Markets wobble after a favorable read on producer price index for May

Dow fell 55 (well above early lows), decliners over advancers 2-1 & NAZ was up 64.  The MLP index stayed down 1 to the 278s & the REIT index added 2+ to the 376s.  Junk bond funds were a little higher & Treasuries saw more buying which reduced yields.  Oil remained steady in the 78s & gold sank 35 to 2319 (more on both below).

Dow Jones Industrials 

The number of Americans filing for unemployment benefits last week unexpectedly jumped to the highest level in 10 months, the latest sign that the labor market is starting to cool in the face of high interest rates.  Labor Dept figures show initial claims for last week increased by 13K to 242K, above the 2019 pre-pandemic average of 218K claims & marks the highest level for jobless claims since Aug 2023.  Continuing claims, filed by Americans who are consecutively receiving unemployment benefits, also rose to 1.82M for the prior wee, an increase of 30K from the previous week.  The weaker-than-expected data could have major implications for the Federal Reserve, which raised interest rates in 2022 & 2023 to the highest level in 2 decades in an attempt to cool the economy — & the labor market.  Policymakers have signaled they will hold rates at elevated levels until they are certain that high inflation is conquered.  Experts say the latest jobless data could keep the central bank on track to cut rates in Sep.  The labor market has remained historically tight over the past year, defying expectations for a slowdown.  Although economists say it is beginning to normalize after last year's blistering pace, it is nowhere near breaking.  The Labor Dept reported at the start of the month that the economy added 272K jobs in May, but that the unemployment rate unexpectedly ticked higher to 4%.

Number of Americans filing for jobless benefits surges to 10-month high

Mortgage rates are down for the 2nd straight week, but still remain stubbornly high for many would-be buyers.  Mortgage rates are down for the 2nd straight week, but still remain stubbornly high for many would-be buyers.  The average rate on the 15-year fixed mortgage also decreased to 6.17% from 6.29% last week.  One year ago, the rate on the 15-year fixed note averaged 6.10%.

Mortgage rates fall for second straight week, but still stubbornly high

Ford (F) is ending a controversial electric vehicle dealership program that initially asked store owners to invest upward of $1M to sell EVs.  The “EV-certified” program was announced in Sep 2022 by CEO Jim Farley amid high demand for the vehicles, low supplies & industry-wide optimism for all-electric cars & trucks.  That optimism, however, has not panned out as expected.  EV sales for Ford & other automakers are growing but at a far slower pace than many expected.  That's led to automakers delaying or canceling future electric vehicles & investments.  “The world has changed,” Marin Gjaja, COO of Ford's Model E electric vehicle business, said.  “The growth has slowed down.”  Gjaja said the Model e Dealership Program, which included about ½ of Ford's 2800 US dealers, “is being sunset” as the market undergoes changing conditions and amid conversations with dealers.  The company had faced lawsuits from dealers over the program.  Instead, Ford will open EV sales to all of its dealers in an attempt to grow sales of its all-electric cars & trucks.  “It allows us to open EV sales and service to more dealers,” Gjaja said.  “We think it’s going to help us grow our sales.”  Dealers will need to make some investments for charging, training & other EV-related expenses, but not as much as they did under the prior program, which included expected investments of $500K - $1.2M.  Gjaja said those initial estimates were high.  He said dealers who participated in the full program invested about $600K on average.  The stock fell 14¢.

Ford ends EV dealership program that required hefty investment

Gold traded lower early as the $ rose following a hawkish outlook for interest-rate cuts from the Federal Reserve, even as yields weakened after US producer prices eased in May.  Gold for Aug was last seen down $20 to $2334 per ounce.  The Federal Open Market Committee (FOMC) ended its 2-day meeting & left interest rates unchanged, while its dot-plot forecast is predicting just 1 cut this year.  Fed Chair Jerome Powell said the central bank will wait for further data showing inflation is moving towards the bank's 2% target before lowering rates despite a lower than expected rise in May's Consumer Price Index (CPI).  Gold's attempted rebound following the CPI miss was cut short by the FOMC's higher-for-longer message.  The $ rose on the dimming prospect for rate cuts, with the ICE dollar index last seen up 0.22 points.  However treasury yields narrowed after the May Producer Price Index fell by 0.2% from Apr, under the estimate that called for a 0.1% rise.  The yield on the 2-year note was last seen down 5.5 basis points to 4.705%, while the US 10-year note was paying 4.275%, down 4.8 basis points.

Gold Trades Lower Early as the Dollar Rises on Fed's Hawkish Outlook for Interest-Rate Cuts

West Texas Intermediate (WTI) crude oil closed higher even after the Federal Reserve lowered expectations for a near-term rate cut & supply remains ample amid moderate demand.  WTI crude for Jul closed up 12¢ to $78.62 per barrel, while Aug Brent crude, the global benchmark, was last seen up 2 pennies to $82.62.  The Federal Reserve's policy committee ended its meeting & left interest unchanged, while its dot-plot forecast predicted just 1 cut to interest rates this year as Fed Chair Jerome Powell said the central bank will wait for further data showing inflation is moving towards the bank's 2% target before lowering rates.  The $ rose following the Fed's decision, bearish for oil that is priced in the currency.  The Energy Information Administration reported US oil inventories rose by 3.7M barrels last week, while the estimate expected inventories to fall.  Gasoline & distillate inventories also rose, showing weak demand during what is supposed to be the high-demand US summer driving season.

WTI Closes With a Small Gain as Inventories Rise amid Weak Demand and the Fed Turns Hawkish

Today brought a double dose of market-moving events: A lower-than-expected consumer inflation data & the Fed's outlook for rates.  But policymakers' shift from 3 rate cuts this year to just 1 didn't appear to rattle investors, given Powell's reminder that the projection isn't set in stone.  Traders are still pricing in 2 rate cuts starting in Sep.  The producer price index for May fell in what appears to be the latest sign that inflation is easing.  High interest rates are still troubling for investors.  A few years ago, mortgage rates were around 2-3%.  Today rates are 6-7% which reduces demand from home buyers.