Dow slid back 115 (above session lows), decliners over advancers 5-4 & NAZ went up 93. The MLP index fell 3+ to 273 & the REIT index was 1+ lower to 372. Junk bond funds continued higher & Treasuries continued to see heavy buying which reduced yields significantly. Oil dropped almost 3 to 74 (4 month low) & gold rebounded 22 to 2368 (more on both below).
Dow Jones Industrials
A growing number of home sellers are slashing their prices as they try to lure back lukewarm buyers who are facing both high costs & steep interest rates. That's according to a new report published by Redfin, which found that 6.4% of sellers cut their asking price during the 4 weeks ended May 26, the highest share since Nov 2022. The median asking price for a typical home on the market also fell by about $3K to $417K, the first time that prices had decelerated in 6 months. On top of that, the number of days active listings have been on the market started to rise in May for the first time in 8 months, hitting a median of 46 days. Together, the metrics suggest that sale-price growth could "soften in the coming months as persistently high mortgage rates turn off homebuyers," the report said. While buyers received a modicum of relief on housing costs at the end of May, monthly housing payments dropped to a 6-week low thanks to a modest decline in mortgage rates, many Americans are still paying a record-high amount to buy a house. The median home sale price hit $390K, according to the report, the highest level on record & a 4.3% increase from the same time last year. Mortgage buyer Freddie Mac said that the average rate on a 30-year loan rose slightly to 7.04%. While that is down from a peak of 7.79% in the fall, it remains sharply higher than the pandemic-era lows of just 3%.
US house sellers are cutting prices for the first time in over a year
US crude oil fell more than 3% as OPEC+ announced plans to phase out voluntary production cuts totaling 2.2M barrels per day. A coalition of 8 OPEC+ members led by Saudi Arabia & Russia announced yesterday that they would begin phasing out those cuts over the course of 12 months starting in Oct. The planned phase out, however, will be subject to market conditions & could be reversed. OPEC+ is keeping separate tranches of production cuts totaling 3.6M bpd in place until the end of 2025. “Some people read the OPEC statement, particularly the part about the adding barrels back from the voluntary cut, as bearish,” said Helima Croft, head of global commodity strategy at RBC Capital Markets. “They were pretty clear that this is going to be data dependent,” Croft added. “As we get to the end of August, if the fundamental picture looks worse than what we have now, they would pause that addition.” Under the plan, more than 500K bpd would return to the market by Dec & 1.8M bpd would come back by Jun of 2025. Andrew Lipow, pres of Lipow Oil Associates, said the decision will limit upside for crude prices. The production that the countries plan to add to the market from Oct 2024 - Sep 2025 is equivalent to OPEC's demand growth forecast of 2.2M bpd for this year, Lipow said. “In essence, the volume that they’re putting back on the market is equal to the optimistic demand growth forecasts that OPEC has put out for 2024,” Lipow added. “And the upshot is that they are adding sufficient supply to meet the growth that’s anticipated in the market.”
U.S. crude oil falls more than 3% as OPEC+ plans phasing out production cuts
Jeep plans to grow US sales of its plug-in hybrid electric vehicles
by as much as 50% this year as it leans into the technology as a bridge
between its traditional gas-guzzling SUVs & all-electric vehicles
amid a slower-than-expected sales pace of EVs. The Stellantis (STLA) brand expects to sell 160-170K plug-in hybrid electric
vehicles, or PHEVs, in the US this year, an increase of 40% to 50%
from last year, Jeep CEO Antonio Filosa said. The target comes as Jeep launches its first all-electric SUVs in the US, beginning with the Wagoneer S. “It’s
the best time to be flexible, as we are,” Filosa said. “One
of the pillars of growth for the market is going to be freedom of
choice.” PHEVs, which combine an internal combustion engine with
EV technologies, could help accelerate consumer adoption of electrified
vehicles, as a sort of stutter step to all-electric models. PHEV
sales at the level Jeep is expecting this year would top STLA'
total 2023 US sales of the vehicles, at roughly 143K units. They
also would outperform an industry forecast for 27.5% segment growth this
year, according to AutoPacific. That compares with the consulting &
data firm’s 17% growth for EVs. Jeep's PHEV sales last year totaled 113K units, including 67K Jeep Wranglers & 46K Jeep Grand Cherokees. Thru the first qtr of this year, sales totaled 31K, up 47%
from the same period a year earlier. The brand is first in the US in
PHEV sales. Jeep
has leaned into PHEVs more than others to offset sales of the brand's
gas-guzzling SUVs amid tightening emissions & fuel economy standards. STLA fell 29¢.
Jeep expects to grow plug-in hybrid SUV sales by as much as 50% in 2024
Gold prices ticked up, as investors awaited multiple US economic reports this week for clues on health of the economy, after a recent inflation report suggested the Federal Reserve might have room for rate cuts in 2024. Spot gold edged 0.3% higher to $2332 per ounce & the dollar index (.DXY) ticked 0.1% lower. Bullion gained 2% in May & about 13% YTD. US gold futures rose 0.3% to $2353. Investors will look at the Institute of Supply Management's (ISM) nationwide PMI reading, Wed's ADP employment report & non-farm payrolls data due on Fri. Data last Fri showed that US inflation had stabilized in Apr, raising bets for a rate cut in Sep. Traders are currently pricing in about a 56% chance of a cut in Sep, versus about 49% before the report. While bullion is considered an inflation hedge, higher rates increase the opportunity cost of holding the non-yielding asset. Elsewhere, the European Central Bank is seen almost certain to trim rates by a qtr point to 3.75% on Thurs, making it the first major central bank to cut rates this cycle.
Gold Prices Edge up as Investors Seek more US Data
West Texas Intermediate (WTI) crude oil fell to the lowest since Feb 6 after OPEC+ over the weekend rolled 2.2M barrels per day of voluntary production cuts into the 3rd qtr, while planning to roll back the cuts beginning in Oct & extending other cuts slated to expire at year end thru 2025. WTI crude oil for Jul closed down $2.77 to settle at $74.22 per barrel, while Aug Brent crude, the global benchmark, was last seen down $2.82 to $78.29. OPEC staged a ministerial meeting on yesterday to decide on the future of 2.2M barrels per day of voluntary cuts slated to end on Jun 30, leaving them in place thru the high-demand 3rd qtr while planning to roll them back beginning in the 4th qtr depending on market conditions. The cartel left another 3.6M bpd of group & voluntary quota cuts in place & extended them thru 2025, though the UAE will be allowed to raise its output by 0.3M bpd next year.
WTI Crude Oil Falls to a Four-Month Low As OPEC+ Rolls Production Cuts into Q3 but Plans to Return Output Afterward
The stock market dipped lower in the AM, then a few buyers returned to trim losses. Tech stocks on NAZ are seeing a little buying, but that's nor really significant. A weak manufacturing report spurred concern that the world's largest economy is losing further traction. Today nervous investors were buying safe haven gold & Treasuries.
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