Markets rise as Fed notes progress on lowering inflation

Dow advanced 99 with profit taking in the last hour of trading, advancers over decliners about 2-1 & NAZ soared 451.  The MLP index was off 1+ to 290 & the REIT index fell 1+ to 406.  Junk bond funds rose along with stocks & Treasuries were bought taking yields lower.  Oil finished up a very big 3+ to 78 on MidEast war fears & gold jumped 39 to a record at 2491 (more on both below).

Dow Jones Industrials 

Federal Reserve officials held short-term interest rates steady but indicated that inflation is getting closer to target, which could open the door for future interest rate cuts.  Central bankers made no obvious indications, though, that a reduction is imminent, choosing to maintain language that indicates ongoing concerns about economic conditions, albeit with progress.  They also preserved a declaration that more progress is needed before rate reductions can happen.  “The Committee judges that the risks to achieving its employment and inflation goals continue to move into better balance,” the Federal Open Market Committee's post-meeting statement said, a slight upgrade from previous language.  “Inflation has eased over the past year but remains somewhat elevated,” the statement continued. “In recent months, there has been some further progress toward the Committee’s 2 percent inflation objective.”  That language also represented an upgrade from the Jun meeting, when the policy statement indicated only “modest” progress in bringing down price pressures that 2 years ago had been running at their highest level since the early 1980s.  The previous statement also characterized inflation as simply “elevated,” rather than “somewhat elevated.”  There were a few other tweaks as well, as the FOMC voted unanimously to keep its benchmark overnight borrowing rate targeted at 5.25-5.50%. That rate, the highest in 23 years, has been in place for the past year, the result of 11 increases aimed at bringing down inflation.  One change noted that committee members are “attentive” to the risks on both sides of its mandate for full employment and low inflation, dropping the word “highly” from the Jun statement.  The statement kept intact 1 key sentence about the Fed's intentions: “The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”  That phrase has underscored the Fed's data dependence.  Officials insist they are not on a predetermined course for rates & won't be guided by forecasts.  Investors will likely be looking for further clues at Fed Chair Jerome Powell's press conference.  Fed officials have vowed to proceed carefully, despite signs that inflation is weakening & worries that the economy won't be able to withstand the highest borrowing costs in some 23 years for much longer.  Their position got some fortification today, when yet another economic report showed that pending home sales surged a stunning 4.8% in Jun, defying expectations for a 1% increase.

Fed holds rates steady and notes progress on inflation

Starbucks (SBUX) reported quarterly revenue that missed expectations as both its US & intl cafes faced weaker demand.  Still, the results weren't as bad as investors feared.  Fiscal 3rd-qtr net income attributable to the company was 93¢, down from 99¢ a year earlier.  Excluding items, EPS was 93¢.  Net sales dropped 1% to $9.1B . Same-store sales fell 3% in the qtr, fueled by a 5% decline in transactions.  Traffic to US stores fell again this qtr, dropping 6%.  Domestic same-store sales fell 2%, boosted by an increase in average ticket.  Last qtr, execs discussed plans to revive lagging US business that included leaning on discounts & new drinks to bring back customers who had abandoned the chain.  CEO Laxman Narasimhan said that more shoppers are buying its packaged coffee at grocery stores, but a “challenging consumer environment” is weighing on sales at its cafes.  Still, the company sees green shoots in the US business already, like the success of new products.  Its Summer-Berry Refreshers drinks with boba-inspired pearls broke the company's record for a week-1 product launch.  Next qtr will also bring the return of its Pumpkin Spice drinks, a perennial favorite since its launch more than 2 decades ago.  SBUX opened 526 net new stores in the fiscal qtr.  The company reiterated the outlook it provided last qtr.  The company projects revenue growth of a low single-digit percentage & EPS growth of flat to a low single-digit percentage.  The stock rose 2.88.

Starbucks revenue misses estimates as same-store sales decline for second straight quarter

Chip giant AMD (AMD) reported its 2nd qtr earnings, beating expectations on the top & bottom lines & posting better-than-anticipated guidance for the 3rd qtr.  AMD is riding the AI hype train, which is powering sales of its data center graphics processing units (GPUs) & central processing units (CPUs).  For the qrr, adjusted EPS was 69¢ & revenue was $5.8B.  The forecast called for adjusted EPS of 68¢ on revenue of $5.7B.  AMD reported adjusted EPS of 58¢ on revenue of $5.4B during the period in 2023.   "Our AI business continued accelerating and we are well positioned to deliver strong revenue growth in the second half of the year led by demand for Instinct, EPYC and Ryzen processors," CEO Lisa Su said.  "The rapid advances in generative AI are driving demand for more compute in every market, creating significant growth opportunities as we deliver leadership AI solutions across our business.”  The stock went up 5.51.

AMD stock rises after earnings beat on chip sales

Gold price exhibited a strong performance in today's session, with investors focusing on the Federal Reserves monetary policy outcome later  in the day. The precious metal climbs to near $2420 as its safe-haven appeal improves amid fears that Middle East tensions would widen further.  Historically, investors find investment in precious metals as safe bet amid geopolitical tensions.  Fears of an all-out war between Israel & Iran deepened after reports showed that Hamas leader Ismail Haniyeh was killed in an Israeli air strike on Tehran.  This has prompted fears of a retaliation move by Iran, which would diminish hopes of a ceasefire significantly.  Meanwhile, the US Dollar slides further on downbeat US Employment data.  The report showed that 122K employees were hired in the private sector in Jul, which was lower than expectations of 150K & the prior release of 155K, upwardly revised from 150K.  This points to easing labor market resilience.  The US Dollar Index, which tracks the Greenback's value against 6 major currencies, skidded below the crucial support of 104.00.  10-year Treasury yields tumbled to a fresh 4-month low at 4.11%.

Gold Price Clings to Gains Above $2,400 on Middle East Woes, Fed Policy in Spotlight

A rally in oil futures comes as no surprise as violence in the MidEast, including the assassination of a Hamas leader in Iran, raises the potential for a wider war in the oil-rich region.  Crude, however, still ended the month with a loss, with worries over a slowdown in Chinese demand & uncertainty surrounding production quotas for major oil producers influencing the Israel-Hamas-Hezbollah tensions rally oil, but Jul weakness hints at long-term worries path for prices in the months to come.  West Texas Intermediate (WTI) for Sep jumped $3.52 to settle at $78.25.

Israel-Hamas-Hezbollah tensions rally oil, but July weakness hints at long-term worries

Today was Powell's day for investors & they liked what they heard.  No great surprises, but his message was well received although there was selling into the close.  He said that a rate cut is on the table.  Meanwhile NAZ had a difficult time this month, falling about 1000 from its Jul peak, picked up fans again today.  However, more price swings may lie ahead given the nature of the new technologies.  Even with serious profit taking this month, Dow finished up 1720 in Jul.

Markets rally amid a revival in tech stocks

Dow gained 203, advancers over decliners about 5-2 & NAZ bounced back 427.  The MLP index was steady at 291 & the REIT index added 1+ to the 408s.  Junk bond funds edged higher along with the stock market rally & Treasuries had  buying which reduced yields.  Oil shot up 2+ to 77 after an Israeli strike killed a Hamas leader in Iran & gold gained 16 to 2468 (closing in on its recent record).

Dow Jones Industrials 

Private job growth slowed further in Jul while the pace of wage gains hit a 3-year low, payrolls processing firm ADP.  Companies added just 122K jobs on the month, the slowest pace since Jan & below the upwardly revised 155K in Jun.  The forecast had been looking for a gain of 150K.  ADP also reported that wages for those who stayed in their jobs increased 4.8% from a year ago, the smallest increase since Jul 2021 & down 0.1 percentage point from Jun.  “With wage growth abating, the labor market is playing along with the Federal Reserve’s effort to slow inflation,” said ADP chief economist Nela Richardson.  “If inflation goes back up, it won’t be because of labor.”  There was more positive inflation news, as the Labor Dept's Bureau of Labor Services reported that the employment cost index, an indicator Fed officials watch closely, increased just 0.9% in the 2nd qtr, according to seasonally adjusted figures.  That was below the 1.2% acceleration in the first qtr & the estimate for a 1% increase.  Both reports could add to the likelihood that the Fed will signal a Sep rate cut when it concludes its 2-day meeting later in the day.  Job growth was heavily concentrated in 2 sectors — trade, transportation & utilities, which added 61K workers & construction, which contributed 39K.  Other sectors seeing gains included leisure & hospitality (24K), education & health services (22K) & other services (19K).

Private payroll growth slowed to 122,000 in July, less than expected, ADP says

Microsoft (MSFT), a Dow stock, shares fell as investors looked past better-than-expected earnings & revenue & focused instead on disappointing cloud results.  But execs provided a dose of optimism when they predicted a cloud growth speed-up in the first ½ of 2025.  Revenue increased 15% year over year in the fiscal 4th qtr, which ended on Jun 30.  Net income, at $22.04B, was up from $20.08B, or $2.69 per share, in the year-ago qtr.  With respect to guidance, MSFT called for fiscal first-qtr revenue of $63.8 - $64.8B, implying 13.8% growth at the middle of the range.  Analysts were looking for $65.2B in revenue.  The forecast included $15.2B in operating expenses at the middle of the range, under the estimate of $16.1B.  The top segment, Intelligent Cloud, generated $28.5B in revenue.  It includes the Azure public cloud, Windows Server, Nuance & GitHub.  The total was up about 19% & below the $28.68B forecast.  GitHub's revenue is now at an annual run rate exceeding $2B, CEO Satya Nadella said.  MSFT sees fiscal first-qtr Azure revenue growth of 28 - 29% at constant currency in the fiscal 2nd qtr, with faster growth in the 2nd ½ of the fiscal year.  Analysts were looking for fiscal 2nd-qtr revenue growth of 30.6% for Azure.  The stock fell 5.64.

Microsoft shares drop as cloud miss overshadows better-than-expected revenue and earnings

Boeing (BA), a Dow stock, reported a bigger quarterly loss & weaker revenue than expected as both its commercial airplane & defense programs continued to struggle.  BA also said it hired more-than-3-decade aerospace industry veteran Robert “Kelly” Ortberg to become its next CEO as the manufacturer tries to regain its footing.  “Despite a challenging quarter, we are making substantial progress strengthening our quality management system and positioning our company for the future,” CEO Dave Calhoun said.  Calhoun said in Mar that he would step down by the end of the year.  BA reported a net loss for the 2nd qtr of $2.33 per share, compared with a loss of 25¢ per share, during the year-earlier period.  On an adjusted basis, the company reported a loss of $2.90 per share, coming in nearly $1 per share under expectations.  Revenue for the 3 months ended Jun 30 was down 15% to $16.9B.  BA is trying to stabilize its operations after a door plug blowout from a nearly new 737 Max at the start of the year reignited additional scrutiny from regulators & further slowed deliveries of new, more fuel-efficient jets to airlines.  BA said it still plans to increase output of its Max planes to 38 a month.  Analysts said it was producing them in the mid-20s per month in the last qtr.  The stock rose 3.11.

Boeing reports wider-than-expected loss, weaker revenue

The market is overwhelmingly convinced a Fed pivot is coming in Sep.  The debate now is whether rates will go down by 0.25% or 0.50%, according to the CME FedWatch tool.  Chair Jerome Powell's post-meeting comments will be closely followed for hints that recent inflation & labor data could support a deeper cut.  At the same time safe haven gold is in demand.

Markets waver as tech shares struggle ahead of big tech earnings

Dow went up 203, advancers over decliners 4-3 & NAZ dropped 222.  The MLP index edged up 2+ to the 291s & the REIT index added 3+ to the 407s.  Junk bond funds continued to see limited buying & Treasuries saw a little buying which reduced yields.  Oil remained off about 1 to the high 74s & gold gained 24 to 2450, nearing it record high (more on both below).

Dow Jones Industrials 

Job opportunities are slowly disappearing in the US & hiring has screeched to its slowest pace in a decade (aside from the pandemic plunge).  That's making more workers hold tight to the job they've already got.  The Bureau of Labor Statistics' latest Job Openings & Labor Turnover JOLTS survey, which showed that the number of open positions edged back slightly in Jun, hiring activity sank, layoffs were muted & the number of people quitting their jobs hit a 3-year low.  It's yet another sign that the once-scalding-hot labor market is not just settling into a steadier state but potentially drifting closer toward a downswing.  In Jun, employers posted an estimated 8.18M jobs.  While that's more than expected, it's a slight step back from the upwardly revised tally of 8.23M openings in May.  It's also the 2nd-lowest monthly total seen so far this year & it puts the ratio of job openings to job seekers at 1.24, or slightly above the average seen in 2019.   The forecast expected job openings to shrink to 8M.  Last month's hiring was some of the weakest in years when there were 5.34M estimated hires & the hires rate (number of hires as a percentage of employment) were the lowest since Apr 2020, when the job market collapsed at the start of the pandemic.  Outside of the pandemic, the hires rate hasn’t been this low since Feb 2014.  Beyond the headline job openings number, economists have been closely watching the quits rate, or number of people voluntarily leaving their jobs as a percentage of total employment.  That metric serves as a signal for workers' willingness to test the labor market waters.  In Jun, that rate held at 2.1%, the lowest since Jun 2020; however, the number of estimated quits dropped to 3.28M from 3.40M & landed at the lowest monthly total since Nov 2020.

The number of available jobs in the US is shrinking

US  consumer confidence unexpectedly rose in Jul, but remained in the tight range of the past 2 years amid lingering worries about inflation & higher borrowing costs.  The Conference Board said that its consumer confidence index increased to 100.3 this month from a downwardly revised 97.8 in Jun.  The forecast called for the index falling to 99.7 from the previously reported 100.4.  "Even though consumers remain relatively positive about the labor market, they still appear to be concerned about elevated prices and interest rates, and uncertainty about the future, things that may not improve until next year," said Dana Peterson, chief economist at the Conference Board.  Consumers' 12-month inflation expectations were steady at 5.4% in Jul.  They peaked at 7.9% in 2022.

US consumer confidence rises in July; inflation expectations steady

Prices increased 5.9% nationally in May when compared with the previous year, the S&P CoreLogic Case-Shiller index showed, down from the 6.4% pace recorded the previous month.  On a monthly basis, prices climbed 0.3%, according to the index.  "Home prices hit a new high in May," said Lisa Sturtevant, Bright MLS chief economist.  "But with affordability a growing challenge for homebuyers and more new listings coming onto the market, we could be at the peak."  The 10-city composite, which encompasses Los Angeles, Miami & New York, rose 7.7% annually, compared with an increase of 8.1% in Apr.  The 20-city composite, which also tracks housing prices in Dallas & Seattle, posted an annual gain of 6.8%, a decrease from the 7.3% figure recorded the previous month.  Prices rose in all the 20 major metro markets tracked by the index.  "All 20 markets observed annual gains for the last six months," said Brian Luke, head of commodities, real & digital assets at S&P DJI.  "The last time we saw that long a streak was when all markets rose for three years consecutively during the COVID housing boom."  The largest price gain took place in New York, which recorded a year-over-year increase of 9.4%.  The Case-Shiller index reports with a 2-month delay, meaning it may not capture the latest ongoings in the market.  There are a number of driving forces behind the affordability crisis.  Years of underbuilding fueled a shortage of homes in the country, a problem that was later exacerbated by the rapid rise in mortgage rates & expensive construction materials.  Higher mortgage rates over the past 3 years have also created a "golden handcuff" effect in the housing market.  Sellers who locked in a record-low mortgage rate of 3% or less during the pandemic began have been reluctant to sell, limiting supply further & leaving few options for eager would-be buyers.  Economists predict that mortgage rates will remain elevated in 2024 & that they will only begin to fall once the Federal Reserve starts cutting rates.  Even then, rates are unlikely to return to the lows seen during the pandemic.

Home prices just set another record high as affordability crisis worsens

Gold prices gained around 1% as investors remained optimistic that the Federal Reserve could drop clues about lowering interest rates in Sep at the end of the policy meeting this week.  Spot gold was up 0.8% at $2403 per ounce & US gold futures settled 1% higher at $2451.  At the conclusion of its 2-day meeting tomorrow the Fed is expected to maintain current interest but may signal potential policy easing as soon as Sep.  The US rate futures market has fully priced in a rate cut in Sep.  Lower interest rates reduce the opportunity cost of holding the non-yielding bullion.  Traders are also awaiting a series of US employment data scheduled to be released this week, including the pivotal non-farm payrolls report due on Fri.

Gold climbs on rate cut hopes as Fed meeting looms

West Texas Intermediate (WTI) crude oil fell to a near 2-month low early today on weak China demand & flagging investor interest in the commodity.  WTI crude oil closed down $1.08 to settle at $74.73 per barrel, the lowest since Jun 5, while Sep Brent crude was last seen down $1.02 to $78.76.  The drop comes as demand from China, the #1 importer, remains weak as the country deals with a debt crisis for its key real-estate sector, flagging consumer demand & high youth unemployment while the ruling Communist Party has avoided expensive stimulus measures to revive demand.  Weak investor interest is also stifling prices, with a report that hedge funds & money managers last week sold off contracts for 103M barrels, cutting their net positions to 380M barrels, down from 524M barrels on Jul 2.  The drop also comes ahead of Thurs's OPEC meeting, which is expected to end with no changes to 2.2M barrels per day of voluntary production cuts in place as the cartel looks to continue supporting prices despite light demand.

WTI Oil Drops to the Lowest in More Than Seven Weeks on Weak China Demand and Investor Disinterest

As is common, the day before the Fed announces the results of its meeting, investors are anxious & nervous.  Tomorrow's meeting has added importance after investors were disappointed that there were no rate cuts a few months ago.  In addition, high profile tech companies will be reporting earnings & the early returns suggest they may be less than optimistic.  Tomorrow's trading could see high volatility.

Markets edge higher while investors wait for key tech earnings

Dow went up 96, advancers over decliners 4-3 & NAZ declined 156.  The MLP index hardly budged in the 289s & the REIT index added 1+ to the 405s.  Junk bond funds inched higher & Treasuries had limited buying which hardly reduced yields.  Oil dropped 1 to the high 74s & gold gained 10 to 2436.

Dow Jones Industrials 

Procter & Gamble (PG), a Dow stock & Dividend Aristocrat, reported weaker-than-expected quarterly revenue as disappointing demand in China weighed on the company's results.  Fiscal 4th-quarter EPS was $1.27, down from $1.37 a year earlier.  Excluding items, EPS was $1.40.  Net sales of $20.5B were essentially flat compared with the year-ago period.  PG's organic revenue, which excludes foreign currency, acquisitions & divestitures, increased 2% in the qtr.  Despite disappointing sales, the company's volume increased for the first time in more than 2 years.  Volume excludes pricing, making the metric a more accurate reflection of demand than sales.  Over the last several years, PG's price hikes across its portfolio, from diapers to detergent, fueled its sales growth, but volume flattened or even declined as consumers bought fewer of its products.  PG's volume rose 1%, thanks to stronger demand for its grooming, health care, & fabric & home-care products.  All 3 of those segments reported 2% volume growth for the qtr.  For fiscal 2025, P&G anticipates core EPS of $6.91 - $7.05.  The company reiterated its revenue outlook of 2-4% growth.  The stock dropped 11.80 (9%).

Procter & Gamble earnings beat estimates, but quarterly sales disappoint as China slides

Merck (MRK), a Dow stock, reported 2nd-qtr revenue & adjusted EPS that topped expectations as it saw strong sales from its blockbuster cancer drug Keytruda as well as other treatments in its oncology & vaccines portfolios & a newly launched cardiovascular drug.  The pharmaceutical giant also raised its full-year sales forecast to $63.4-64.4B on increased demand for key products, particularly its oncology treatments.  That's only slightly higher than the $63.1-64.3B guidance the company provided in Apr.  MRK lowered its adjusted profit guidance to $7.94 - $8.04, from a previous forecast of $8.53 - 8.65.  That updated outlook reflects 1-time charges of 26¢ & 51¢ for the acquisitions of Harpoon Therapeutics & EyeBio, respectively.  The drugmaker posted EPS or $2.14 for the 2nd qtr.  That compares with a net loss of $2.35 per share, during the year-earlier period, which included a charge related to its acquisition of Prometheus Biosciences.  Excluding acquisition & restructuring costs, the EPS was $2.28 for the 3-month period.  MRK reported $16.11B in revenue for the qtr, up 7% from the same period a year ago.  The stock sank 11.92 (6%).

Merck beats on earnings, raises sales outlook on strong demand for top drugs

Pfizer (PFE) reported 2nd-qtr revenue & adjusted earnings that blew past expectations & raised its full-year outlook, benefiting from its broad cost-cutting program, better-than-expected sales of its Covid antiviral pill, Paxlovid & strong non-Covid product sales.  The company now expects to book adjusted EPS of $2.45 - $2.65 for the fiscal year, up from its previous guidance of $2.15 - $2.35.  PFE also hiked its revenue outlook to $59.5 - 62.5B, up from a previous revenue forecast of $58.5- $61.5B.  That includes roughly $5B in expected revenue from its Covid vaccine & $3.5B from Paxlovid.  The pharmaceutical giant said its higher outlook reflects its strong performance in the first ½ of the year & its confidence in the “underlying strength” of its business.  Notably, PFE posted its first qtr of topline revenue growth since the 4th qtr of 2022, when its Covid revenues peaked.  The results come as PFE scrambles to stabilize its business & win back investor's favor following the rapid decline in demand for its Covid products.  Demand for its vaccine & Paxlovid plunged & transitioned to the commercial market in the US last year as the world emerged from the pandemic.  As revenue dried up, PFE in Oct launched a broad cost-cutting push that aims to deliver at least $4B in savings by the end of 2024.  The company has since announced a separate multiyear plan to slash costs, with the first phase of the effort slated to deliver $1.5B in savings by 2027.  The company booked 2nd-qtr net income of 1¢.  That compares with net income of 41¢ during the same period a year ago.  Excluding certain items, the company posted EPS of 60¢ for the qtr.  PFE recorded revenue of $13.3B for the 2nd qtr, up 2% from the same period a year ago.  The company pointed to growth from acquired drugs, recently launched treatments & other key products, which helped offset the drop in sales from its Covid business.  The stock was off 15¢.

Pfizer beats earnings estimates, hikes full-year outlook as drugmaker cuts costs

So far, earnings season has not been impressive.  A notable theme has emerged this earnings season, a willingness by investors to support companies that post weak results but outline a turn in their business coming soon.

Markets wobble as tech shares have a modest rebound

Dow slid 49, decliners over advancers 4-3 & NAZ added 12.  The MLP index slid back 1+ to the 288s & the REIT index added 2+ to the 404s.  Junk bond funds remained mixed & Treasuries were in demand, which lowered yields slightly.  Oil fell 1+ to the high 75s & gold backed off 4 to 2376 (more on both below).

Dow Jones Industrials 

 

Apple (AAPL), a Dow stock, released the first version of Apple Intelligence, its suite of artificial intelligence features that will improve Siri, automatically generate emails & images & sort notifications.  The new software called Apple Intelligence was released in the developer beta of iOS 18.1.  It is also available in similar releases for iPad & Mac.  It is currently only available to registered AAPL developers. AAPL's developer program costs $99 a year.  In addition, users will have to register for a waitlist inside AAPL's settings app after updating to gain access to the service, which involves pinging AAPL servers for more complicated requests.  Later this year, it will be released to the public, but the 18.1 version number suggests Apple Intelligence will not be released alongside new iPhone hardware, which is expected to be launched running iOS 18 in the fall.  Apple Intelligence is an important initiative for AAPL.  Investors hope the tight integration of AI with Apple's operating system can spur a big wave of upgrades in the coming years, especially since the system will only work on the iPhone 15 Pro & iPhone 15 Pro Max & newer.  The stock settled 28¢ higher.

Apple releases first preview of its long-awaited iPhone AI

Companies with disappointing quarterly results are getting punished more than usual this earnings season.  2nd-qtr earnings misses have resulted in an average 3.8% decline for a stock from 2 days before the quarterly release thru the 2 days after the report comes out, according to FactSet.  That is compared to the 5-year average price decrease of 2.3% during this same window for companies that disappointed.  The ones that beat expectations have been rewarded less than average.  They are seeing only a 0.3% rise during that same period, per FactSet.  That is compared to a 5-year average price increase of 1%, FactSet said.  This phenomenon underscores the high expectations going into this season as well as a stock market that is viewed by many as overheated.  The S&P 500 has gained more than 14% this year & is trading at 21 times forward earnings.  Shares of Ford (F) plunged more than 18% on Thurs after the automaker came in short of earnings expectations due to warranty costs.  Dexcom (DXCM) tumbled 40% on the same day after the diabetes management company reported disappointing revenue & offered weak guidance.  Those that delivered stellar results did not necessarily see a pop in their stocks.  For example, JPMorgan Chase (JPM), a Dow stock, shares dipped 1% on Jul 12 even after the bank's profit & revenue topped expectations as investment banking fees surged 52% from a year earlier.  The strong tech-led rally this year has shown some signs of broadening out to small-cap shares & cyclical names as investors rotated out of winning megacap names.

Investors are punishing stocks that miss earnings more than normal this season

Most Federal Reserve watchers don't expect the central bank to ease monetary policy this week in DC but what they do expect is that policymakers will set the stage for an interest rate cut at their next meeting in Sep.  Fed officials have said they are getting closer to having confidence inflation is sustainably dropping to their 2% goal.  They have also said they are paying more attention to rising unemployment, another sign that cuts may be nearing.  But most Fed watchers say the central bank still needs just a bit more time to be sure, while also preparing the markets for the significant action to come.  "The pressure is growing for them," said former Kansas City Fed pres Esther George.  "I think that they are going to look at September very seriously. It’s looking to me like we are coming to a time where that decision is more important and it's why I'm more confident."  The latest reassurance that a cut could be nearing came Fri when a new reading of the Fed's preferred inflation gauge, the core Personal Consumption Expenditures (PCE) index, showed its lowest annual gain in more than 3 years.  The 2.6% annual increase in the month of Jun was the same level as May & down from 2.8% in Apr.  On a 3-month annualized rate, core PCE dropped back to 2.3% from 2.9%.  Another inflation measure, the Consumer Price Index (CPI), has also shown progress.  On a "core" basis, which excludes volatile food & energy prices the Fed can't control, CPI rose 3.3% year over year in the month of Jun.  That was down from 3.4% in May & 3.6% in Apr.  Some Fed watchers do argue the Fed has the basis to support a cut at its meeting this week, even as they note they don’t expect it to happen.

Risk of 'spooking the markets': Odds are Fed won't cut just yet

Gold prices edged up on heightened geopolitical tensions in the Middle East & expectations of a US rate cut in Sep, with the focus on this week’s Federal Reserve policy meeting.  Spot gold rose 0.1% to $2387 per ounce.  Non-yielding gold is up 3% in Jul after hitting a record high of $2483 on Jul 17 on growing optimism of a rate cut from the Federal Reserve in Sep.  After a benign Jun inflation report, markets are wagering that the Fed will lay the groundwork for the Sep rate cut at its policy meeting on Wed.  Supporting the demand for gold as a hedge against geopolitical risks were worries of a widening conflict in the Middle East following a rocket strike in the Israeli-occupied Golan Heights.  As to the physical demand, consumption of gold in China, the world's biggest user, fell by 5.6% in the first ½ of 2024 as demand for gold jewelry tumbled by 26.7% amid high prices; however, purchasing of gold bars & coins surged by 46%.

Gold Edges Up on Fed Rate-Cut Hopes, Geopolitical Risks

West Texas Intermediate (WTI) crude oil closed lower for a 2nd-straight session, dropping to a 7-week low amid weak risk appetite.  West Texas Intermediate crude for Sep closed down $1.35 to $75.81 per barrel, the lowest since Jun 7, while Sep Brent crude, the global benchmark, was last seen down $1.23 to $79.90.  The drop comes as the market remains in summer doldrums with weak demand from China, the #1 importer. somewhat offset by geopolitical concerns over spreading Middle East violence as Israel & the Iran-backed Hezbollah militant group in Lebanon trade attacks.

WTI Crude Oil Falls to a Seven-Week Low as Traders Shy Away from Risk

After opening with a gain, sellers brought the Dow back to around even where it stayed for the rest of today's session.  There was not a lot of excitement in today's trading with traders waiting for the conclusion of the Fed meeting on Wed.

Markets struggle ahead of major tech earnings reports later this week

Dow dropped 142, decliners over advancers better than 3-2 & NAZ slid back 36.  The MLP index was off 2+ to the 288s & the REIT index inched up 1+ to 403.  Junk bond funds were mixed & Treasuries had a little buying which lowered yields (more below).  Oil fell 1+ to the high 75s (more below) & gold lost 3 to 2377.

Dow Jones Industrials 

McDonald's (MCD), a Dow stock & Dividend Aristocrat, saw a drop in sales for the first time in years as it struggled to draw in cash-strapped customers amid higher menu prices.  CEO Chris Kempczinski said that the company's system "sustained significant inflationary cost increases" between 20-40%, depending on the market, over the last several years.  "As we absorb these cost increases in partnership with our franchisees, we look for ways to protect restaurant profitability via productivity efforts and selective price increases," Kempczinski added.  "These price increases disrupted long-running value programs and led consumers to reconsider their buying habits."  Global sales fell 1% in the 2nd qtr, its first decline in 13 qtrs, compared with the estimate of a 0.5% rise.  To reverse the decline, fast food chains have launched several promotions in an attempt to boost customer traffic during persistent inflation.  MCD was set to extend its $5 meal offer into Aug at most US locations after its launch on Jun 25.  Even though consumers were more discriminating with their spend, MCD still kept its 2024 operating margin forecast unchanged in the mid-to-high 40% range.  More than ½ of the amount will be used to start new restaurants in the US & intl markets.  EPS was $2.97 on an adjusted basis in the 2nd qtr, missing expectations of $3.07.  The stock rose 9.89 (4%).

McDonald's posts weak quarterly results as higher fast food prices hurt demand

Crude oil futures fell as traders appeared unfazed by the risk of widening war between Israel & the Iran-backed militia Hezbollah.  A rocket fired from Lebanon killed 12 children in the Israel-occupied Golan Heights on Sat.  Israel has blamed Hezbollah for the attack & the militia has denied responsibility.  Israel's security cabinet has authorized Prime Minister Benjamin Netanyahu's gov to decide on how & when to respond to the rocket attack.  West Texas Intermediate Sep contract was $76.86 per barrel, down 30¢ (0.4%) & YTD US oil has gained 7.3%.  The Brent Sept contract was $80.80 per barrel, down 3¢ & YTD, the global benchmark is ahead 4.9%.  Middle East tensions pushed oil prices higher in the spring, but the market’s reaction to events in the region have been muted since then in the absence of an actual risk to oil supplies.  Analysts have warned that a war between Israel & Hezbollah could lead to a direct confrontation with OPEC member Iran, which backs the militia group.  Oil prices have pulled back recently on worries about the health of China’s economy.

Oil prices fall as traders unfazed by Israel-Hezbollah escalation

Treasury yields fell as investors awaited the release of key economic data & looked to the Federal Reserve's meeting scheduled for the week.  The yield on the 10-year Treasury was down by nearly 3 basis points at 4.173% & the 2-year Treasury yield was last at 4.385% after falling by less than 1 basis point.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Investors awaited the Federal Reserve's Jul meeting & key data from the labor market slated for the week.  Rates are widely expected to remain unchanged, but investors are hoping for clues about when rate cuts will begin & how many will take place this year.  They will therefore be closely watching any policy guidance released by the central bank & the post-meeting press conference with Fed Chair Jerome Powell.  Fed officials have in recent months repeatedly said that they were looking for more evidence that inflation is sustainably returning to the 2% target before cutting rates.  On the data front, JOLTs job opening figures are due tomorrow, followed by ADP's private payrolls report Wed & the Jul jobs report, which includes nonfarm payrolls & unemployment data, on Fri.  Investors will be looking at the data for hints about the state of the labor market, as this could also inform monetary policy expectations & decision-making.

Treasury yields fall as investors look to key data, Fed meeting in week ahead

Stocks opened with a modest gain, then sellers took stocks lower.  No move is expected at the Federal Reserve meeting on Wed, despite signs the US economy & inflation have hit a sweet spot.  Many see other reasons for the central bank to wait until Sep to act.

Markets skyrocket fueled by latest earnings and inflation data

Dow surged 683 but still 200 below the high, advancers over decliners 4-1 & NAZ went up 117.  The MLP index advanced 3+ to the 291s & the REIT index shot up 7 to 402 on hopes for lower interest rates.  Junk bond funds edged higher & Treasuries were purchased taking yields lower.  Oil slid back 1+ to the 76s & gold jumped 30 to 2383 (more on both below),

Dow Jones Industrials 

Warner Bros Discovery (WBD sued the National Basketball Association as it tries to maintain broadcast rights for a package of live games.  “Given the NBA’s unjustified rejection of our matching of a third-party offer, we have taken legal action to enforce our rights,” the company's TNT Sports unit said.  “We strongly believe this is not just our contractual right, but also in the best interest of fans who want to keep watching our industry-leading NBA content with the choice and flexibility we offer them through our widely distributed WBD video-first distribution platforms – including TNT and Max.”  The media company seeks to prevent the NBA from awarding the rights to Amazon (AMZN), whose games package WBD tried to match, or aims to win monetary damages.  The NBA said it had reached agreements with Disney (DIS), Comcast's (CMCSA) & AMZN on 3 different packages of games, ending its nearly 40-year relationship with WND's Turner Sports.  The 11-year media rights deal is worth roughly $77B, a massive increase over the previous agreement as the value of live sports booms.  In response, NBA spokesman Mike Bass said “Warner Bros. Discovery’s claims are without merit and our lawyers will address them.”  WBD said earlier this week it submitted paperwork to the league to match 1 of the packages, which people familiar with the matter identified as the $1.8B-per-year group of games earmarked for AMZN.  The tech giant’s deal includes regular-season games, the in-season tournament & some playoff games. The NBA granted WBD matching rights when it signed its previous media deal in 2014.  The provision is meant to give an incumbent company the right of last refusal to maintain its position as a media partner.  But WBD's decision to match the AMZN package, rather than the $2.5B-per-year NBCUniversal agreement, caused the league to say that the matching rights are invalid.  WBD's offer for that package involves airing the NBA games on its cable network TNT & simulcasting them on its streaming service, Max.  That's not an apples-to-apples comparison to Amazon Prime Video, which is a streaming-only service, the league argued.  WBD stock rose 32¢.

Warner Bros. Discovery sues NBA to secure media rights awarded to Amazon

The Federal Aviation Administration has approved SpaceX to resume flights of its mainstay Falcon 9 rocket after a brief grounding, with Elon Musk's company planning to launch its next mission carrying satellites as soon as Sat.  The FAA clearance came just 15 days after the rocket suffered a rare inflight failure while in orbit during a launch of Starlink satellites.  “The FAA determined no public safety issues were involved” in the Jul 11 mishap, the regulator said, allowing the rocket to “return to flight operations while the overall investigation remains open.”  The hiatus was unusually brief following a flight failure, but SpaceX argued the rocket's rapid launch pace – on average every 2-3 days this year – & “unprecedented levels of flight data” from nearly a decade of over 300 consecutive successful orbital launches supported a quicker return to service.  “Safety and reliability are at the core of SpaceX’s operations. It would not have been possible to achieve our current cadence without this focus,” the company wrote Thurs.

FAA approves SpaceX to resume Falcon 9 rocket launches after two-week hiatus

Hasbro (HAS) beat expectations for the 2nd qtr, thanks in part to growth in its digital gaming segment.  HAS reported EPS of 99¢ for the qtr.  That marked a significant gain from the same qtr last year, when the company reported a net loss of $1.69 per share.  Though HAS revenue declined 18% overall for the qtr, its Wizards of the Coast & digital gaming segment saw 20% revenue growth.  This partially offset a drop in consumer product revenue of 20%, as well as a decline in the entertainment segment of 90%, driven by the divestiture of production studio eOne.  HAS attributed the revenue increase for Wizards of the Coast & digital gaming to the launch of Magic's card game, Modern Horizons 3 & the continued impact of licensed & digital gaming, with Monopoly Go! leading along with Baldur’s Gate 3.  CEO Chris Cocks said that it continues to invest in its digital gaming portfolio, highlighting the recent appointment of John Hight as pres of Wizards of the Coast & digital gaming.  “Between our board move and talent we brought on board, most recently with John ... we’re going all in on becoming a digital play company,” Cocks said.  HAS anticipates further revenue declines for the full year, with consumer product revenue projected to be down 7-11% & Wizards of the Coast revenue anticipated to be down 1-3%.  The company estimates a total adjusted EBITDA for the full year of $975M - $1.025B & also expects to cut costs by $750M by the end of 2025.  The stock went up 2.33.

Hasbro beats second-quarter estimates, goes ‘all in’ on digital gaming segment

Gold prices rose 1% as Treasury yields fell on optimism for an interest rate cut by the Federal Reserve in Sep after data showed US prices rose modestly in Jun.  Spot gold rose 0.8% to $2382 per ounce, after hitting its lowest since Jul 9 yesterday.  US gold futures for Aug settled 1.2% higher at $2381.  Fed policymakers got fresh evidence of progress on their battle against inflation, fueling expectations they will use their meeting next week to signal interest rate cuts starting in Sep.  Lower rates reduce the opportunity cost of holding non-yielding bullion.  The personal consumption expenditures (PCE) price index nudged up 0.1% last month after being unchanged in May, the Commerce Dept's Bureau of Economic Analysis said.  Following the data, benchmark 10-year note yields fell to a 1-week low.  Meanwhile, physical demand in India, the 2nd-largest consumer, received a boost as the country slashed import duties on gold & silver earlier this week.  Gold premiums in India jumped to their highest level in a decade this week as well.

Gold Rises as Yields Slip After U.S. Data Lifts Rate-Cut Hopes

Oil prices were little changed but on track for a 3rd consecutive weekly decline, pressured by muted demand in China & expectations of a Gaza ceasefire deal that could ease Middle East tensions & accompanying supply concerns.  Brent crude futures for Sep dipped 1¢ to $82.36 a barrel & West Texas Intermediate (WTI) crude for Sep fell 6¢ to $78.22.  The benchmarks have lost about 5% in the past 3 weeks.  Brent is trading marginally lower this week while WTI is down more than 2%.  Chinese data this week showed the country's apparent oil demand fell 8.1% to 13.66M barrels per day (bpd) in Jun, prompting concerns over consumption.  In the Middle East, hopes of a ceasefire in Gaza have been gaining momentum.  The leaders of Australia, New Zealand & Canada called for an immediate ceasefire in a joint statement.  VP Kamala Harris, meanwhile, has pressed Israeli Prime Minister Benjamin Netanyahu to help efforts at reaching a ceasefire deal, striking a tougher tone than Pres Biden.  A ceasefire has been the subject of negotiations for months, but US officials believe the parties are closer than ever to an agreement for a 6-week ceasefire in exchange for the release by Hamas of women, sick, elderly & wounded hostages.

Oil set for third weekly decline, pressured by Gaza ceasefire hopes

These are not times in the stock market that those feint of heart want to see.  After all the wild swings Dow finished up 302 for the week.  With the Fed meeting coming next week, more excitement can be expected.  Softness in the economy are of no interest to the bulls.

Markets jump after data shows inflation has settled down

Dow soared 519, advancers over decliners 3-1 & NAZ gained a more modest 118.  The MLP index was up 1+ to the 289s & the REIT index rose 3+ to the 398s.  Junk bond funds were mixed & Treasuries had buying which lowered yields (more below).  Oil fell 1+ to the 76s & gold recovered 28 to 2382.

Dow Jones Industrials 

An inflation measure closely watched by the Federal Reserve eased slightly in Jun, even as high prices continued to weigh on Ms of Americans.  The personal consumption expenditures (PCE) index showed that consumer prices rose 0.1% from the previous month, according to the Labor Dept.  On an annual basis, prices climbed 2.5%, down slightly from the 2.6% reading recorded the previous month.  The figures were both in line with estimates.  Prices for services increased 0.2% for the month & remain up 3.9% from the same time last year.  The cost of goods also rose 0.1% on a monthly basis, despite a 2.1% drop in energy prices.  Goods prices are down 0.2% when compared with last year.  When excluding food & energy, core prices climbed 0.2% from the previous month & 2.6% from the previous year.  Both of those figures are slightly higher than estimates.  While the Fed is targeting the PCE headline figure as it tries to wrestle consumer prices back to 2%, Chair Jerome Powell previously told reporters that core data is actually a better indicator of inflation.  Other figures included in the report showed that consumer spending rose 0.3% in Jun compared with a 0.4% increase in May, as Americans continued to open their wallets.  Consumer spending has proven surprisingly resilient, despite high prices, steep interest rates & the resumption of federal student loan payments.  The report also showed that personal income rose just 0.2% last month.  The data comes as investors look for signs that the Federal Reserve is prepared to cut interest rates.  Policymakers will meet next week but are widely expected to hold rates steady at a 23-year high.  Most investors now anticipate the Fed will make the first rate reduction in Sep amid signs that the economy is cooling & inflation is slowly easing.

Fed's closely watched inflation measure eases slightly as Americans face soaring prices

Treasury prices rose & yields fell after the Federal Reserve's preferred inflation gauge matched expectations ahead of the central bank's monetary policy meeting next week.  The yield on the 10-year Treasury fell 3 basis points at 4.222% & the 2-year Treasury yield was last at 4.408%, down about 4 basis points.  Yields & prices have an inverted relationship & 1 basis point equals 0.01%.  The above report further cemented the case for a Sep rate cut ahead of the Fed's meeting next week.  The central bank is widely anticipated to leave interest rates unchanged at the Jul meeting, but investors are hoping clearer signals of when rates will be lowered & how many cuts are likely this year.  Markets were last pricing in a 100% likelihood that the benchmark fed funds borrowing rate will fall from its current 5.25%-5.50% at the Fed's Sep meeting, according to the CME FedWatch Tool.  The latest inflation data comes after a raft of mixed signals this week on the state of the US economy.  A preliminary reading of gross domestic product for the 2nd qtr annual growth of 2.8%, faster than the 2.4% economists had forecast.

Treasurys gain and yields slip after the release of key inflation data for June

Bristol Myers Squibb (BMY) reported 2nd-quarter earnings & revenue that topped expectations & raised its full-year guidance as the drugmaker moves to slash costs.  The pharmaceutical giant raised its full-year revenue forecast to an increase in the “upper end” of the low single-digit range.  That compares with its previous guidance in Apr of a low single-digit increase in sales.  The company also raised its 2024 adjusted earnings guidance to 60-90¢ per share, up from a previous forecast of 40-70¢.  The results come as BMY moves to cut $1.5B in costs by 2025 & reinvest that money into key drug brands & research & development programs.  In Apr, the company said that will involve laying off more than 2000 employees, culling some drug programs & consolidating its sites, among other efforts.  Revenue rose 9% from the same period a year ago to $12.2B.   EPS was 83¢ for the 2nd qtr.  That compares 99¢ for the year-earlier period.  Excluding certain items, its adjusted EPS was $2.07 for the qtr.  The 2nd-qtr sales increase came primarily from the company's blockbuster blood thinner Eliquis & a portfolio of drugs it expects to help it deliver long-term growth.  Among those treatments is the cancer drug Opdivo, which raked in higher-than-expected sales for the qtr.  The stock rose 3.97 (6%).

Bristol Myers Squibb beats estimates, raises outlook as drugmaker cuts costs 

Stocks rose, poised for a comeback bid as investors embraced new pricing data that showed inflation continuing to ease, solidifying expectations for coming interest-rate cuts.  A pause in this year's rally has investors questioning whether the sell-off is a turning point to sustained lower prices or a typical bull-market pullback.  In play are earnings-fueled concerns about softness in the US economy, though yesterday's relatively hot GDP data eased those somewhat.  Tech stocks have lost some of their fans recently.

Markets rise but the early advance was pared late in the day

Dow was up only 81 after yesterday's slide, advancers over decliners about 3-1 & NAZ was down 160.  The MLP index stayed near 290 & the REIT index fell 1+ to the 396s.  Junk bond funds edged higher & Treasuries saw limited buying which reduced yields a little.  Oil climbed in the 78s & gold tumbled 58 to 2357 (more on both below).

Dow Jones Industrials 

Keurig Dr Pepper (KDP) reported quarterly earnings & revenue that met expectations as higher prices fueled its US soda sales.  The beverage company reported 2nd-qtr EPS of 38¢, up from of 36¢ a year earlier.   Excluding items, EPS was 45¢.  Net sales rose 3.5% to $3.92B.  Volume, which excludes pricing & currency changes, increased 1.8% during the qtr, while prices were up 1.6% compared with the year-ago period.  The US refreshment beverages division, which includes Snapple, Canada Dry & Sunkist, reported sales growth of 3.3%.  Prices for its drinks were up 2.9% compared with the year-ago period.  Its Dr Pepper Creamy Coconut drink was the company's most successful limited-time beverage.  While soda sales have been resilient, sales of still beverages & even energy drinks are under more pressure due to the “uneven” consumer environment, execs said.  The US coffee division's sales shrank 2.1% to $1B, fueled by a 2.9% decline in pricing.  Shipments of its K-Cup pods were roughly flat, which the company credited to strong market share trends.  The company's intl division saw sales climb 15.5% for the qtr, but it accounts for less than a 6th of total revenue.  The company also reiterated its prior full-year outlook of constant currency revenue growth in the mid-single-digit range & adjusted EPS growth in the high single digits.  The stock went up 44¢.

Keurig Dr Pepper earnings meet estimates as higher prices fuel U.S. soda sales

Mortgage rates remained relatively unchanged from last week, with a slight movement higher.  Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate on the benchmark 30-year fixed mortgage increased to 6.78% this week from 6.77% last week & the average rate on a 30-year loan was 6.81% a year ago.  "Mortgage rates essentially remained flat from last week but have decreased nearly half a percent from their peak earlier this year," said Sam Khater, Freddie Mac's chief economist.  "Despite these lower rates, buyers continue to pause, as reflected in tumbling new and existing home sales data."  The average rate on the 15-year fixed mortgage increased to 6.07% from 6.05% last week & 1 year ago, the rate on the 15-year fixed note averaged 6.11%.

Mortgage rates increase slightly

American Airlines (AAL) CEO vowed to be “diligent” in making sure capacity doesn't outgrow demand after the carrier slashed its profit forecast for the year after a backfired sales strategy & an industrywide glut of flights that have forced airlines to discount seats.  AAL expects to earn an adjusted 70¢ - $1.30 this year, well below the $2.25 - $3.25 it forecast in Apr & short of the $1.10 - $2.60 that analysts were expecting.  The airline also estimated its unit revenue would drop as much as 4.5% for the3rd qtr as high travel demand failed to make up for an excess of flights.  EPS fell 46% during the 2nd qtr to $1.01, even though revenue rose 2% to $14.3B.  Carriers have faced an oversupplied domestic market, & executives at AAL & other airlines are planning to scale back their capacity growth in the 2nd ½ of the year.  AAL expects to grow capacity in the 2nd ½ of the year by about 3.5%, down from roughly 8% growth in the first ½ in line with an estimate it gave in May.  “As we take a look into the fourth quarter and then beyond, we’re going to react to the marketplace and making sure that we’re competitive, but at the same time, doing what’s right for profitability,” CEO Robert Isom said.  “As we take a look out into 2025, we’re going to be very diligent in assessing and making sure that we’re certainly not outgrowing demand.”  AAL has also reversed policies of a direct-to-consumer sales strategy it adopted in 2023 that backfired.  It said today that it has “taken swift and aggressive action to reorient its sales and distribution strategy” after complaints from travel agents & customers.  Isom said that the strategy, which sought to drive more bookings to its platforms but alienated some corp customers that didn't have access to all of the airline's fares, would cost the carrier about $1.5B in revenue this year.  The stock rose 43¢.

American issues weak profit forecast after backfired sales plan

Gold prices slipped to its lowest in over 2 weeks as profit-taking kicked in after gold's recent rally, while traders awaited US economic data that could offer more cues on when the central bank will cut interest rates.  Spot gold fell 1.8% to $2355 per ounce, having touched its lowest since Jul 9.  US gold futures settled about 2.6% lower at $2353.  Gold hit an all-time high of $2483 last week on growing optimism for an interest-rate cut from the Federal Reserve in Sep.  Former New York Fed Pres Bill Dudley said the Fed should cut rates next week, citing recent employment data.  Markets see a 100% chance of a rate cut in Sep, according to the CME FedWatch Tool.  Non-yielding bullion's appeal tends to shine in a low-interest rate environment.  Traders now await the US personal consumption expenditure (PCE) data, the Fed's preferred inflation gauge, due tomorrow.  Meanwhile, China's net gold imports via Hong Kong slumped 18% in Jun from the previous month, Hong Kong Census & Statistics Dept data showed, as the recent surge in gold prices weighed on jewellery demand.

Gold Hits Over 2-Week Low as Investors Book Profit; US Data in Focus

Oil prices rose as an equity market rally carried futures prices out of an earlier slump.  West Texas Intermediate (WTI) settled above $78 a barrel after earlier falling to the lowest since early Jun.  Crude is tracking equities, which have risen on faith that the Federal Reserve will secure a soft landing for the US economy.  Data from the US have provided upward pressure.  GDP figures beat estimates, helping oil prices pare some of the earlier drop.  The US reported that commercial crude inventories fell by 3.7M barrels, down for a 4th week, with stockpiles of gasoline & distillates also shrinking.  Crude has eased from a peak at the start of the month amid concern about a soft demand outlook in Asia's largest economy, as well as selling by trend-following commodity trading advisers.  That has countered the lift from OPEC+ output curbs & expectations of US interest-rate cuts.  Crude imports by China — which sources supplies from across the globe including Russia, the Middle East & the Americas — were 2.3% lower in the first ½ on the year compared with the same period of 2023.  WTI’s options skew has reached its most bearish level since early Jun, indicating that negative sentiment has taken hold market-wide.  WTI for Sep rose 0.9% to settle at $78.28 a barrel & Brent for Sep climbed 0.8% to $82.37.

Oil Rises as Equity Rally Counteracts China Demand Slump

Dow was up sharply at midday, but enthusiasm faded in the PM.  Today's rally was not impressive.  Market leader NAZ is still seeing a lot of selling in its stocks while investors are rethinking their attitudes towards AI stocks.  With uninspiring earnings reports, the oversold stock market needs to take a rest.

Markets whipsaw as rotation out of tech shares continues

Dow rebounded 250, advancers over decliners 3-1 & NAZ remained weak, sliding back 12.  The MLP index was flat at 290 & the REIT index added 3 to 401.  Junk bond funds inched higher & Treasuries saw buying which lowered yields (more below).  Oil was fractionally off in 77s & gold retreated a huge 49 to 2366.

Dow Jones Industrials 

The US economy grew at a faster pace than expected at the beginning of 2024 as consumers continued to open their wallets despite ongoing inflation & high interest rates.  Gross domestic product, the broadest measure of goods & services produced across the economy, grew by 2.8% on an annualized basis in the 3-month period from Apr- Jun, the Commerce Dept said in its first reading of the data.  That is much higher than the 2% increase forecast & the 1.4% pace seen during the first qtr.  Consumer spending, which accounts for about 2/3 of GDP, saw a solid increase during the 2nd qtr.  It rose 2.3% for the period, up from the 1.5% figure recorded the previous qtr, as Americans boosted their spending on goods.  Business investment also rose at a brisk 5.2% pace in the spring, even as companies dealt with headwinds like high interest rates.  "GDP doubled from the first quarter as consumers spent more than expected and businesses built up inventories expecting continued good consumer demand," said Robert Frick, corp economist at Navy Federal Credit Union.  "This was a nice surprise in further support of the expansion continuing, but not so nice as to make the Fed hesitate in cutting interest rates."  Despite the increase last qtr, the economy still appears to be moderating in the face of higher borrowing cost, the steepest in more than 2 decades.  Before the Federal Reserve aggressively hiked interest rates in 2022 & 2023 to cool inflation, economic growth was much higher than it is now.  There are other signs that growth is slowing in the face of tighter monetary policy.  Job growth is moderating.  The housing market, which is vulnerable to higher interest rates, is trapped in a prolonged downturn & consumer spending has shown signs of leveling off.

US economy grew faster than expected during the second quarter

Treasury yields declined as investors sifted through a batch of economic data & prepared for next week’s Federal Reserve meeting.  The yield on the 10-year Treasury was down by 5 basis points to 4.234% & the 2-year Treasury yield was less than 1 basis point lower to 4.406%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Yields ticked up slightly after a Commerce Dept report suggested that economic growth has been stronger than expected.  Meanwhile, initial jobless claims for last week came in at 235K, matching expectations.  This week has shown conflicting signs of which way the US economy is headed.  Data released from the manufacturing sector for Jul came in below expectations, with the US PMI flash manufacturing output index falling to 49.5 as new orders, production and inventories fell.  The forecast expected the figure to come in at 51.5.  Readings below 50 indicate a contraction, while those above 50 reflect growth.  Markets are widely expecting interest rates to remain unchanged then, but are hoping to gain hints about what the path ahead for rates could look like, including when cuts may begin & how many there could be this year.

Treasury yields fall as traders weigh economic data, look to next week’s Fed meeting

Ford (F) came in short of 2nd-qtr earnings expectations while beating on revenue, due to warranty costs that have plagued the automaker for several years now.  The automaker increased its full-year target for free cash flow but maintained its 2024 earnings guidance, disappointing some investors who had hoped for a hike.  Ford's guidance for the year includes adjusted earnings before interest and taxes (EBIT) of $10-12B.  Profitability was affected by increases in its warranty reserves used to pay for vehicle issues.  The costs are related to vehicles for the 2021 model year or older, CFO John Lawler said.  But recent initiatives to improve quality & vehicle launches are paying off & are expected to help bring down future warranty costs.  “We’re making real progress in raising quality, lowering costs and reducing complexity across our entire enterprise,” Lawler said.  “We’re making real progress on quality that will benefit us down the road.  EPS was 46¢ compared to 47¢ a year earlier.  Adjusted EBIT declined 27% year over year to 47¢ per share, compared to 72¢ per share, during the 2nd qtr of 2023.  Overall revenue for the 2nd qtr, including its finance business, increased about 6% year over year to $47.8B.  CEO Jim Farley said that his Ford+ restructuring plan remains on track to make the automaker more profitable.  The stock sank 2.32 (17%).

Ford shares tumble after massive earnings miss

Stocks are running into a wall as traders start to question when tech companies' huge investments in AI will start to pay off.  Unimpressive earnings from big tech companies this week have dented hopes that Big Techs can live up to their AI-fueled sky-high valuations.  At the same time, concerns about the robustness of the US economy are emerging as big-name earnings misses cast doubt on how consumers are holding up in the face of historically high borrowing costs.  Gold's decline today may be getting caught up in risk-asset selloff.

Markets plummet led by very heavy selling in tech stocks

Dow tumbled 504 (near session lows), decliners over advancers a very big 4-1 & NAZ plunged 654.  The MLP index dropped 5+ to 291 & the REIT index fell 5+ to the 398s.  Junk bond funds were sold & Treasuries were hit with selling, raising yields.  Oil crawled higher in the 77s as crude supplies shrank & gold inched up 1 to 2408 (more on both below).

Dow Jones Industrials 

Would-be homebuyers are getting a case of cold feet as they confront still elevated mortgage rates & record-high housing prices.  New findings published by Redfin show that a growing number of buyers are backing out of deals to buy a house at the last minute because buying a home is more expensive than ever.  About 56K home purchases were canceled in Jun, about 15% of homes that went under contract, the highest percentage of any Jun on record.  The median home sale price rose 4% in Jun to $442K, the highest level on record.  At the same time, the average 30-year mortgage rate was about 6.92%, more than double the pandemic-era lows.  "Buyers are getting more and more selective," said Julie Zubiate, a Redfin real estate agent near San Francisco.  "They’re backing out due to minor issues because the monthly costs associated with buying a home today are just too high to rationalize not getting everything on their must-have list."  Still, there are some signs that home prices may soon fall.  The Redfin report showed that 1 in 5 homes for sale saw a price cut, the highest level of any Jun on record.  It marks a notable increase from the 14.4% pace seen 1 year ago & is just shy of the 21.7% record set in Oct 2022.

Homebuyers are getting cold feet

Google (GOOG) parent company Alphabet reported 2nd-qtr results that were in-line with estimates on revenue & earnings, but missed on YouTube advertising revenue.  Revenue was up 14% year over year, driven by search as well as cloud, which surpassed $10B in quarterly revenues & $1B in operating profit for the first time.  The company reported ad revenue of $64.6B, up from $58.1B last year, showing that its advertising business continues to grow, though at a slower pace than in the first qtr, after rising inflation & interest rates tightened marketing budgets in 2022 & 2023.  While YouTube ad revenue missed estimates, it still grew to $8.66B compared to $7.66B in the year-ago qtr.  Though it's the largest video platform in the world, it faces increased competition from social video sites like TikTok.  EPS was $1.89, compared to $1.44 in the year-ago qtr.  The company's “Other Bets” unit, which includes its self-driving car company Waymo, brought in $365M, up from $285M a year ago.  Finance chief Ruth Porat said that GOOG is committing a new $5B multiyear investment in Waymo.  CEO Sundar Pichai said  that Waymo is now making 50K weekly paid public rides, primarily in San Francisco &  Phoenix.  “Our strong performance this quarter highlights ongoing strength in Search and momentum in Cloud,” Pichai said.  “We are innovating at every layer of the AI stack. Our longstanding infrastructure leadership and in-house research teams position us well as technology evolves and as we pursue the many opportunities ahead.”  The stock dropped 9.23 (5%).

Alphabet meets earnings expectations but misses on YouTube ad revenue

Pfizer (PFE) said its experimental gene therapy for a rare genetic blood-clotting disorder succeeded in a large late-stage trial, paving the way for a potential approval.  The treatment for hemophilia A could become the company's 2nd gene therapy to enter the US market after Beqvez, which was cleared in Apr for a less common type of the bleeding disorder called hemophilia B.  PFE is co-developing the therapy with Sangamo Therapeutics (SGMO), whose shares rose following the data release before paring some of those gains.  PFE is among several drugmakers to invest in the rapidly growing field of gene & cell therapies, 1-time, costly treatments that target a patient's genetic source or cell to cure or significantly alter the course of a disease.  Some industry health experts anticipate those therapies to replace traditional lifelong treatments that patients take to manage chronic conditions.  Hemophilia A is a lifelong disease caused by a lack of blood-clotting protein called factor VIII.  Without enough of that protein, the blood cannot clot properly, increasing the risk of spontaneous bleeding & severe bleeding after surgery.  The condition occurs in roughly 25 in every 100K male births worldwide.  PFE said its 1-time treatment significantly cut the number of annual bleeding episodes in patients with moderately severe to severe hemophilia A after 15 months.  The drug also performed better than the current standard treatment for the disease, which is routine infusions that replace the Factor VIII protein.  PFE stock went up 49¢ & SGMO (a low priced stock) was up 16¢

Pfizer’s gene therapy for rare genetic bleeding disorder succeeds in late-stage trial

Gold prices rose as the $ slipped, with investors' focus shifting to US economic data due this week for more signals on the timing of the central bank's interest rate cuts.  Spot gold was up 0.1% at $2411 per ounce & US gold futures settled 0.3% higher at $2415.  The dollar index (.DXY), was down 0.2%.  A weaker $ makes bullion more attractive to buyers holding other currencies.  The tech-heavy NAZ took the biggest hit in a weak open on Wed.  Investors are looking forward to a US report on gross domestic product for the 2nd qtr on tomorrow & personal consumption expenditures data for Jun on Fri for clues on the Federal Reserve's interest rate cut path.  India cut import duties on gold & silver to 6% from 15%.  Markets are anticipating a 100% chance of a rate cut by the central bank in Sep, according to the CME FedWatch Tool.  Lower interest rates reduce the opportunity cost of holding non-yielding gold.  Investors are also watching developments in the US election campaign, as VP Kamala Harris is expected to be the Dem Party's candidate to face Rep Donald Trump.

Gold Rises on Softer Dollar, Traders Eye More US Data

Oil rose, clawing back from a run of losses, after a gov report showed that US crude inventories fell to the lowest since Feb.  West Texas Intermediate (WTI) topped $77 a barrel after falling 5.5% since last Wed.  US oil inventories shrank by 3.74M barrels last week, the Energy Information Administration reported.  That was the 4th straight decline.  Price gains were limited as traders also eyed declines in equity markets.  Crude's earlier selloff was exacerbated by trend-following algorithms after futures surpasses key technical levels.  Yesterday, WTI settled into oversold territory on the 9-day relative strength index, signaling a rebound was imminent.  Meanwhile, US gasoline inventories dropped the most since Mar, as some refineries remain shuttered & summer driving season propelled seasonal fuel demand on a 4-week basis to the highest level since 2021.  Though driving season typically peaks in late Jul, there may still be some room left to rally.  WTI for Sep rose 0.8% to settle at $77.59 a barrel & Brent for Sep climbed 0.9% to $81.71 a barrel.

Oil Ends Slump as US Inventories Drop to Lowest Since February

In economic news, fresh data from S&P Global showed the business activity in the US grew at its fastest pace in more than 2 years.  Next up are tomorrow's 2nd-qtr GDP report & Fri's key release on Jun PCE inflation, the report favored by the Federal Reserve.  Recent economic data has been raising concerns on the future path for rate cuts.  Nervous investors are buying gold & treasuries.