Dow recouped 294 (450 off session highs), advancers over decliners 4-1 & NAZ rebounded 166. The MLP index was up 6+ to the 279s & the REIT index soared 8+ to the 407s. Junk bond funds were in demand & Treasuries saw heavy selling which raised yields sharply. Oil was higher in the 73s following recent weakness & gold pulled back 8 to 2435 (more on both below).
Dow Jones Industrials
Americans are increasingly turning to their credit cards to cover everyday expenses, with debt hitting a new record high at the end of Jun, according to a New York Federal Reserve report. In the 3-month period from Apr - Jun, total credit card debt rose to $1.14T, an increase of $27B (about 1%) from the previous qtr, according to the report. It marks the highest level on record in Fed data dating back to 2003. Credit card delinquencies continued to rise from their pre-pandemic levels in the 2nd qtr. As of Jun, about 9.1% of outstanding credit card debt was in some stage of delinquency, up from 8.5% the previous qtr. The rise in credit card usage & debt is particularly concerning because interest rates are astronomically high right now. The average credit card annual percentage rate (APR) hit a new record of 20.73% last week, according to a Bankrate database that goes back to 1985. The previous record was 19% in 1991. If people are carrying debt to compensate for steeper prices, they could end up paying more for items in the long run. For instance, if someone owes $5K in debt, which the average American does, current APR levels would mean it would take about 279 months & $8124 in interest to pay off the debt making the minimum payments. As of Jun, about 3.2% of total debt was in some stage of delinquency, unchanged from the previous qtr. About 136K consumers had a bankruptcy notation added to their credit reports, an increase from the previous qtr. Despite the uptick, researchers said new bankruptcies remain at low levels. The increase in the credit card category helped to push total household debt to a staggering $17.8T, a $109B (0.6%) increase from the end of Mar. Auto loan balances also contributed to the uptick, climbing by $10B over the course of the 4th qtr to $1.62T. Mortgage balances, meanwhile, jumped by $77B to $12.5T. Student loan debt fell by $10B; missed federal student loan payments will not be reported to credit bureaus until the end of 2024. The rise in balances comes in the wake of the Federal Reserve's aggressive interest rate-hike campaign designed to crush stubborn inflation & cool the economy. Although inflation has cooled considerably in recent months, it remains up 3% compared with the same time 1 year ago, according to the most recent Labor Dept data.
Americans owe a record $1.14T in credit card debt as inflation squeezes
3 years ago, JPMorgan Chase (JPM), a Dow stock, became the first bank with a branch in all 48 contiguous states. Now,
the firm is expanding, with the aim of reaching more Americans in
smaller cities & towns. JPM recently announced a new goal within its multibillion-dollar branch expansion plan
that ensures coverage is within an “accessible drive time” for ½ the
population in the lower 48 states. That requires new locations in areas
that are less densely populated, a focus for CEO Jamie
Dimon as he embarks on his 14th annual bus tour. His first stop is in Iowa, where the bank plans to open 25 more branches by 2030. “From
promoting community development to helping small businesses and
teaching financial management skills and tools, we strive to extend the
full force of the firm to all of the communities we serve,” Dimon said. He will also travel across 6 states, the
bank has plans to open more than 125 new branches, according to Jennifer
Roberts, CEO of Chase Consumer Banking. “We’re still at very low
single-digit branch share, and we know that in order for us to really
optimize our investment in these communities, we need to be at a higher
branch share,” Roberts said. Roberts
said the goal is to reach “optimal branch share,” which in some newer
markets amounts to “more than double” current levels. At
the bank's investor day in May, Roberts said that the firm was
targeting 15% deposit share & that extending the reach of bank
branches is a key part of that strategy. She said 80 of the firm's 220
basis points of deposit-share gain in 2019 - 2023 were from
branches less than a decade old. In other words, almost 40% of those
deposit share gains can be linked to investments in new physical
branches. In expanding its brick-&-mortar footprint, JPM
is bucking the broader banking industry trend of shuttering branches. Higher-for-longer interest rates have created industrywide headwinds due
to funding costs & banks have opted to reduce their branch footprint
to offset some of the macro pressures. The stock gained 5.35.
JPMorgan Chase is opening more small-town branches in middle America
Disney (DIS), a Dow stock, is raising prices on its streaming platforms. Starting
mid-Oct, most plans for Disney+, Hulu and ESPN+ will cost $1-2
more per month. The most expensive
plans for Hulu, which include live TV, will cost $6 more per month. Disney+
basic & premium will be priced at $9.99 & $15.99, respectively. Hulu with ads will cost $9.99 monthly, while Hulu without adds will cost
$18.99 per month. ESPN+, which features ads, will cost $11.99 per
month. The price hikes come as DIS continues to push its customers toward bundles to get a bigger bang for their buck. For
some time, DIS has offered a bundle of its own services, either Hulu & Disney+, or the 2 streaming services plus ESPN+. The existing
bundle of Disney+ & Hulu, with ads, will also get a price hike this
fall, up $1 to $10.99 per month. The same bundle without ads won't see
any price increase from the current rate of $19.99 per month. DIS also aims to entice subscribers with ABC News Live & a
playlist featuring preschool content, available to all subscribers
starting Sep 4. The company plans to
introduce four more curated playlists for premium subscribers. “Playlists
are the latest example of how we’re providing the best value and
experience for our subscribers every time they open Disney+,” Alisa
Bowen, pres of the streaming platform, said. The stock went up 2.18.
Disney raises streaming prices for Hulu, Disney+ and ESPN+
Gold traded lower for a 2nd day as the $ & treasury yields rose following a sharp drop yesterday. Gold for Dec was last seen down $13 to $2431 per ounce. The drop follows yesterday's market turmoil caused by recession worries as weak US jobs data on Fri & a surprise hike in Japanese interest rates sent investors scurrying to the safe haven of gov bonds & away from equities & commodities. The $ rose off a 5-month low touched yesterday, with the ICE dollar index last seen up 0.31 to 102.99. Treasury yields rose, bearish for gold since it pays no interest. The 2-year note was last seen up 7.9 basis points to 4.016%, the lowest since Sep 2022, while the 10-year note was last seen paying 3.908%, up 11 basis points.
Gold Moves Lower as the Dollar and Treasury Yields Rise Following Monday Market Turmoil
West Texas Intermediate (WTI) crude oil closed with its first gain in 5 sessions, rebounding from the lowest in more than 6 months as markets calmed following day-prior market turmoil. WTI crude oil for Sep closed up 26¢ to $73.20 per barrel. Oct Brent crude, the global benchmark, was last seen up 35¢ to $76.65. Oil has reached the lowest since early Feb following Fri's weak US jobs report raised worries the Federal Reserve erred in delaying interest-rate cuts, slowing the economy amid already weak demand from China, the #1 importer. Stock & commodity markets dropped sharply following the report. The shutdown of Libya's 270K barrel per day Sharara oil field is offering some support for prices. Employees at the field were order to shut down production on Sat by 1 of the country's 2 competing govs.
WTI Crude Oil Rebounds From a Six-Month Low as Markets Calm
Stocks had a strong rebound today with a little profit taking in the last hour of trading. The Volatility Index (VIX) fell to the 25s (still high) from the 38s last seen in the wild days for financial stocks in 2008. Excitable investors are calling for an inter-meeting rate cut, but that would be hard to justify even with recent volatility. The stock market will be react from supply & demand by investors. Rate cuts can wait for the Sep meeting.
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