Markets rally with jumbo Fed cuts back on the table

Dow went up 297, advancers over decliners 5-1 & NAZ gained 114.  The MLP index was flattish in the 285s & the REIT index added 2+ to close over the 441s.  Junk bond funds inched higher & Treasuries had modest buying which reduced yields.  Oil was even at 69 & gold jumped 29 to 2610 for another record high (more on both below).

Dow Jones Industrials 

Boeing (BA), a Dow stock, CFO Brian West said the labor strike that began just after midnight today will hurt aircraft deliveries & “jeopardize” the company's recovery, hours after factory workers overwhelmingly rejected a new labor contract & walked off the job.  West said the financial impact of the strike will depend on how long it lasts, but that it will affect the company's production of its bestselling planes, including its cash cow bestseller, the 737 Max, which is produced in Renton, Washington.  “The strike will impact production and deliveries and our operations and will jeopardize our recovery,” West said.  “So our immediate focus is to the laser-like focus on actions to conserve cash, and we will.”  He said BA's priority is to get back to the bargaining table & “reach an agreement that’s good for our people, their families, our community.”  West declined to say whether the company could meet a rate of producing 38 737 Max planes per month by the end of the year.  Jefferies aerospace analyst Sheila Kahyaoglu had previously estimated that a 30-day strike could be a $1.5B hit for BA.  West said BA's immediate focus would be “on actions to conserve cash” & added that new CEO Kelly Ortberg would be working to restore relationships with the union.  The stock fell 5.94.

Boeing warns strike will 'jeopardize' recovery, hurt aircraft production

McDonald’s (MCD), a Dow stock & Dividend Aristocrat, will extend its $5 value meal into Dec in most US markets as it looks to win back lower-income consumers.  Franchisees have been voting on extending the value meal & roughly 80% of local markets have opted to extend the deal into Dec.  Votes on extensions are ongoing, so additional locations may be added in the weeks to come.  The value meal offers a McDouble or McChicken sandwich, small fries, 4-piece chicken nuggets & a small soft drink for $5.  Owners will also be offering local promotions in the weeks & months to come, in addition to the value bundle, the company said.  Deals will also be available in MCD's app.  “Together with our franchisees, we’re committed to keeping our prices as affordable as possible, which is why we’re doubling down with even more ways to save,” US Pres Joe Erlinger said about the meal's extension into Dec.  After MCD's posted declining 2nd-qtr same-store sales in Jul, execs told restaurant operators & analysts the company would focus on how to recapture consumers with deals, as they pushed for an extension of the $5 value meal.  The offer ran thru the end of Aug, after 93% of restaurants had agreed to keep it on the menu following its initial 4-week run in Jun & Jul.  The $5 meal trial performed well among low-income consumers & sentiment around the company's value had started to improve, Erlinger added.  The stock rose 3.45.

McDonald’s to extend $5 value meal offer into December in most U.S. markets

Mortgage rates are falling, but that doesn't guarantee homes will be more affordable in 2025.  The average 30-year fixed mortgage rate dropped to 6.2% yesterday, down from a peak of 7.79% in May.  For many buyers, that means saving hundreds on mortgage payments.  But those savings are bringing buyers back into the market.  Existing home sales increased 1.3% in Jul, after 5 months of declines, per National Association of Realtors (NAR) data.  With more buyers competing for a limited number of homes, prices are likely to rise.  While lower mortgage rates help out buyers, the larger force at play in the housing market is supply.  A longstanding lack of homes, at least 4M, according to NAR's most recent estimate, means the supply of homes can't keep up with rising demand, pushing prices higher.  “In essence, affordability improves temporarily with lower rates, but the competition for scarce housing stock often offsets those savings, especially in markets with high desirability that are known to have limited supply like New York,” says Maggie Kent, a real estate agent at CORE & sales at Eastlight Condominiums in New York.  Existing home sales were near historic lows for most of the summer, as rising mortgage rates both pushed buyers out of the market and discouraged homeowners from selling, since many are holding onto their lower-rate loans.  Roughly 86% of existing mortgages have rates of 6% or less, making it tough for homeowners to justify moving & taking on a new mortgage with a higher rate.  “If mortgage rates drop below 6%, it’s likely to increase demand for homes, which could push prices higher,” in the next year, said Kent.  She says we could see a “modest” median home price increase of 3% or 4%.  Trade associations & financial firms predict mortgage rates will be in the high 5% range for 2025.  While the rates are most closely aligned with 10-year Treasury yields, they're expected to fall following anticipated Fed rate cuts starting this month.

Mortgage rates are dropping, but homes aren’t expected to get cheaper

Gold prices powered higher, beating record levels, as a boost in bullish momentum fueled by optimism that the Federal Reserve is on the brink of trimming interest rates was catalyzed by fund inflows & a drop in the $.  Spot gold was trading at record levels, up 0.9% at $2582 per ounce & US gold futures rallied 1.2% to $2610.  Gold market bulls are locking in bullion prices surging to fresh records, with a milestone of $3000 per ounce coming into focus, fired up by monetary easing by major central banks & a tight US presidential election race.  Markets fully price a rate cut next week, with a 57% chance of 25-basis-point US rate cut & a 43% chance of a 50-bps cut, the CME FedWatch tool showed, the Fed's first rate cut since 2020

Gold skyrockets as stars align for Fed rate cuts

West Texas Intermediate (WTI) crude oil closed lower, even with supply tight as Hurricane Francine shut in 42% of Gulf of Mexico production.  WTI crude for Oct closed down 32¢ to settle at $68.65 per barrel, while Nov Brent crude, the global benchmark, was last seen down 35¢ to $71.72.  Prices have continued to rebound from 3-year lows touched Tues on weak demand from China.  However following Hurricane Francine's passage thru the Gulf of Mexico 732K barrels per day of supply remain shut in, according the the US offshore regulator.

WTI Crude Closes with a Loss Even as Supply Remains Tight Following Hurricane Francine

After rising in the first hour of trading, Dow remained flattish for the rest of the session.  For the week it rose 1048.  Traders can already taste a rate cut in next week.  At the same time gold was up 83 this week, settling over $2600.  All markets can be expected to remain turbulent in Sep.