Dow climbed 236 (near session highs), advancers over decliners about 3-1 & NAZ was up 245. The MLP index was 1 higher to the 284s & the REIT index rose 2+ to the 413s. Junk bond funds fluctuated & Treasuries continued to see modest buying which lowered yields. Oil dropped 2+ to the 74s & gold added 4 to 2542 (more on both below).
Dow Jones Industrials
In another sign of cracks forming in the US labor market, a New York Federal Reserve survey showed a slide in people reporting they are employed, a surge in those looking for work & growing dissatisfaction with pay. The thrice-yearly measure of labor activity, confidence & satisfaction reflected growing concern in Jul about job security & an increase in those expecting to work past typical retirement age. Workers are still looking for higher starting salaries but are getting lower offers. The results come with the Fed policymakers watching the developments closely for clues about where things are headed for the US economy. Among the findings was that, of those who were employed at the time of the last survey in Mar, 88% still had jobs, the lowest in data that goes back to 2014. Similarly, those who expected to become unemployed rose to 4.4%, a 0.5 percentage point increase from a year ago & the highest in the survey's history. Moreover, the level of those searching for a new job in the previous 4 weeks popped to 28.4%, up 9 percentage points from a year ago & another historic high going back to 2014. On wages, satisfaction with current compensation dropped to 56.7%, down more than 3 percentage points from the same period in 2023. Satisfaction with benefits tumbled to 56.3%, off more than 8 points from a year ago, while satisfaction with opportunities for promotion slid to 44.2%, down from 53.5% last year, & was most pronounced among women, those without a college degree & respondents with household incomes less than $60K. The typical wage offering for full-time jobs in the past 4 months declined slightly to $69K while the average “reservation wage,” or the minimum level workers would accept for a new job rose to $81K, up about $2500 from a year ago but fractionally below the record high in the last survey. Finally, the expected likelihood of working past age 62 nudged up to 48.3% of respondents & increased to 34.2% of those saying they expect to work past 67, an increase of more than 2 percentage points.
Fed survey shows lows in employment, worries about finding work and dissatisfaction with pay
The Federal Reserve will cut interest rates by 25 basis points at each of the remaining 3 meetings of 2024, 1 more reduction than predicted last month, according to a slim majority of economists polled who said a recession is unlikely. The change in Fed rate cut calls follows a weaker-than-expected Jul US jobs report, which encouraged interest rate futures traders to price in as much as 120 basis points of reductions in 2024 earlier this month. That pricing has reduced to roughly 100 now. Investors also said a violent, but brief market sell-off also was a driver of aggressive rate cut calls, related to the unwinding of large leveraged positions as a result of a sudden, sharp rise in the Japanese ¥. Although some Fed officials have hinted rate cuts are coming, most economists in the poll were not expecting a rapid series of rate cuts. Recent data, including last week's strong retail sales report, suggests the economy is performing relatively well even as inflation recedes. The central bank will cut the federal funds rate by 25 basis points in Sep, Nov & Dec taking the range to 4.50%-4.75% by end-2024, according to 54% of those polled. Markets, which were earlier betting on a ½-percentage-point cut in Sep, are currently pricing around 70% probability of a qtr percentage point cut next month. 34 of those polled, predicted 2 rate cuts this year & 1 respondent forecast only 1 rate reduction. 11 economists of the 101 expected the Fed to cut rates by 100 basis points or more.
Fed is predicted to deliver three quarter-point rate cuts this year
California Gov Gavin Newsom has signed 10 new bills into law that aim to combat retail crime in the state. The package includes new laws that crack down on shoplifting, theft from a vehicle, organized theft & online marketplaces where these stolen goods are sometimes resold. The new laws come after retailers have called on both local & federal govs to do more to combat retail theft, citing it as a growing challenge that’s impacted profits, customers & staff. 1 of the bills in the package establishes tougher penalties for middlemen in organized retail crime rings. That bill establishes additional prison time & fines for the sale, exchange or return of stolen property — the bread & butter of retail resale crime rings. Before to the law's passage, those charged with being involved in organized retail crime rings could face up to 3 years in prison. Critics said that sentence & penalty were not enough of a deterrence. Newsom said the law was designed to go after middlemen. Theft & organized retail crime rings like that of Mack's “California Girls” have been cited by retailers as a reason for lower profits, difficulty in hiring & retaining staff, & the degradation of the in-store experience. Others have countered these claims, saying that retailers are overstating the impact of theft & downplaying the operational issues behind lower profits. Commercial burglary & commercial robbery rates in California have been steadily rising over the past few years, according to data from the Public Policy Institute of California. Shoplifting, although still well below pre-pandemic levels, is seeing an increase as well. Since Jan, the California Highway Patrol's Organized Retail Crime Task Force has made 884 arrests & recovered more than 250K stolen items valued collectively at over $7.2M, according to the press release announcing the new legislation.
California cracks down on organized retail crime with new package of laws
Gold was subdued after piercing
the $2500 ceiling in the previous session, as investors booked profits
from the record run & positioned for more cues from the Federal
Reserve & developments in the Middle East. Spot gold was down 0.2% at $2501 per
ounce, shy of the record high of
$2509 hit on Fri & US gold futures settled 0.1% higher at
$2541. The focus will turn to minutes from the
Fed's last policy meeting this Wed & Chair Jerome Powell's speech
at an economic symposium in Jackson Hole on Fri. One analyst said
gold could rise further in the coming months, likely reaching $2600/oz
by end-year, adding all eyes will be on any indication of an imminent
rate cut from Powell.
Gold Subdued After Record Run as Traders Await Cues From Fed
Oil fell the most in more than 2 weeks, with the lackluster demand outlook for the world's 2 largest economies outweighing geopolitical tensions in the Middle East. West Texas Intermediate dropped 3% to settle near $74 a barrel. Prices have dropped amid signs of softness in China, the biggest oil importer, as economic growth has slowed & the decarbonization of the transportation sector has eroded some fuel demand. The positive correlation between oil & equity indices broke down which is underlining the bears' dominance & selling is intensifying as crude prices approach key technical levels. Meanwhile, traders are awaiting a potential retaliatory attack by Iran on Israel. Ceasefire efforts are being hampered by fresh disagreements between Israel & Hamas, & Iran-backed Palestinian groups claimed responsibility for what they said was a "suicide mission" in Tel Aviv yesterday. Elsewhere, production at Libya's Waha oil field has returned to normal levels of about 300K barrels a day after pipeline maintenance was completed earlier than expected. Its Sharara field, however, remains offline & its central bank has been pulled into a dispute between the OPEC nation's rival govs. WTI for Sep dropped $2.28 to settle at $74.37 & Brent for Oct settlement fell $2.02 to settle at $77.66.
Oil Slumps as China Demand Fears Ignite ‘Bearish Dominance'
Stocks consolidated last week's strong gains as a measure of calm returns to a market previously whipsawed by worries about a potential recession. Last week's rally recouped the losses stacked up in an early Aug sell-off as investors fretted about cracks in the economy. Those concerns that have since been eased by improving economic data.
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