Markets waver as investors weigh Powell comments

Dow was off 4, advancers over decliners 3-2 & NAZ added 40.  The MLP index moved up 1 to the 291s & the REIT index rose 1 to 376.  Junk bond funds were up slightly & Treasuries rose in price, bringing lower yields (more below).  Oil steadied in the 83s & gold dropped 5 to 2333.

Dow Jones Industrials 

Federal Reserve Chair Jerome Powell said that policymakers have made "quite a bit" of progress on fighting inflation, but that he needs to see more evidence before starting to reduce interest rates.  Powell said that inflation reports from Apr & May show that price pressures are fading from the economy & reiterated that the Fed wants that progress to continue.  "I think the last reading, and the one before it to a lesser extent, do suggest that we are getting back on a disinflationary path," he added.  "We want to be more confident that inflation is moving sustainably down to 2% before we start the process of loosening policy."  Officials voted at their most recent meeting in May to hold interest rates steady at 5.25% - 5.50%, the highest level since 2001.  Although policymakers left the door open to rate cuts later this year in their post-meeting statement, they also stressed the need for "greater confidence" that inflation is coming down before easing policy.  Since then, there has been some evidence that inflation is starting to ease again.  The May producer consumption index showed that inflation had cooled slightly to 2.6%, from a high of 7.1%.  At the same time, core prices, which are more closely watched by the Fed because they strip out volatile measurements like food & energy, also climbed 2.6%, the slowest annual rate since Mar 2021.  "That represents really significant progress," Powell continued.  "We've made a lot of progress. We just want to understand that the levels that we're seeing are a true reading of what's happening with underlying inflation."  Both of those figures remain above the Fed's 2% target.  Most investors now expect the Fed to begin cutting rates in Sep or Nov & are penciling in just 2 reductions this year — a dramatic shift from the start of the year, when they anticipated 7 rate cuts beginning as soon as Mar.

Fed's Powell says prices are ‘back on disinflationary path,’ but more confidence is still needed

Tesla (TSLA) reported 2nd-qtr vehicle production & deliveries numbers for 2024, beating expectations.  Total deliveries in Q2 were 444K vehicles & total production in Q2 were 411K vehicles.  These numbers beat estimates.  Analysts expected deliveries to hit 439K in the & months ending Jun 30.  The total number of deliveries in the 2nd qtr was down 4.8% from 466K a year earlier but 14.8% higher than the first qtr of 2024.  Deliveries are the closest approximation of sales disclosed by the electric vehicle maker.  TSLA groups deliveries into 2 categories — Model 3 & Model Y vehicles, & all other vehicles — but doesn't report numbers for individual models or specific regions.  Its current lineup includes its popular Model Y crossover utility vehicles, Model 3 sedans & the new Cybertruck pickups, as well as the Model X SUV & flagship Model S sedan.  The stock jumped 20 to about 230.

Tesla shares rise on better-than-expected Q2 deliveries report

Treasury yields fell after Powell cited progress on squashing stubborn inflation.  The yield on the benchmark 10-year Treasury note fell more than 3 basis points to about 4.44%, while the yield on the 2-year Treasury note fell 3 basis points to trade at about 4.74%.  Yields & prices move in opposite directions & 1 basis point is equivalent to 0.01%.  In his remarks, Powell expressed satisfaction with the progress on inflation over the past year but said he wants to see more before being confident enough to start cutting interest rates.  “I think the last [inflation] reading and the one before it to a lesser, lesser extent, suggest that we are getting back on the disinflationary path,” Powell said.  “We want to be more confident that inflation is moving sustainably down toward 2% before we start the process of reducing or loosening policy.”  The consumer price index, a broad inflation gauge that measures a basket of goods & services costs across the US economy, showed no increase in May though it increased 3.3% from a year ago.  The Labor Dept's Job Openings & Labor Turnover Survey (JOLTS) showed openings changed little at 8.1M, down by 1.2M over the year.

Treasury yields fall as Powell says U.S. getting back on ‘disinflationary path’

Stocks are showing signs of fatigue as show in the Dow chart above.  The trading week is dominated by Fri's crucial Jun jobs report & will be shortened for the Jul 4 holiday.