Markets edge higher on a surprisingly resilient US economy

Dow was up 40, advancers barely ahead of decliners & NAZ jumped 203.  The MLP index declined about 3 to the 286s & the REIT index slid back 1+ to the 423s.  Junk bond funds remained mixed & Treasuries saw limited selling which lifted yields slightly (more below).  Oil gave back almost 4 the 73s (more below) & gold sank 36 to 2629 on talk of Lebanon-Israel ceasefire.

Dow Jones Industrials

In the last year, credit card debt spiked to a record $1.14T.  But recent signs show consumers may now be pulling back.  Revolving debt, which mostly includes credit card balances, fell 1.2% in Aug, compared to a year earlier, according to the Federal Reserve's G.19 consumer credit report.  Nonrevolving debt, such as auto loans & student loans, rose 3.3%.  After a prolonged period of high interest rates rates, spending habits are adjusting, according to Ted Rossman, Bankrate's senior industry analyst.  "Consumers have been in a pretty frugal mood lately," he said.  Credit cards are also one of the most expensive ways to borrow money.  The average credit card currently charges more than 20%, near an all-time high.  “The big fork in the road is whether or not you carry a balance,” Rossman continued.  Cardholders who pay their bill in full every month reap the benefits of cash back & travel rewards without paying interest.  Cardholders carrying debt from month to month put themselves at risk of getting trapped in an expensive debt cycle, he added.  “Consumer spending is good for the economy, but it’s not good for your personal finances if you’re carrying credit card debt and paying a hefty interest rate,” Rossman said.  However, it may be too soon to say whether Aug's contraction reflects a real shift in consumer behavior, said Matt Schulz, LendingTree's chief credit analyst.  “It is far more likely that is just a blip.”  Even though spending has moderated this year, “it isn’t a huge decrease and I don’t think there’s really any reason to think that this is the beginning of a trend,” he added.

Credit card spending growth is slowing — ‘consumers have been in a pretty frugal mood,’ expert says

PepsiCo (PEP), a Dividend Aristocrat, lowered its full-year outlook for organic revenue after its 2nd straight qtr of weaker-than-expected sales.  The repercussions of the Quaker Foods North America recalls, weakening demand in the US & business disruptions in some intel markets weighed on the company's performance in the qtr, CEO Ramon Laguarta said.  For 2024, Pepsi now expects a low-single-digit rise in organic revenue, down from its prior outlook of 4% growth.  The company reiterated its forecast for an increase of at least 8% for its core constant currency EPS.  3rd-qtr EPS was $2.13, down from $2.24 a year earlier.  Excluding items, EPS was $2.31.  Net sales fell 0.6% to $23.3B.  Organic revenue, which strips out acquisitions, divestitures & currency changes, rose 1.3% in the qtr.  Demand for its snacks & drinks dropped this qtr.  The company reported that volume for both its food & beverage divisions declined 2%.  Last quarter, execs said shoppers across all income levels are changing their behavior.  In particular, weak demand in North America weighed on overall volume.  Shoppers in the US have grown more cautious, snacking less & making fewer purchases at convenience stores.  And Mexican sales slowed, which Laguarta attributed in part to the country's election in Jun.  The stock rose 2.19.

PepsiCo trims revenue outlook as North American snacking, key international markets lag

Crude oil futures fell more than 4% as the rally spurred by heightened geopolitical risk paused while the market waits for Israel to strike back against Iran.  Oil prices had surged about 13% thru yesterday's close since Iran fired roughly 180 ballistic missiles at Israel last week, raising fears that Israel might retaliate by hitting Iran's crude industry.  Pres Biden, however, has publicly discouraged Israel from hitting Iran's oil infrastructure.  Israel will likely hit military & intelligence sites in Iran first.  West Texas Intermediate Nov contract was $73.52 per barrel, down $3.62 (4.7%) & YTD US. crude has gained more than 2%.  Brent Dec contract: $77.28 per barrel was down $3.65 (4.5%) & YTD, the global benchmark is little changed.  The market was also disappointed that Chinese officials did not announce any new stimulus plans at a press briefing today.  Prior to the recent escalation in the Middle East, the market was swept by bearish sentiment on soft demand in China, the world's largest crude importer & worries that oil supplies will exceed demand in 2025.  In early Sep, oil prices hit their lowest level since Dec 2021.  “After yesterday’s surge, oil prices are pulling back a bit, partially due to the fact that the Chinese government did not add any new stimulus to the system,” Phil Flynn, senior analyst at the Price Futures Group, said.

Crude oil futures sell off after surging on Middle East war risk

US growth data is once again surprising to the upside.  Escalating fears of a "hard landing," where the Fed's restrictive interest rates send the economy into a tailspin, have quickly moved to discussion about a "no landing" where the economy keeps growing & inflation risks once again emerge.  On balance, remain investors optimistic.