Markets climb after worries about a recession recede

Dow shot up 683 (session highs), advancers over decliners about 4-1 & NAZ advanced 464.  The MLP index added 3+ to 279 & the REIT index went up 3+ to the 408s.  Junk bond funds continued mixed & Treasuries continued to see selling, taking yields a little higher.  Oil went up about 1 to the low 76s & gold gained 31 to 2463, near record territory (more on both below).

Dow Jones Industrials 

Mortgage rates fell sharply this week to the lowest level in more than a year, igniting a boost in demand in the housing market.  Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate on the benchmark 30-year fixed mortgage dropped to 6.47% this week from 6.73% last week.  The average rate on a 30-year loan was 6.96% a year ago.  "Mortgage rates plunged this week to their lowest level in over a year following the likely overreaction to a less than favorable employment report and financial market turbulence for an economy that remains on solid footing," said Sam Khater, Freddie Mac's chief economist.  "The decline in mortgage rates does increase prospective homebuyers’ purchasing power and should begin to pique their interest in making a move."  The average rate on the 15-year fixed mortgage fell to 5.63% from 5.99% last week. One year ago, the rate on the 15-year fixed note averaged 6.34%. 

Mortgage rates drop to lowest level in over a year as Americans look to pounce

JPMorgan (JPM) upped the likelihood it sees for the US economy entering a recession this year, the latest sign of concern around the country's financial health following the market turbulence this week.  The bank raised its probability for a US or global recession to 35% by year end, chief global economist Bruce Kasman said.  That's up from the 25% figure shared in the bank's midyear outlook.  Meanwhile, JPM kept its odds for a recessionary period by the 2nd ½ of 2025 at 45%.  The move comes as investors have questioned in recent days if an economic slowdown is imminent after last week's disappointing jobs report.  But traders got better news on the labor market front today, with the volume of weekly jobless claims coming in lower than expected.  Kasman pointed to a “material positive shift” in the risk profile for US inflation, catalyzed in part by easing pressure on the labor market as demand cools.  He also noted wage inflation is slowing down in a way that’s unlike other developed economies.  Now, he said America's unit labor costs have “realigned to a level broadly consistent” with the Federal Reserve's inflation target.  Given this change, the economist decreased the likelihood of scenarios with higher-for-longer interest rates.  While the Fed held interest rates steady at its policy meeting last week, Fed funds futures are pricing in a 100% chance of a cut at the Sep gathering, according to CME's FedWatch tool.  Despite raising his odds, Kasman said investors should not assume all signs point to a recession.  In fact, Kasman described his increase to near-term recession risk as modest.  “More fundamentally, the vulnerabilities normally associated with a recession break—sustained profit margin compression or credit market stress, and energy or financial market shocks—are notably absent,” Kasman added.

JPMorgan raises 2024 recession odds to 35%

E-commerce giant Amazon's (AMZN) multibillion-$ investment in the US artificial intelligence firm Anthropic is formally being investigated by a UK competition regulator.  The Competition & Markets Authority (CMA) said that it has begun a “Phase 1” investigation into AMZN's investment & partnership with Anthropic to assess whether the deal has resulted in a relevant merger situation that may harm competition in the UK.  Following initial scrutiny into the Amazon-Anthropic partnership, the CMA now has “sufficient information” in relation to the tie-up to begin a formal probe, the regulator said.  The CMA now has up to 40 working days to decide whether the transaction could harm competition & should therefore be scrutinized further in an in-depth “Phase 2” investigation.  AMZN completed in Mar a $4B investment in Anthropic.  The deal consisted of an initial $1.25B equity stake in Sep, followed by a further $2.75B transaction finalized earlier this year.  “By investing in Anthropic, Amazon, along with other companies, is helping Anthropic expand choice and competition in this important technology. Amazon holds no board seat nor decision-making power at Anthropic, and Anthropic is free to work with any other provider (and indeed has multiple partners),” the spokesperson said.  AMZN's spokesperson added that the company will continue to make Anthropic’s models available to customers via Bedrock.  The stock went up 2.53.

Amazon’s $4 billion investment in AI firm Anthropic faces UK merger investigation

Gold prices rose more than 1%, supported by firm safe-haven demand & growing expectations for a sizeable interest rate cut from the Federal Reserve in Sep.  Spot gold rose 1.8% to $2423 per ounce, snapping a 5-session losing streak & US gold futures settled 1.3% higher at $2463.  On the geopolitical front, the killing of senior members of militant groups Hamas & Hezbollah last week raised the possibility of retaliatory strikes by Iran on Israel.  Bullion is considered a hedge against geopolitical & economic uncertainties & tends to thrive in a low-interest-rate environment.  Many brokerage firms have forecast a 50-basis-point interest rate cut by the Fed in Sep after last week's US jobs data.  Market see a 72% chance of 50 basis points cut in Sep, up from 70% on Mon, according to the CME FedWatch Tool, with an additional cut anticipated in Dec.  US data showed there were 233K initial jobless claims last week, below the 240K expected & down from 250K the week before, easing worries of a slowdown in the world's largest economy.  Gold prices fell as much as 3% on Mon, caught in a global sell-off driven by fears of a US recession.

Gold Rises More Than 1% On Safe-Haven Demand, Fed Rate-Cut Optimism

Oil prices rose, as better-than-feared US labor data eased jitters that the world's largest economy is headed for recession.  Brent oil futures was 1%% higher at $79.08 a barrel, while West Texas Intermediate crude futures added 1.2% to $76.09 a barrel.  Data released earlier today showed the number of Americans filing new applications for unemployment benefits came in at 233K for the latest week, below the 241K expected & a reduction from the revised 250K the prior week, which was an 11-month high.  Both contracts were nursing sharp losses in recent sessions amid concerns that a potential US recession will batter oil demand. 

Oil Prices Settle Higher As Easing US Recession Jitters Boost Demand Sentiment

Dow started the day strong & the bulls kept coming all day. .Earnings & margins have been have been healthy.  Fears of a recession have receded.  However the nagging strength in safe haven gold has caused some investors to be skeptical.  With wild gyrations in the stock market recently, gold also remains essentially at record levels.