Markets hesitate as PCE inflation data warms the hearts of investors

Dow went up 228 with buying into the close, advancers ahead of decliners 4-3 & NAZ gained 197.  The MLP index was steady in the 285s & the REIT index added 3+ to the 427s.  Junk bond funds edged higher & Treasuries were sold which raised yields.  Oil fell 2+ to the 73s & gold sank 28 to 2531 (more on both below).

Dow Jones Industrials 

Dell (DELL) reported quarterly results that beat expectations, powered by an 80% increase in server sales.  EPS was $1.17, up from 63¢ in the year-ago period.  Revenue increased about 9% from $22.9B a year ago.  The stock took a leg lower after DELL revised its full-year revenue guidance to $95.5 - $98.5B, a slight upward revision from the company's previous forecast.  Earlier this year, the company said to expect revenue of $93.5 - $97.5B for the full year, up from $88.4B in the prior year.  For the current qtr, DELL said it expects $24 - $25B in revenue, in line with the estimate of $24.6B.  DELL has emerged as a top vendor for servers that can handle artificial intelligence workloads, especially those based around Nvidia (NVDA) chips, as demand skyrockets from cloud providers.  Earlier this year, NVDA  CEO Jensen Huang called out DELL founder Michael Dell as the person to contact to place orders for systems that include the company's new chips.  AI sales are in the company's Infrastructure Solutions Group (ISG), which makes servers & systems for data centers.  It's the company's fastest-growing unit.  Overall ISG sales rose 38% to $11.6B, ahead of expectations for $10.4B.  DELL said it spent $1B in the qtr on share repurchases & divs.  DELL stock rose 4.84.

Dell beats estimates as server sales soar 80%, riding AI wave

Lululemon (LULU) lowered its guidance and posted its first revenue miss in more than 2 years after it botched a highly anticipated product launch & growth slowed in the Americas.  The company now expects full-year net revenue to be $10.4 - $10.5B, down from a previous estimate of $10.7 - $10.8B.  LULU anticipates earnings per share will be $13.95 - $14.15, down from previous guidance of $14.27 -  $14.47.  EPS for the 3-month period that ended Jul 28 rose to $3.15, compared with $2.68 per share a year earlier.  Sales rose to $2.37B, up about 7% from $2.21B a year earlier.  Beyond total sales, LULU also missed expectations on comparable sales, which grew 2%, well behind estimates of 5.9%.  Comparable sales in the Americas fell 3%.  The trend doesn't appear poised to improve in the current qtr.  LULU expects sales to grow 6-7%, lower than the 9.2% growth that had expected.  However, its profit guidance is roughly in line with what was anticipated.  The expects 3rd-qtr EPS to be $2.68 - $2.73, compared with estimates of $2.70.  The stock fell 78¢.

Lululemon cuts guidance, misses sales estimates after botched product launch

MongoDB (MDB) reported healthy fiscal 2nd-qtr earnings & pushed up full-year guidance.  EPS was 70¢ adjusted vs 49¢ expected & sales were $478M vs $464M.  MDB's revenue grew 13% year over year in the qtr that ended Jul 31.  The qtr's net loss came to 74¢ per share, compared with 53¢ per share, in the same qtr a year ago.  "We believe we are incredibly well positioned to help customers incorporate generative AI into their business and modernize their legacy application estate," CEO Dev Ittycheria said.  The company's Atlas cloud database service enjoyed modestly better consumption than expected.  In the fiscal first qtr, Atlas consumption growth slowed as clients observed more challenging economic conditions & usage in the fiscal 2nd qtr implied that the climate did not change, Ittycheria said.  "We generally have not seen the macro environment impact our ability to win new business, and that was true in Q2 as well," Ittycheria added.  "We realized that this is different from what you hear from some other software vendors."  With respect to guidance, MDB called for fiscal 3rd-qtr adjusted EPS of 65-68¢ on $493 - $497M in revenue.  Analysts had expected 60¢ in adjusted EPS on $478.8M in revenue.  Management nudged up its fiscal 2025 forecast.  MDB now sees $2.33 - $2.47 in adjusted EPS, with $1.92 - $1.93B in revenue.  That's up from the May guidance of $2.15 - $2.30 in adjusted EPS & $1.88 - $1.90B in revenue.  Analysts had predicted $2.26 per share in adjusted earnings, along with $1.90B in revenue.  The stock soared 42+ (18%).

MongoDB shares surge as high as 16% on guidance boost

Gold slipped 1% as the $ & yields firmed after US inflation data matched expectations, but the bullion is set for a monthly gain as a Sep interest rate cut by the Federal Reserve remains in play.  Spot gold fell 0.9% to $2497 per ounce & US gold futures settled 1.3% lower at $2527.  Bullion gained 2% this month after prices rallied to an all-time high of $2531 on Aug 20.  Data earlier in the day from the Commerce Dept showed the personal consumption expenditures (PCE) price index rose 0.2% last month, matching forecasts.  The PCE data confirms inflation is no longer the Fed's main concern, as they have shifted their focus to unemployment, which further validates the potential rate cuts in Sep.  Investors now look ahead to the US non-farm payroll report due next week.  Next week will solidify whether or not there will be a 50- or 25-basis-point interest rate cut at the Sep meeting.  Traders slightly raised bets of a 25-basis-point rate reduction by the Fed next month to 69%, with a 50-bps cut possibility coming down to 31% following the inflation report, according to the CME FedWatch tool.

Gold Drops as Dollar, Yields Firm After US Inflation Report

Oil prices rose as investors weighed supply concerns in Libya & Iraq, although signs of weakened demand, particularly in China, limited gains.  Brent crude futures for Oct, which expire today, were up 39¢ (0.5%) at $80.33 a barrel.  The more actively traded contract for Nov rose 34¢ (0.4%) to $79.16.  US West Texas Intermediate crude futures gained 30¢ (0.4%) to $76.21.  Both benchmarks settled more than $1 higher yesterday on oil supply concerns, up 1.6% & 1.8% respectively for the week so far.  Meanwhile, Iraqi supplies are also expected to shrink after the country's output surpassed its OPEC+ quota.  The Organization of the Petroleum Exporting Countries (OPEC) & allies, (OPEC+), is set to gradually phase out voluntary production cuts of 2.2M bpd over the course of a year from Oct 2024 - Sep 2025.

Oil prices gain on Middle East supply concerns

Stocks finished a wobbly day, week & month on a high note as the latest reading of the Federal Reserve's preferred inflation gauge bolstered rate-cut hopes.  But today the popular stock averages did not stray far from breakeven.  For the fickle month, Dow rose 720 & for the week eased up a modest 387.  Next week, traders on holiday will return & should bring even more excitement to the stock market.  Have a good holiday!

Markets struggle after the PCE inflation report

Dow dropped 106, advancers only slightly ahead of decliners & NAZ is up 46.  The MLP index added 1 to 286 after a strong advance yesterday & the REIT index hardly budged in the 423s.  Junk bond funds had modest buying & Treasuries saw minimal selling, raising yields slightly (more below).  Oil was off 1+ back down to the 74s & gold dropped 21 to 2538 on profit taking.

Dow Jones Industrials

An inflation measure closely watched by the Federal Reserve inched higher in Jul as elevated prices continue to weigh on Ms of Americans.  The Commerce Dept reported that the personal consumption expenditures (PCE) price index rose 0.2% from the previous month.  On an annual basis, prices climbed 2.5%.  Those figures are mostly in line with expectations.  When excluding food & energy prices, which are more volatile, core prices climbed 0.2% for the month & remain up 2.6% when compared with the same time last year.  While the Fed is targeting the PCE headline figure as it tries to bring consumer prices back to 2%, policymakers view core data as a better indicator of inflation.  Both the core & headline numbers point to inflation that is continuing to cool.  Other figures included in the report showed that consumer spending rose 0.5% in Jul compared with a 0.3% increase in Jun, 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 0.3% last month, slightly higher than expected.  The data comes as investors look for signs that the Fed is prepared to cut interest rates.  Policymakers, including Chair Jerome Powell, have signaled in recent days that they are ready to start adjusting interest rate policy.  "The time has come for policy to adjust," Powell said last week.  "The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks."  Investors widely expect the Fed to reduce rates in Sep amid signs that the economy is weakening & inflation is still easing.  About 30% of traders are actually pricing in an even bigger ½-point rate cut next month as concerns grow about the state of the job market.

Inflation measure closely watched by the Fed rises 2.5% in July

Intel (INTC), a Dow stock, execs are working with multiple advisors to formulate options to address its flagging business.  Advisors will likely present INTC directors with options at an upcoming board meeting in Sep.  The advisors are considering a full range of options, including splitting off & selling businesses.  CEO Pat Gelsinger acknowledged publicly that the company understood investor skepticism & was working to address it.  “We realize we have to operate efficiently with nimbleness, with urgency,” Gelsinger said at Deutsche Bank's Technology Conference.  INTC remains on track to launch its next iteration of its laptop central processor, Lunar Lake, Gelsinger said at the appearance.  But investors don't see a turnaround on the horizon & have pushed the stock down almost 60% this year.  Alongside a disastrous earnings report earlier this month, INTC announced it would lay off 15K workers.  The job cuts, part of a broader focus on slashing expenses, did little to assuage investor dismay.  While Gelsinger said yesterday that the foundry business had roughly a dozen interested customers, the buildout remains costly for INTC.  INTL stock rose 1.87 (9%).

Intel working with bankers to present board with strategic options

The yield on the 10-year Treasury was unchanged as investors digested the latest batch of inflation data.  The yield on the benchmark 10-year note was flat at 3.871% & the yield on the 2-year Treasury rose 2 basis points to 3.91%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Yields ticked higher after the release of the the personal consumption expenditures price index.  It comes after economic data released yesterday further eased recession concerns.  Weekly jobless claims fell from the prior week, while 2nd-qtr gross domestic product was revised higher to 3% growth from an initial 2.8% rate.  Fed Chair Jerome Powell said last week that “the time has come for policy to adjust,” bolstering expectations for a rate cut at the central bank's next meeting.  Powell declined to provide exact indications on the timing or extent of the cut, however.

10-year Treasury yield is flat after key inflation indicator matches expectations

Dow began trading higher, but nervous investors have dragged it well into the red.  Traders are trying to take an upbeat tone going into the end of the month, with recession fears & the early-Aug rout in the rear-view mirror & a long-awaited start to Fed easing just ahead.  PCE inflation levels are closely tracked by the Fed & are watched closely to calibrate the size & pace of interest rate cuts this year.  After Chair Jerome Powell last week made it clear a pivot can be expected in Sep, bets on 0.5% cut have mounted amid signs of strength in the economy.  But the steady level of price pressures in Jul kept a 0.25% move lower in play.

Markets rise with stock averages and gold at or near records

Dow rose 243 although late dry selling trimmed gains, advancers over decliners about 3-1 & NAZ finished down 39.  The MLP index soared 6+ to the 285s & the REIT index slid back 1+ to the 413s.  Junk bond funds were little changed & Treasuries had marginal selling which lifted yields slightly.  Oil finished up 1+ to nearly 76 & gold advanced 18 to 2556 (more on both below).

Dow Jones Industrials 

Gap (GAP) beat quarterly earnings & revenue estimates & raised its full-year profit margin outlook, the apparel retailer said.  Sales climbed 5% to $3.7B in its 2nd qtr & comparable sales rose 3%.  EPS was 54¢ for the period ended Aug 3, compared with 32¢ in the prior-year period.  The retailer also affirmed its full-year sales guidance of up slightly from the previous year.  GAP increased its gross margin outlook to about a 200 basis point expansion, up from at least a 150 basis point improvement potentially.  It also hiked its operating income guidance to approximately 50% growth, up from percentage growth in the mid-40s.  Comparable sales were strongest at the Old Navy brand, where they rose 5% & GAP's namesake brand posted 3% comparable sales growth.  Comparable sales were flat at Banana Republic, while they fell 4% at Athleta.  Earnings come as CEO Richard Dickson, who took the helm last year, tries to lead a sales turnaround at the legacy retailer.  The stock rose 64¢.

Gap beats earnings and revenue estimates, hikes profit margin outlook

Dollar General (DG) shares tumbled after the discount retailer slashed its sales & profit guidance for the full year, suggesting its lower-income customers are struggling in this economy.  The company now expects fiscal 2024 same-store sales to be up 1.0-1.6%, lower than its prior outlook for a 2-2.7% increase.  EPS for the year are expected to be just $5.50 - $6.20, versus the prior forecast of $6.80 - $7.55.  “While we believe the softer sales trends are partially attributable to a core customer who feels financially constrained, we know the importance of controlling what we can control,” said CEO Todd Vasos.  However, he also acknowledged that the company has more work to do.  DG has said that it needs to improve its stores & how it handles inventory to curb losses.  EPS for the 3-month period that ended Aug 2 was $1.70, compared with $2.13 a year earlier.  Sales rose to $10.2B, up about 4.2% from $9.8B a year earlier.  The stock plunged 37 (39%).

Dollar General shares crater 25% as retailer cuts outlook, blaming ‘financially constrained’ customers

Mortgage rates are down again this week, but remain too high to spark any significant movement in the housing market as the affordability crisis remains set in.  Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate on the benchmark 30-year fixed mortgage fell to 6.35% this week from 6.46% last week & the average rate on a 30-year loan was 7.18% a year ago.  "Mortgage rates fell again this week due to expectations of a Fed rate cut," said Sam Khater, Freddie Mac's chief economist.  "Rates are expected to continue their decline and while potential homebuyers are watching closely, a rebound in purchase activity remains elusive until we see further declines."  The average rate on the 15-year fixed mortgage declined to 5.51% from 5.62% last week & 1 year ago, the rate on the 15-year fixed note averaged 6.55%.

Mortgage rates drop again, but housing market remains stalled

Gold prices gained 1%, fueled by strong expectations of a Federal Reserve rate cut in Sep with investors focusing on US inflation data for further insights on the potential size of the cut.  Spot gold rose 0.9% to $2524 per ounce & US gold futures settled 0.9% higher at $2560.  The market seems to be penciling in a rate cut no matter what, & now it is simply a question of what size & how big of a rate cut.  There does seem to be that strong floor of support because of geopolitics.  The Israeli military said its troops killed 5 Palestinian militants who were hiding inside a mosque in the West Bank city of Tulkarm.  Gold is used as a safe investment during times of economic & geopolitical uncertainties.  Data earlier showed US initial jobless claims slipped last week, with the Labor Dept adding that the unemployment rate probably remained high in Aug.  Fed Chair Jerome Powell last Fri signaled interest rate cuts were imminent in a nod to concerns over the jobs market.  Traders see a 65.5% chance of a 25-basis-point (bp) rate cut in Sep & about a 34.5% probability of a bigger 50-bp reduction, according to the CME FedWatch tool.  Investors are now looking at Personal Consumption Expenditures (PCE) price index, the Fed's preferred measure of inflation, due tomorrow.

Gold Gains Nearly 1% as Investors Zero in on Fed Cuts, Inflation Data

Oil futures finished higher, finding some support after posting back-to-back session declines, as discord in Libya continued to limit supply from the OPEC producer.  West Texas International crude for Oct rose $1.39 (1.9%) to settle at $75.91 a barrel & Oct Brent crude, the global benchmark, added $1.29 (1.6%) at $79.94 a barrel.  The more actively traded Nov Brent contract gained $1.24 (1.6%) to $78.82 a barrel.  A dispute between Libya's eastern leaders & western authorities over the nation's central bank has resulted in an oil blockade that has significantly curtailed crude flows, with output down about 500K barrels a day & that figure doesn't include the shutdown of the Sharara oil field earlier this month.

Oil Prices End Higher as Standoff Over Libya Central Bank Curtails Supply

Investors are weighing the lackluster reception for the numbers from Nvidia (NVDA) whose stellar growth streak has underpinned the market's rally this year.  While the AI chipmaker's quarterly profit & revenue guidance topped estimates, the size of the beats fell short of high-running hopes.  That stirred questions as to whether the AI boom has peaked but analysts remain bullish.  The inflation data will drive the market tomorrow.

Markets rise even as Nvidia shares decline on results

Dow climbed 306, advancers over decliners better than 2-1 & NAZ advanced 187.  The MLP index gained 4+ to the 282s & the REIT index fell 2+ to 422.  Junk bond funds crawled higher & Treasuries had selling which reduced yields (more below).  Oil rose 1+ to the 76s & gold jumped 16 to 2553 (record territory).

Dow Jones Industrials

Artificial intelligence giant Nvidia (NVDA) 2nd-qtr earnings report, which beat estimates as the company's AI-driven momentum continued.  Analysts expected EPS to come in at 64¢, up 137% from last year, while its revenue was estimated to be $28.7B, up 112% from last year.  EPS came in at 68¢ while revenue was $30B.  Data center revenue, its largest operating segment, was projected to rise by 144% from last year to $25.1B.  The company beat estimates & brought in $26.3B in sales from the segment, an increase of 16% from the prior qtr & 154% from a year ago.  "Hopper demand remains strong, and the anticipation for Blackwell is incredible," NVDA founder & CEO Jensen Huang said of the company's core chip offering & its next-generation product, respectively.  "Nvidia achieved record revenues as global data centers are in full throttle to modernize the entire computing stack with accelerated computing and generative AI," Huang added.  Analysts had cited some concerns about production delays with the Blackwell AI chips that could push back deliveries & impact its revenues in the next few qtrs.  Huang said that it has started sending out Blackwell samples, but didn't offer a timeline related to its anticipated 2025 ramp-up.  "Blackwell samples are shipping to our partners and customers. Spectrum-X Ethernet for AI and Nvidia AI Enterprise software are two new product categories achieving significant scale, demonstrating that Nvidia is a full-stack and data center-scale platform," Huang said.  "Across the entire stack and ecosystem we are helping frontier model makers to consumer internet services, and now enterprises. Generative AI will revolutionize every industry."  NVDA also issued a forecast for 3rd-qtr revenue that came in above estimates, projecting revenue of $32.5B, plus or minus 2%, for the 3rd qtr, above analysts' estimate of $31.8B.  But the stock fell 3.30.

Nvidia earnings beat Wall Street expectations again amid strong AI demand

Salesforce (CRM), a Dow stock, fiscal 2nd-qtr results that beat estimates & raised its full-year profit outlook.  The company also said CFO Amy Weaver will step down.  She will remain at the company as the CFO until a successor is appointed &, after that, will stay on as an advisor.  CRM will consider internal & external candidates, Marc Benioff, the company's co-founder, chair & CEO, said.  He said it was his idea to have Weaver take over the lead financial role after joining as general counsel in 2013.  Revenue grew 8% year over year during the qtr, which ended on Jul 31.  Weaver pointed to growth in average revenue per user, partly because of a shift to premium products.  EPS was $1.47, up from $1.28 in the same qtr a year ago.  With respect to guidance, CRM called for adjusted fiscal 3rd-qtr earnings of $2.42 to $2.44 on $9.31B to $9.36B in revenue.  Analysts had expected EPS of $2.43 on $9.41B in revenue.  Management called for $10.03 - $10.11 in adjusted fiscal 2025 EPS, with $37.7B to $38B in revenue, which implies growth of 8-9%.  Last qtr's forecast was $9.86-9.94 EPS & revenue of $37.7-38.0B.  The estimate was $9.89 in adjusted EPS, with $37.84B in revenue.  Adjusted operating margin guidance for the full year is now 32.8%, up from 32.5% in May.  "We are assuming that the conditions we've been experiencing over the past few years persist," Weaver said.  Execs have previously pointed to longer sales cycles & scrutiny of budgets.  The stock went up 1.72.

Salesforce beats earnings estimates, CFO Amy Weaver to step down

The 10-year Treasury rose as investors looked ahead to a key inflation report due tomorrow.  The yield on the 10-year Treasury traded nearly 5 basis points higher at 3.886%, while the yield on the 2-year Treasury gained 4 basis points to 3.906%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  It comes as market participants await a fresh batch of economic data, with focus set to turn to the Federal Reserve's preferred inflation gauge tomorrow.  Economic data released today showed that weekly jobless claims fell from the prior week, further easing recession concerns.  In addition, 2nd-qtr gross domestic product was revised higher to 3% growth from an initial 2.8% rate.  US personal consumption expenditures price index will be published tomorrow & the reading could offer more clues on the outlook for interest rates.  Federal Reserve officials use the measure as their main baseline to gauge inflation.  Fed Chair Jerome Powell said late last week that "the time has come for policy to adjust," bolstering expectations for a rate cut at the central bank's next meeting.  Powell declined to provide exact indications on the timing or extent of the cut, however.  Market participants are firmly pricing in a rate cut at the Fed's Sep 18 meeting.  Traders are currently pricing in a 65.5% chance of a 25-basis-point rate cut next month, with 34.5% pricing in a 50-basis-point rate cut, according to the CME Group's FedWatch Tool.

Treasury yields rise as investors agwait key U.S. inflation data

The stock market's performance difficult to understand.  Even though big tech companies are doing well on NAZ, NVDA is not.  Good was just not good enough for its investors.  Meanwhile, Dow & gold are at record levels.  Go figgah!

Markets slip lower ahead of Nvidia's earnings later today

Dow slid back 26, advancers barely ahead of decliners & NAZ sank 259.  The MLP index fell 1+ to the 279s & the REIT index was even in the 426s.  Junk bond funds hardly budged & Treasuries saw a little more buying which lowered yields slightly (more below).  Oil was off pennies in the 75s & gold fell 12 to 2540.

Dow Jones Industrials

Abercrombie & Fitch (ANF) revenue grew 21% during its fiscal 2nd qtr as the apparel company builds on its torrid growth.  The sales gain, which follows 16% growth in the year-ago period, led the company to issue bullish guidance for the current qtr.  Still, its full-year outlook was largely in line with estimates as it prepares for 1 fewer week this year than last.  CEO Fran Horowitz, who often says good companies win in any economic environment, may be bracing for a turbulent 2nd ½ of the year because for the first time in 4 qtrs, she referenced the uncertain state of the economy in the company's earnings release.  “We delivered a strong first half of the year, and we are increasing our full-year outlook. Although we continue to operate in an increasingly uncertain environment, we remain steadfast in executing our global playbook and maintaining discipline over inventory and expenses,” said Horowitz.  “We are on track and confident in our goal to deliver sustainable, profitable growth this year, while making strategic long-term investments across marketing, digital and technology and stores to enable future growth.”  EPS for the 3-month period that ended Aug 3 was $2.50, compared with  $1.10 a year earlier.  Sales rose to $1.13B, up about 21% from $935M a year earlier.  During the qtr, same-store sales jumped 18%, driven by better-than-expected summer & back-to-school selling.  For the current qtr, ANF expects sales to rise by a low double-digit percentage, better than the 8.9% growth that was expected.  ANF raised its full-year sales guidance from 10% growth to a 12-13% increase, which is roughly in line with the 12% rise analysts had expected.   The stock plunged 28.35 (17%).

Shares of Abercrombie & Fitch plunge 15% after CEO warns of ‘increasingly uncertain environment’

Mortgage rates fell last week for the 4th straight week, but neither current homeowners nor homebuyers seemed particularly impressed.  Total mortgage application volume rose just 0.5% last week compared to the previous week, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index.  The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $766K or less, decreased to 6.44% from 6.50%, with points decreasing to 0.54 from 0.60, including the origination fee, for loans with a 20% down payment.  That was the lowest rate since Apr 2023.  Rates have come down more than 80 basis points from a year ago.  Despite the drop, demand to refinance decreased 0.1% from the previous week.  It was, however, 85% higher than the same week 1 year ago.  The trouble is that the vast majority of borrowers have mortgages with rates well below 6%.  Doing a refinance is really only worth the expense if you can shave at least 75 basis points off your current rate.  Applications for a mortgage to purchase a home rose 1% for the week but were 9% lower than the same week 1 year ago.  “As observed in recent weeks, despite lower rates, purchase applications have not moved much. Prospective homebuyers are staying patient now that rates are moving lower and for-sale inventory has started to increase,” said Joel Kan, MBA's VP & deputy chief economist.  Mortgage rates have been flat to start this week, with no significant economic data to influence them. The next big move could come with the monthly employment report at the end of next week.

Weekly mortgage demand stalls, even though rates drop to lowest since April 2023

The US 10-year Treasury  was flat as investors awaited a key US inflation report due later in the week.  The yield on the 10-year Treasury was unchanged at 3.833% & the yield on the 2-year Treasury was also flat at 3.861%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Market participants are looking ahead to the release of personal consumption expenditures (PCE) data on Fri to get a better picture on the health of the world's largest economy.  Federal Reserve officials use the PCE measure as their main baseline to gauge inflation.  It comes after Fed Chair Jerome Powell said late last week that “the time has come for policy to adjust,” bolstering expectations for a rate cut at the central bank's next meeting.  Powell declined to provide exact indications on the timing or extent of the cut, however. “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks,” Powell said in his keynote address at the Fed's annual retreat in Jackson Hole.  Market participants are firmly pricing in a rate cut at the Fed's Sep 18 meeting.  Traders are currently pricing in a roughly 63.5% chance of a 25-basis-point rate cut next month, with 36.5% pricing in a 50-basis-point rate cut, according to the CME Group’s FedWatch Tool.

Treasury yields are flat as investors look ahead to U.S. inflation data

US stocks were mixed ahead of chipmaker Nvidia's (NVDA) earnings report later today, seen as crucial to keeping confidence in the broader market aloft.  Traders are expecting a swing of almost 10% in the chipmaker's shares in either direction, depending on whether hopes for another blowout qtr are met.  Forecasts are for earnings to grow by 109% & revenue by 99%, year-on-year.  Updates on any potential delays for its new Blackwell chip will be in particular focus.  Meanwhile Dow & gold are essentially at record highs (quite a combination)!!!

Markets' rally stalls with stock averages and gold near record highs

Dow finished up 9, decliners over advancers 4-3 & NAZ added 29.  The MLP index fell 3+ to the 281s & the REIT index inched up 1+ to the 426s.  Junk bond funds continued a little higher & Treasuries saw a little buying which allowed interest rates to ease high.  Oil was fractionally lower to the 75s & gold was up 4 to 2559 (more on both below).

Dow Jones Industrials 

AI juggernaut Nvidia (NVDA) will report its 2nd qtr earnings after the bell tomorow.  Its announcement, the most anticipated results of the qtr, will send ripple effects throughout the tech sector as investors look for signs that the AI trade will continue to dominate market conversations into the 2nd ½ of the year.  For the qtr, NVDA is expected to report adjusted EPS of 65¢ on revenue of $28.7B.  That works out to a 139% jump in EPS & a 113% increase in revenue compared to the same period a year ago when EPS was 27¢ on revenue of $13.5B.  NVDA is the world leader in AI chip design & software, controlling 80-95% of the market.  And it's expected to continue to hold that lead as it begins rolling out its next-generation Blackwell line of chips.  While The Information has reported about a potential delay in Blackwell shipments, analysts at firms don't see that as much of a concern for NVDA in the near term.  For the qtr, NVDA's all-important data center business is expected to bring in $24B in revenue, a 142% increase from the $10.3B the segment saw in the same qtr last year.  Analysts expect NVDA to not only beat its Q2 expectations but raise its guidance for Q3, something that could be backed up by TSMC's recent earnings beat.  TSMC produces chips for NVDA.  NVDA stock rose 1.84 ahead of earnings.

Nvidia earnings preview: High stakes for the AI trade

Cava (CAVA) shares opened the session in negative territory, after CEO Brent Schulman & other execs reported selling stock.  Schulman reportedly sold 211K shares for $24.9M, Chief Concept Officer Ted Xenohristos sold 98M shares for $12.4M & CFO Patricia Tolivar sold 5M shares for $628K.  The stock sank 7.67 (6%).

Cava stock slides after CEO, executives disclose stock sales

Consumer sentiment in the US continued to improve in Aug with The Conference Board's CB Consumer Confidence Index rising to 103.3 from 101.9 (revised from 100.3) in Jul.  The Present Situation Index rose to 134.4 from 133.1 in the same period, while the Expectations Index edged higher to 82.5 from 81.1.  Assessing the survey's findings, "consumers continued to express mixed feelings in August," noted Dana M Peterson, Chief Economist at The Conference Board.  "Compared to July, they were more positive about business conditions, both current and future, but also more concerned about the labor market."

US CB Consumer Confidence Index improves to 103.3 in August

Gold prices fell, weighed down by higher US bond yields, as markets await inflation data that could shed light on the scale of an expected interest rate cut from the Federal Reserve next month.  Spot gold fell 0.2% to $2512 per ounce, having eased from the record high of $2531 hit last week & US gold futures eased 0.3% to $2547.  The benchmark US 10-year yields rose, making the non-yielding bullion less attractive for overseas buyers.  Investors await data for the Personal Consumption Expenditures (PCE), a key inflation report & the Fed's preferred inflation gauge on Fri.  Traders see a 71.5% chance of a 25-basis-point (bp) rate cut in Sep & about a 28.5% probability of a bigger 50-bp reduction, according to the CME FedWatch tool.

Gold retreats as US yields firm; market awaits further Fed guidance

Oil prices fell 2% on worries that slower economic growth in the US China & could reduce demand for energy, especially after prices surged over 7% during the prior 3 days.  Brent futures fell $1.88 (2.3%) to settle at $79.55 a barrel, while US West Texas Intermediate (WTI) crude fell $1.89 (2.4%) to settle at $75.53.  Today's price pullback, although significant, still fell within range of a normal & deserved correction following a substantial 3-day $6-per-barrel advance.  Technical traders noted that prices of both contracts pulled back after failing to break above resistance around the 200-day moving averages yesterday.  With US gasoline futures still trading near a 6-month low, the 321-crack spread, which measures refining profit margins, held near its lowest level since Feb 2021 for a 2nd day in a row.

Oil Prices Fall 2% on Economic Worries, Technical Decline

The stock averages & gold stayed near breakeven in lackluster trading for most of the day.  With some traders away on long holidays, volume is light & market moves should not be significant (assuming news remains fairly quiet).

Markets slide while waiting for the inflation guide favored by the FED

Dow dropped 97, decliners over advancers 4-3 & NAZ was off 12.  The MLP index was even in the 284s & the REIT index remained in the 424s.  Junk bond funds had a little buying & Treasuries saw limited selling which increased yields modestly (more below).  Oil was off 1+ to the 76s following recent strength & gold retreated 6 to 2549.

Dow Jones Industrials

Even as mortgage interest rates were rising, home prices reached the highest level ever on the S&P CoreLogic Case-Shiller US National Home Price Index.  On a 3-month running average ending in Jun, prices nationally were 5.4% higher than they were in Jun 2023.  Despite being a record high for the index, the annual gain was smaller than May's 5.9% reading.  The index's 10-city composite rose 7.4% annually, down from 7.8% in the previous month & the 20-city composite was 6.5% higher year-over-year, down from a 6.9% increase in May.  “While both housing and inflation have slowed, the gap between the two is larger than historical norms, with our National Index averaging 2.8% more than the Consumer Price Index,” noted Brian Luke, head of commodities, real & digital assets at S&P Dow Jones Indices.  “That is a full percentage point above the 50-year average. Before accounting for inflation, home prices have risen over 1,100% since 1974, but have slightly more than doubled (111%) after accounting for inflation.”  New York saw the highest annual gain among the 20 cities, with prices increasing 9% in Jun, followed by San Diego & Las Vegas with annual increases of 8.7% & 8.5%, respectively.  Portland, Oregon, saw just a 0.8% annual increase in Jun, the smallest gain of the top cities.  Since housing affordability has been a major talking point in this election cycle, this month's report also broke out home values by price tier, dividing each city's market into three tiers.  Looking just at large markets over the past 5 years, it found that 75% of the markets covered show low-price tiers rising faster than the overall market.  The increase in prices came even as mortgage rates rose sharply in Apr-Jun, which is the period averaged on the index.  Usually when rates rise, prices cool.  While home prices should ease month-to-month going into the fall, due to seasonal factors & more inventory on the market, they are unlikely to drop significantly & are expected to still be higher than they were last fall.

Home prices hit record high in June on S&P Case-Shiller Index

Eli Lilly (LLY) is expanding the supply of its weight-loss drug & selling it for ½ the price of other drugs in the highly lucrative market.  LLY announced that it is now offering 2.5 mg & 5 mg single-dose vials of tirzepatide, sold under the brand name Zepbound, in response to growing demand.  In its last fiscal qtr, the company's earnings surpassed expectations due in large part because of the performance of Mounjaro & Zepbound, which have the same active ingredient but have different FDA-approved uses.  The new single doses are also "priced at a 50% or greater discount compared to the list price of all other incretin (GLP-1) medicines for obesity," LLY added.  GLP-1 agonists are a class of Type 2 diabetes drugs that improve blood sugar control but may also lead to weight loss.  LLY said that the additional supply will help "millions of adults with obesity access the medicine they need."  That includes those not eligible for the Zepbound savings card program, those without employer coverage & those who are paying outside of insurance.  "These new vials not only help us meet the high demand for our obesity medicine, but also broaden access for patients seeking a safe and effective treatment option," Patrik Jonsson, LLY's pres of cardiometabolic health, continued.  Jonsson referenced a clinical study in which the 5 mg maintenance dose helped patients achieve an average of 15% weight loss after 72 weeks of treatment.  A recent trial also showed that weekly shots of tirzepatide injections significantly reduced the risk of progression to Type 2 diabetes by 94% among adults with pre-diabetes & obesity compared to the placebo, according to LLY.  In 2023, one in 60 adults were prescribed a GLP-1 medication, according to the American Pharmacists Association.  By 2030, the number of GLP-1 users in the US could reach 30M, around 9% of the overall population, according to JPMorgan.  The market is projected to exceed $100B by that same year, "driven equally by diabetes and obesity usage," the firm noted.  The stock rose 13.08.

Eli Lilly cuts cost of certain Zepbound doses by at least 50%

The US 10-year Treasury  rose as investors monitored fresh economic data after the Federal Reserve boosted already high expectations for imminent interest rate cuts.  The yield on the 10-year Treasury climbed 3 basis points to 3.848%, while the yield on the 2-year Treasury was trading around flat.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Fed Chair Jerome Powell on Friday said that “the time has come for policy to adjust,” bolstering expectations for a rate cut at the central bank's next meeting.  Powell declined to provide exact indications on the timing or extent of the cut, however.  “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks,” Powell said in his keynote address at the Fed's annual retreat in Jackson Hole.  Market participants are firmly pricing in a rate cut at the Fed's Sep 18 meeting.  Traders are currently pricing in a roughly 71.5% chance of a 25-basis-point rate cut next month, with 28.5% pricing in a 50-basis-point rate cut, according to the CME Group's FedWatch Tool.

10-year Treasury yield rises as investors weigh prospect of interest rate cut

Stocks are struggling to find a footing ahead of the next Fed meeting in mid Sep.  They are counting down to a crucial update to the inflation gauge (PCE) favored by the Federal Reserve due on Fri.  In the last hour selling picked up.

Markets wobble while tech shares are being sold

Dow rose 65, advancers over decliners 4-3 & NAZ dropped 152.  The MLP index added 1 to the 284s & the REIT index stayed near 425.  Junk bond funds inched higher & Treasuries were a tad lower so that yields hardly budged.  Oil remained higher, up 2+ to the 77s on growing MidEast worries, & gold was added 6 to 2552 (more on both below).

Dow Jones Industrials 

Apple (AAPL), a Dow stock, announced it will hold a press event at its headquarters on Sep 9, where it is expected to announce new iPhones & Apple Watch models.  The launch event will be streamed on the AAPL website & YouTube.  AAPL has launched products through pre-recorded videos since 2020.  AAPL typically releases new iPhones & AAPL Watches at its fall launches ahead of the critical holiday shopping season.  This year's iPhone models, which could be called the iPhone 16, could include bigger screens on the high-end devices, a redesigned camera bump & a new color & the wearables are expected to get a new faster chip.  AAPL also typically announces the release data of the newest version of the iPhone software for all users alongside the new models.  This year's version is called iOS 18, & will eventually include Apple Intelligence, a collection of artificial intelligence features for daily usage such as summarizing messages & generating cute images.  However, AAPL's recent developer preview signaled that Apple Intelligence features will likely launch shortly after its hardware launch.  This year’s invites include the tagline “It’s Glowtime,” a reference to A APL' s new redesign of its Siri interface.  AAPL stock rose 34¢.

Apple announces iPhone event for Monday, Sept. 9

An uptick in sausage demand can offer the latest sign of consumers tightening their belts as they continue grappling with high prices.  There's been “modest growth” in the dinner sausage category for 1 producer, according to the Dallas Federal Reserve's Texas Manufacturing Outlook Survey.  This underscores the trends of shoppers opting for cheaper products & pulling back spending all together as cumulative inflation bites into purchasing power.  “This category tends to grow when the economy weakens,” the respondent said, according to edited comments included in the Dallas Fed's report.  That’s because “sausage is a good protein substitute for higher-priced proteins and can ‘stretch’ consumers’ food budgets.”  This anecdote pointed out by eagle-eyed Bespoke Investment Group on X comes as grocery prices remain top of mind for consumers.  While the rate of annualized inflation has fallen closer to levels deemed healthy by economic policymakers, the collective increase in prices compared with just a few years ago has left everyday Americans feeling sour about the state of the national economy.  Additionally, it bolsters 2 themes emerging as hallmarks of today's post-pandemic economy.  A growing chorus of corp execs, including those leading some of the largest restaurant chains, have warned that the consumer is starting to slowdown.  In particular, they've pointed to stress on lower-income tax brackets as they attempt to make their dollars go further.  The shift to sausage also highlights an action experts call the “trade down.”  Carefree customers may select protein that's typically more expensive like steak or chicken.  On the other hand, price-conscious shoppers will hunt for sausage or other lower-cost alternatives.  Other food manufacturers who responded to the Dallas Fed's survey also raised concern about their economic health.  One said agriculture as a whole was “hurting,” citing challenges from factors like weather & higher costs.  Another put it more plainly, saying it was “preparing for the recession.” 

Increased sausage demand could be worrying signal on the economy

Canada's gov announced it is imposing a 100% tariff on imports of Chinese-made electric vehicles that matches US tariffs & follows similar plans announced by the European Commission.  The announcement came after encouragement by US national security advisor Jake Sullivan during a meeting with Canadian Prime Minister Justin Trudeau & cabinet ministers yesterday.  Sullivan is making his first visit to Beijing tomorrow.  Trudeau said Canada also will impose a 25% tariff on Chinese steel & aluminum.  “Actors like China have chosen to give themselves an unfair advantage in the global marketplace,” he said.  Chinese officials are likely to raise concerns about American tariffs with Sullivan as Beijing continues to repair its economy after the COVID-19 pandemic.  Pres Biden in May slapped major new tariffs on Chinese electric vehicles, advanced batteries, solar cells, steel, aluminum & medical equipment.  “The U.S. does believe that a united front, a coordinated approach on these issues benefits all of us,” Sullivan said.  Biden has said Chinese gov subsidies for EVs & other consumer goods ensure that Chinese companies don't have to turn a profit, giving them an unfair advantage in global trade.  Chinese firms can sell EVs for as little as $12K.  China's solar cell plants & steel & aluminum mills have enough capacity to meet much of the world's demand.  Chinese officials argue their production keeps prices low & would aid a transition to the green economy.  “We’re doing it in alignment, in parallel, with other economies around the world that recognize that this is a challenge that we are all facing,” Trudeau said.  “Unless we all want to get to a race to the bottom, we have to stand up.”  Deputy Prime Minister Chrystia Freeland said Canada also will launch a 30-day consultation about possible tariffs on Chinese batteries, battery parts, semiconductors, critical minerals, metals & solar panels.  “China has a intentional state-directed policy of overcapacity and oversupply designed to cripple our own industry,” Freeland added.  “We simply will not allow that to happen to our EV sector, which has shown such promise.”  The only Chinese-made EVs currently imported into Canada are from Tesla (TSLA), made at the company's Shanghai factory.  TSLA stock fell 7.11 (3%).

Canada to put 100% tariff on China EV imports like Tesla's

Gold prices firmed, nearing its recent record high, amid solid bets of a Sep interest-rate cut following dovish signals from Federal Reserve Chair Jerome Powell & safe-haven demand due to geopolitical risks in the Middle East.  Spot gold rose 0.3% to $2518 per ounce, just shy of the record high of $2531 hit last week & US gold futures settled 0.3% higher at $2555.  The dovish signals from Powell's speech on Fri & safe-haven interest & geopolitical risks in the MidEast are precipitating the bid in gold.  Hezbollah had launched hundreds of rockets & drones at Israel early on yesterday.  There might be some indication that China is going to come back in, but even if they don't, demand from central banks has been pretty robust regardless of price this year and that's going to continue.  Gold demand in top consumers India & China is expected to improve in the next few months, industry officials said.

Gold Nears Record High on US Rate-Cut Optimism, Geopolitical Risks

West Texas Intermediate (WTI) crude oil closed sharply higher on rising geopolitical risk as one of Libya's govs suspended exports while Israel & the Hezbollah militant group ratcheted up attacks, raising familiar concerns over a spreading Middle Eastern war.  WTI crude for Oct closed up $2.59 to settle at $77.42 per barrel, while Oct Brent crude, the global benchmark, was last seen up $2.45 to $81.47 per barrel.  Libya's eastern government on the weekend said it is suspending oil exports as it continues to fight for control over the country with a competing gov in its west.  The shutdown of the bulk of the country's 1.5M barrels per day of exports comes on squabbling over control of a central bank with a competing gov in western Libya continues.  The cut to exports comes as Israel & the Iran-backed Hezbollah militia in Lebanon increased attacks on each other, with Israel yesterday launching a series of airborne sorties on Hezbollah missile sites, while Hezbollah responded with rocket & drone attacks on Israel.  Rising tension & reduced supply has boosted oil prices, which last week touched 7-month lows on concerns over the health of China's economy.

WTI Closes Higher on Libya Export Shutdown and Heightened Worries Over a Spreading Middle East Conflict 

 

Stocks were mixed in choppy trading as investors weighed the imminent arrival of interest rate cuts & braced for a busy week for earnings reports.  Shares of the AI chip heavyweights fell along with other semiconductor names.  Tensions in the MidEast are getting more attention & some there is some worry about a possible recession.  

Markets crawl higher and tech stocks struggle in choppy trading

Dow went up 44 (slipped back in the last hour), advancers over decliners 2-1 & NAZ pulled back 125.  The MLP index edged up 1 to the 284s & the REIT index remained flat in the 425s.  Junk bond funds dipped lower & Treasuries saw a little buying which lowered yields slightly (more below).  Oil jumped 2+ to the 77s on growing tensions in the MidEast (more below) & gold added 3 to the 249s (still in record territory).

Dow Jones Industrials

Crude oil futures gained more than 3% amid reports of a production halt in Libya & after Israel & Hezbollah traded a barrage of strikes across the Lebanon border.  Libya's eastern gov in Benghazi said that oil production & exports in the North African country would shut down, amid a dispute with the internationally recognized western gov in Tripoli over who should lead the central bank.  The West Texas Intermediate contract was $77.50 per barrel, up $2.67 (3.6%) & YTD US crude oil has gained 8.1%.  The Brent Oct was contract was $81.51 per barrel, up $2.49 (3.1%) & YTD the global benchmark has advanced 5.7%.  Israel launched a major wave of airstrikes in Lebanon yesterday, describing the operation as a preemptive strike to prevent Hezbollah from firing a barrage of missiles.  Hezbollah subsequently said it had launched hundreds of missiles at Israel in retaliation for the killing of 1 of the militia group's senior commanders in Jul.  The Middle East has been on edge for weeks after the assassinations of the Hezbollah commander in Beirut & a Hamas leader in Tehran, Iran.  Iran has also vowed to retaliate against Israel, but so far the threatened attack has not materialized.

Oil prices jump more than 3% on Libya production halt, Israel-Hezbollah attacks

The credibility of the Federal Reserve helped financial markets in the central bank's multiyear battle against inflation, but it had to back up its verbal promises to restore price stability with rate cuts, according to new research presented at the Kansas City Fed's annual research conference in Jackson Hole, Wyoming.  The research found that a strong perception in financial markets that a central bank is committed to controlling inflation can make its monetary policy more effective, prompting markets to shift financial conditions faster & lowering inflation with a less serious hit to economic growth than would otherwise be the case.  Although investors came to believe that Fed Chair Jerome Powell & other policymakers were serious about maintaining the central bank's 2% inflation target, that belief only formed over time & after officials began raising the benchmark federal funds rate in Mar 2022 & accelerated the hikes that summer, the researchers found.  Inflation surged to a 40-year high of 9.1% in Jun 2022, which prompted the Fed to raise the federal funds rate to 5.25 - 5.50%, the highest level in 23 years.  With the rate of inflation having slowed to 2.9%, the Fed is expected to cut interest rates in Sep for the first time since the onset of the COVID pandemic in Mar 2020.  "Forecasters and markets were highly uncertain about the monetary policy rule prior to 'liftoff' and learned about it from the Fed's rate hikes," economists Michael Bauer from the San Francisco Fed, Carolin Pflueger from the University of Chicago & Adi Sunderam from Harvard Business School found in their research.  "Substantial rate hikes were apparently necessary for perceptions to shift… The public did not fully understand the Fed's strategy and policy rule prior to liftoff," they wrote.  The research serves as a form of warning against central bankers putting too much emphasis on the power of "talk therapy" – the ability to influence economic outcomes with words & promises alone.  However, the researchers found that while the Powell-led Fed eventually earned the benefit of public trust, it wasn't a given.  Researchers used survey data to quantify how professional forecasters perceived the Fed would respond to higher inflation & they found that even when prices began rising in 2021, the expected Fed response to inflation was near zero.  While that could have been attributed to other factors, including a belief that inflation would ease on its own, researchers concluded it was actually because forecasters weren't sure how the Fed would react.  In the wake of the Fed's initial rate increase in Mar 2022, perceptions began to shift & forecasters eventually began expecting the Fed to respond to any rise in inflation with a corresponding rate hike.

Fed's actions spoke louder than words to markets in fight against inflation, research finds

The US 10-year Treasury yield was lower, continuing a downward trend after Federal Reserve Chair Jerome Powell last week gave his strongest indication yet that rate cuts are near.  The yield on the 10-year Treasury slipped 3 basis points to 3.778%, while the 2-year Treasury yield lost 2 basis points to 3.891%. Yields & prices move in opposite directions.  1 basis point equals 0.01%.  The 10-year yield slipped by around 6 basis points on Fri & the 2-year yield pulled back almost 10 basis points.  Last week, Powell bolstered already-high expectations for a rate cut at the central bank's next meeting, saying that “the time has come for policy to adjust.”  “Inflation has declined significantly. The labor market is no longer overheated, and conditions are now less tight than those that prevailed before the pandemic,” Powell said in his hotly anticipated speech at the annual Jackson Hole symposium.  He did not, however, guarantee a cut at the Fed's Sep 18 meeting, stressing that although “the direction of travel is clear ... the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”  Traders nevertheless remain dead set on a rate cut, according to the CME Group's FedWatch Tool, putting the chance of a qtr percentage point rate cut at 63.5% & the chance of a ½-point reduction at 36.5%.

10-year Treasury yield slips after Powell boosts expectations of Fed rate cut

Stocks are coming off weekly gains, after Chair Jerome Powell made it crystal clear the Fed is ready to pivot to lowering rates in Sep.  Markets quickly moved to price in cuts totaling 1% by the end of 2024.  But with only 3 Fed meetings left in the year in Sep, Nov & Dec, & the Aug jobs report next week, traders are wondering when & whether a 0.5% cut is likely.

Markets rise as Fed signals rate cuts ahead

Dow went up 462 (above 41K), advancers over decliners an impressive 7-1 & NAZ gained 258.  The MLP index was up 2+ to the 283s & the REIT index rose 8+ to the 425s.  Junk bond funds edged slightly higher & Treasuries continued to be purchased which lowered yields.  Oil jumped 1+ to nearly 75 & gold soared 29 to 2546 on lower interest rates (more on both below).

Dow Jones Industrials 

With Federal Reserve Chair Jerome Powell all but confirming that an interest rate cut is imminent, the market's attention quickly turned to when and by how much.  Traders continued to price in a greater likelihood that the Fed will kick off what is expected to be a protracted easing campaign in Sep with a qtr percentage point, or 25 basis point, reduction.  However, the odds of something even more aggressive, like a ½-point move, grew quickly & were around a 1-in-3 chance of happening, according to pricing in the 30-day fed funds futures market as measured by the CME Group's FedWatch.  Market participants see the chance as particularly likely should the Aug jobs report, to be released Sep 6, prove a repeat of the weaker-than-expected reading in Jul.  The Fed's next meeting kicks off less than 2 weeks later, on Sep 17.  “My base-case scenario is that we are on a journey of 25 basis point cuts, probably for the next eight meetings, a couple hundred basis points cumulative,” economist Paul McCulley said.  “But if we see weaker growth, and particularly weaker jobs, then I think we could have a bit of front-loading and start the process with 50 basis point cuts.”  “I don’t think that’s the base case yet, but clearly he’s opened the door for front-loading of the easing process, just like he had front-loading of the tightening process,” added McCulley, a former managing director at Pimco & now a senior fellow at Cornell & adjunct professor at Georgetown.  Powell's much-anticipated speech at the Fed's annual symposium in Jackson Hole, Wyoming, provided clear indications that a rate cut is in the cards. “The time has come for policy to adjust,” the central bank leader said.

Markets are now wondering whether the Fed might cut by half a point in September

Cava CAVA raised its full-year outlook as its restaurants reported strong traffic, fueling better-than-expected quarterly earnings & revenue.  The Mediterranean restaurant chain reported fiscal 2nd-qtr net income of 17¢ versus 21¢ a year earlier.  Net sales climbed 35% to $233M.  Same-store sales rose 14.4%, topping estimates of 7.9%.  While many other restaurant companies have reported declines in visits as consumers pull back their spending,  CAVA traffic grew 9.5% in the qtr.  CEO & co-founder Brett Schulman credited the chain's new grilled steak option as one reason customers kept coming to its restaurants during the qtr.  Cava opened 18 net new locations during the qtr, bringing its total footprint up to 341 restaurants.  For fiscal 2024, Cava now expects same-store sales growth of 8.5 - 9.5%, up from its prior estimate of 4.5 - 6.5%.  The company is also projecting that it will open 54 to 57 new locations this year, up from its previous forecast of 50 - 54 restaurants.  CAVA also expects to report adjusted earnings before interest, taxes, depreciation & amortization of $109-114M.  Previously, it was projecting adjusted EBITDA of $100-105M for the fiscal year.  The stock jumped 20.05 (20%).

Cava earnings beat estimates as restaurant traffic climbs nearly 10%

Microsoft (MSFT), a Dow stock, will hold a conference in Sep for cybersecurity firms to discuss ways the industry can evolve following a faulty CrowdStrike (CRWD) software update that caused Ms of Windows computers to crash in Jul.  The incident sent internet-connected systems into disarray.   Airlines canceled thousands of flights, logistics companies reported package delivery delays & hospitals delayed medical appointments.  MSFT will meet with CRWD & other security companies at its campus in Redmond, Washington, on Sep 10 to discuss how to prevent similar issues in the future.  The person requested anonymity because they didn’t have approval to discuss internal matters publicly.  The exec said participants at the Windows Endpoint Security Ecosystem Summit will explore the possibility of having applications rely more on a part of Windows called user mode instead of the more privileged kernel mode.  Attendees at the Sep 10 event will also discuss the adoption of eBPF technology, which checks if programs will run without triggering system crashes & memory-safe programming languages such as Rust.  MSFT stock up 1.24.

Microsoft plans September event to discuss changes after CrowdStrike outage

Gold prices gained more than 1% as the $ & Treasury yields retreated following comments from Federal Reserve Chair Jerome Powell that signaled an interest rate cut in Sep.  Spot gold rose 1.2% to $2512 per ounce, but was off a record high of $2531 hit on Tues.  US gold futures settled 1.2% higher at $2546.  Powell said "the time has come" for the central bank to cut interest rates & that inflation was nearing the Fed's 2% target, offering an explicit endorsement of an imminent policy easing.  The dollar index fell 0.8% against its rivals, while benchmark 10-year yields also declined following Powell's speech, making gold more attractive for other currency holders.

Gold Gains Over 1% As Powell Comments Hint At September Rate Cut

West Texas Intermediate (WTI) crude closed higher, advancing for a 2nd day after Federal Reserve Chair Jerome Powell said the central bank is ready to begin cutting interest rates.  WTI crude for Oct closed up$1.82 to settle at $74.83 per barrel, while Oct Brent crude, the global benchmark, was last seen up $1.85 to $79.07.  In a speech to the central bank's annual Jackson Hole, Wyoming, conference, Powell said the central bank is ready to begin lowering interest rates from their current 23-year high as the labor market slows.  Despite today's gains, the odds prices will again test this year's highs are seen as slim because demand in China, the #1 importer, remains subdued as the country's economy stumbles.  At the same time, the risks of a wider Middle Eastern war that could threaten Persian Gulf supplies fade.  Expectations OPEC will begin returning 2.2M barrels per day of voluntary cuts to the market in the 4th qtr are also keeping a lid on prices.  41198?

WTI Crude Oil Rises as Fed Chair Confirms Lower U.S. Interest Rates are Coming

Stocks climbed today as Federal Reserve Chair Jerome Powell said the "time has come" to begin cutting interest rates, offering the clearest signal yet that the central bank is prepared to begin an easing cycle, with major implications for the economy.  Enthusiasm turned buoyant as a day of reckoning for rate-cut bets finally arrived, after a week of mounting anticipation for what Powell would reveal during his speech at Jackson Hole when he said: "The time has come for policy to adjust."  "The direction of travel is clear," Powell added, "and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks."  Dow rose 516 to a new record this week.

Markets rally after Powell says 'time has come' to cut interest rates

Dow gained 474, advancers over decliners a massive 9-1 & NAZ went up 251.  The MLP index added 1+ to the 282s & the REIT index advanced 8+ to the 425s as interest rates fell.  Junk bond funds inched higher & Treasuries saw buying which lowered yields (more below).  Oil recovered 1+ to the 74s after recent selling & gold jumped 34 to 2551 well into record territory.

Dow Jones Industrials

Federal Reserve Chair Jerome Powell laid the groundwork for interest rate cuts ahead, though he declined to provide exact indications on timing or extent.  "The time has come for policy to adjust," the central bank leader said in his much-awaited keynote address at the Fed's annual retreat in Jackson Hole, Wyoming.  "The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks."  With markets awaiting direction on where monetary policy is headed, Powell focused as much on a look back at what caused the inflation that led to an aggressive series of 13 rate hikes from Mar 2022 thru Jul 2023.  However, he did note the progress on inflation & said the Fed can now turn its focus equally to other side of its dual mandate, namely to make sure the economy stays around full employment.  “Inflation has declined significantly.  The labor market is no longer overheated, and conditions are now less tight than those that prevailed before the pandemic,” Powell said.  “Supply constraints have normalized.  And the balance of the risks to our two mandates has changed.”  He vowed that “we will do everything we can” to make sure the labor market says strong & progress on inflation continues.  The speech comes with the inflation rate consistently drifting back to the Fed's 2% target though still not there yet.  A gauge the Fed prefers to measure inflation most recently showed the rate at 2.5%, down from 3.2% a year ago & well off its peak above 7% in Jun 2022.  At the same time, the unemployment rate has slowly but consistently climbed higher, most recently at 4.3% & in an area that otherwise would trigger a time-tested indicator of a recession.  However, Powell attributed the rise in unemployment to more individuals entering the workforce & a slower pace of hiring, rather than a rise in layoffs or a general deterioration in the labor market.  “Our objective has been to restore price stability while maintaining a strong labor market, avoiding the sharp increases in unemployment that characterized earlier disinflationary episodes when inflation expectations were less well anchored,” he said.  “While the task is not complete, we have made a good deal of progress toward that outcome.”

Fed Chair Powell indicates interest rate cuts ahead: ‘The time has come for policy to adjust’

The 10-year Treasury yield fell as Federal Reserve Chair Jerome Powell signaled to rate cuts ahead at the annual Jackson Hole symposium.  The yield on the 10-year Treasury was down about 6 basis points at 3.799% & the yield on the 2-year Treasury pulled back about 7 basis points to 3.939%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  “The time has come for policy to adjust,” the central bank leader said.  “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”  The central bank chair, however, failed to provide insight into when the cuts would take place & the magnitude of the decreases.  Market participant had been looking ahead to Powell's speech as investors hunt for more insight into the central bank's policy meeting on the heels of a volatile trading month.  Earlier in the week, minutes from the Fed's Jul meeting showed that the “vast majority” of central bank officials “observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting.”  The news seemed to reassure traders pricing in a interest rate cut at the Fed's next meeting.  Traders are currently pricing in a more than 75% chance of a 25-basis-point rate cut in Sep, with about a qtr pricing in a 50-basis-point rate cut, according to the CME Group's FedWatch Tool.

10-year Treasury yields slide after Powell remarks point to Fed rate cuts

Ford's (F) profit engine for decades has been large trucks & SUVs in the US.  It might surprise investors that the automaker believes its new path to profitability for electric vehicles will first be led by smaller, more affordable vehicles.  The new plan is an “insurance policy” for the automaker to be able to expand its growingly popular hybrid models & create more affordable EVs that it believes will deliver a more capital-efficient, profitable electric vehicle business for the company & investors, according to Marin Gjaja, Ford's COO for its Model e EV unit.  “We’re quite convinced that the highest adoption rates for electric vehicles will be in the affordable segment on the lower size-end of the range,” he said.  “We have to play there in order to compete with the entrants that are coming.”  Those expected newcomers are largely Chinese automakers that have been rapidly growing from their home market to Europe & other countries.  Gjaja's comments came a day after the automaker announced updates to its EV strategy that will cost up to $1.9B.  That includes about $400M for the write-down of manufacturing assets, as well as additional expenses & cash expenditures of up to $1.5B.  Ford's new plans for North America include canceling a large, electric 3-row SUV that was already far in development, delaying production of its next-generation “T3” electric full-size pickup truck by about 18 months until late 2027, & refocusing battery production & sourcing to the US.  Instead of the 3-row SUV or large pickup, the company's first new EV is expected to be a commercial van in 2026, followed the next year by a midsized pickup & then the T3 full-size pickup.  Gjaja said the decision wasn’t taken lightly, especially the cancellation of the upcoming 3-row vehicle, which Ford CEO Jim Farley & other execs had been touting as a game changer for several years.  The commercial van comes as Ford's “Pro” commercial vehicle & fleet business, which includes vans & large Super Duty trucks, has been a standout for the company & offset Bs of $s in EV losses.  “We believe smaller, more affordable vehicles are the way to go for EV in volume. Why? Because the math is completely different than [internal combustion engine (ICE) vehicles],” Farley said.  “In ICE, a business we’ve been in for 120 years, the bigger the vehicle, the higher the margin. But it’s exactly the opposite for EVs.”  The stock rose 28¢.

Why Ford believes its $1.9 billion shift in EV strategy is the right choice for the company, investors

Stocks climbed as Powell said the "time has come" to begin cutting interest rates, offering the clearest signal yet that the central bank is prepared to begin an easing cycle, with major implications for the economy.  Spirits turned buoyant as a day of reckoning for rate-cut bets finally arrived, after a week of mounting anticipation for what Powell would reveal at Jackson Hole.  Powell said: "The time has come for policy to adjust."  "The direction of travel is clear," Powell added, "and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks."  That's exactly what investors wanted to hear!!

Markets fall as Fed's Jackson Hole symposium kicks off

Dow retreated 177 decliners over advancers about 2-1 & NAZ was off 299.  The MLP index added 1 to the 281s & the REIT index was up 1+ to the 416s.  Junk bond funds continued mixed & Treasuries had more selling in the PM which raised yields.  Oil was up about 1 to the high 72s & gold sank 28 to 2518 (more on both below).

Dow Jones Industrials 

Philadelphia Federal Reserve Pres Patrick Harker provided a strong endorsement to an interest rate cut on the way Sep.  Harker gave the most direct statement yet from a central bank official that monetary policy easing is almost a certainty when officials meeting again in less than a month.   The position comes a day after minutes from the last Fed policy meeting gave a solid indication of a cut ahead, as officials gain more confidence in where inflation is headed & look to head off any potential weakness in the labor market.  “I think it means this September we need to start a process of moving rates down,” Harker said.  Harker added that the Fed should ease “methodically and signal well in advance.”  With markets pricing in a 100% certainty of a qtr percentage point, or 25 basis point, cut, & about a 1-in-4 chance of a 50 basis point reduction, Harker said it's still a toss-up in his mind.  “Right now, I’m not in the camp of 25 or 50. I need to see a couple more weeks of data,” he noted.  The Fed has held its benchmark overnight borrowing rateat 5.25-5.50% since Jul 2023 as it tackles a lingering inflation problem.  Markets briefly rebelled after the Jul Fed meeting when officials signaled they still had not seen enough evidence to start bringing down rates.  However, since then policymakers have acknowledged that it soon will be appropriate to ease.  Harker said policy will be made independently of political concerns as the presidential election looms in the background.  “I am very proud of being at the Fed, where we are proud technocrats,” he said.  “That’s our job. Our job is to look at the data and respond appropriately. When I look at the data as a proud technocrat, it’s time to start bringing rates down.”  Harker does not get a vote this year on the rate-setting Federal Open Market Committee but still has input at meetings.  Another nonvoter, Kansas City Fed Pres Jeffrey Schmid offered a less direct take on the future of policy.  Still, he leaned toward a cut ahead.  Schmid said the rising unemployment rate as a factor in where things are going.  A severe supply-demand mismatch in the labor market had helped fuel the run in inflation, pushing wages up & driving inflation expectations.  In recent months, though, jobs indicators have cooled & the unemployment rate has climbed slowly but steadily.  “Having the labor market cool some is helping, but there’s work to do,” Schmid added.  “I really do believe you’ve got to start looking at it a little bit harder relative to where this 3.5% [unemployment] number was and where it is today in the low 4s.”  However, Schmid said he believes banks have held up well under the high-rate environment & added that he does not believe monetary policy is “over-restrictive.”

Philadelphia Fed President Harker advocates for interest rate cut in September

Mortgage rates dipped a bit this week, still holding steady around the mid-6% range while demand remains weak in the housing market.  Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate on the benchmark 30-year fixed mortgage ticked down to 6.46% this week from 6.49% last week & the average rate on a 30-year loan was 7.23% a year ago.  "Although mortgage rates have stayed relatively flat over the past couple of weeks, softer incoming economic data suggest rates will gently slope downward through the end of the year," said Sam Khater, Freddie Mac's chief economist.  "Earlier this month, rates plunged and are now lingering just under 6.5 percent, which has not been enough to motivate potential homebuyers. We expect rates likely will need to decline another percentage point to generate buyer demand."  The average rate on the 15-year fixed mortgage declined to 5.62% from 5.66% last week & 1 year ago, the rate on the 15-year fixed note averaged 6.55%.

Mortgage rates edge lower

The Food & Drug Administration (FDA) approved updated Covid vaccines from Pfizer (PFE) & Moderna (MRNA), putting the new shots on track to reach most Americans in the coming days amid a summer surge of the virus.  The jabs target a strain called KP.2, a descendant of the highly contagious omicron subvariant JN.1 that began circulating widely in the US earlier this year.  KP.2 was the dominant Covid strain in May, but now only accounts for roughly 3% of all US cases as of Sat, according to the latest Centers for Disease Control & Prevention (CDC) data.  Still, PFE & MRNA have said their KP.2 vaccines can produce stronger immune responses against other circulating subvariants of JN.1, such as KP.3 & LB.1, than last year's round of shots targeting the omicron strain XBB.1.5 can.  “Given waning immunity of the population from previous exposure to the virus and from prior vaccination, we strongly encourage those who are eligible to consider receiving an updated COVID-19 vaccine to provide better protection against currently circulating variants,” Dr Peter Marks, director of the FDA's Center for Biologics Evaluation & Research, said.  PFE will begin shipping its new shot immediately & expects it to be available in pharmacies, hospitals & clinics across the US “beginning in the coming days,” the company said & MRNA expects its shot to be available in the coming days.  The earlier arrival of updated vaccines could offer some reassurance to Americans as the nation sees a relatively large spike in the virus this summer.  A “high” or “very high” level of Covid is being detected in wastewater in almost every state, according to CDC data.  Wastewater monitoring provides a glimpse of how widespread the virus is in the US as other forms of testing have fallen off.  PFE stock fell 24¢ & MRNA stock fell 5.61. 

FDA approves updated Pfizer, Moderna Covid vaccines as virus surges; shots to be available within days

Gold settled lower, with strength in the $ & Treasury yields contributing to the precious metal's largest 1-day decline in a month, just 2 days after prices marked a fresh record high.  The decline in gold prices comes ahead of tomorrow's highly anticipated speech by Federal Reserve Chair Jerome Powell at the Jackson Hole Economic Symposium in Wyoming.  Past years have seen central-bank officials make markets-moving pronouncements at the confab.  Powell's speech may offer some guidance on the size of an expected US interest-rate cut in Sep.  Today, Dec gold declined by $30 (1.2%) to settle at $2516 an ounce after trading as low as $2506.  Prices based on the most active contract, settled at their lowest since Aug 15 & marked their biggest 1-day percentage loss since Jul 25.

Gold Suffers Biggest Daily Drop of Month as Traders Brace for Powell Speech at Jackson Hole

West Texas Intermediate (WTI) crude oil closed higher, rising off the lowest since Jan following 4 losing sessions that came on weak Chinese demand & concerns over the health of the US economy.  WTI crude for Oct closed up $1.08 to settle at $73.01 per barrel after falling yesterday to the lowest since Jan 8, while Oct Brent crude, the global benchmark, was last seen up $1.43 to $77.48.  Oil prices have dropped 8.4% over the past month on weak demand from China & low interest from institutional investors.  While a 4.6M barrel drop in US inventories reported yesterday by the Energy Information Administration showed US demand remains healthy, traders focused instead on a sizable downward revision to US employment growth, showing 818K fewer jobs than expected were added in the year ending on Mar 31.

WTI Crude Oil Rises Off the Lowest Since January as Weak Demand Remains in Focus

The Fed's Jackson Hole symposium kicked off today with the market on high alert for any shift in tone from the policymakers when Powell speaks at the event tomorrow.  Minutes from the Fed's last meeting showed several officials were open to a Jul rate cut, signaling a pivot is likely in next month's policy decision.  Mounting hopes for lower rates have already helped markets recoup losses from an early Aug rout.  Stocks were sliding lower for the entire session.  In the past, Powell's speeches tend to get a good reception unless there is a negative tone which brings on selling.  Hope for the best.