K last week from 243% in the prior week, the gov reported, while construction of new US homes fell 5.5% in May, the lowest level in 4 years.  Against that backdrop, Aug gold rose $22 (0.9%) to settle at $2369 an ounce

Gold Futures Settle at Two-Week Highs

West Texas Intermediate (WTI) crude oil closed at a 7-week high on expectations summer demand is on the rise amid tight supply while US inventories fell last week.  WTI crude for Jul closed up 60¢ to $82.17 per barrel, the highest since Apr 29, while Aug Brent crude was last seen up 44¢ to $85.51.  Strong summer demand is expected to deplete oil inventories, with supply restricted after OPEC+ earlier this month extended 2.2M barrels per day of production cuts slated to end on Jun 30 to the end of Sep.  The focus is still on resilient demand coming from an expanding global economy while OPEC+ recently extended supply cuts & hinted more could come if necessary.  The Energy Information Administration said US oil inventories fell by 2.5M barrels last week, while the estimate expected stocks to fall by 2.2M barrels.  Gasoline & distillate inventories also fell.

WTI Crude Oil Closes Higher on Expectations for Solid Demand and a Drop in US Inventories

The winning streak for NAZ came to an end.  Some of that money may have gone into Dow stocks which have been ignored in recent weeks.  The economy appears to be slowing which the Fed would like to see so it can cut interest rates.  But that is a touchy issue because too much slowing will hurt everybody.  While stocks have been strong, safe haven gold remains popular with nervous investors.