Markets rebound as oil prices ease and chinese stock rally ends

Dow went up 126 (near session highs), advancers modestly ahead of decliners & NAZ gained 270.  The MLP index fell 3+ to 259 & the REIT index eases up to the 425s.  Junk bond fund slid lower & Treasuries had a little selling which brought slightly higher yields.  Oil dropped 3+ to the 73s & gold plummeted 31 to 2634 (more on both below).

Dow Jones Industrials 

Hurricane Milton's once-in-a-century potential could cause damage of more than $50B, with the potential to leave behind devastation approaching $175B  or more in a worst-case scenario, according to analysts.  That would be on top of the carnage already left behind by Hurricane Helene, posing a potential record-breaking path of wreckage.  “While too early to make insured loss estimates, a major hurricane impact in one of Florida’s most heavily populated regions could result in mid-double-digit billion dollar loss,” Jefferies equity analyst Yaron Kinar said.  “A 1-in-100 year event is estimated by some to result in $175 [billion] in losses for landfall in the Tampa region, and $70 [billion] in losses in the [Fort] Myers region.”  The extent of the potential is hard to pin down & will depend on timing & location, with a landfall closer to Fort Myers being less costly.  For a historical comparison, analysts need only to look back 2 years, when Hurricane Ian hit near the Fort Myers area as a Category 4 storm & left behind more than $50B in losses.  Ian was considered a 1-in-20-year event.  “Should Milton’s path through the more developed Tampa region hold, potential losses could be greater,”  Kinar said.  Milton is currently at Category 4 as well, though it could weaken by the time its full force is felt.  Wells Fargo noted that the “market seems to be factoring in a loss of over $50 billion (greater than Ian) at this point.”  The firm set a wide range for potential damage, from $10-100B. The region already has been rocked, Helene barreled through the region 12 days ago, & left behind devastation that Moody's estimated at $11B.  In addition to the property damage, Moody’s figures that the National Flood Insurance Program likely will see losses approaching $2B.  The firm's analysts have not yet estimated potential damage from Milton.  “Hurricane Helene is by far the most impactful event of the current 2024 hurricane season thus far, though this may quickly change with Major Hurricane Milton due to impact Florida in the coming days,” said Mohsen Rahnama, chief risk modeling officer at Moody's.  While the danger & damage to the region are expected to be enormous, the storm does not pose the same danger to adjoining states that Helene pummeled.

Milton could cause $175B in damage, according to early estimates

Boeing (BA). a Dow stock, delivered 33 airplanes in Sep, 6 more than during the same period a year earlier, as the company & its customers keep an eye on the impact of a machinist strike, now in its 4th week.  Thru Sep, BA has handed over 291 aircraft, well below the 371 it had delivered in the first 9 months of 2023.  Rival Airbus has delivered 447 airplanes this year thru Aug,  Last month' s deliveries were led by 27 of BA's bestselling 737 Max aircraft.  Deliveries are key to BA.  It's already burned thru more than $8B this year since customers pay the bulk of the price when they receive the airplane.  The aircraft are produced in Renton, Washington, 1 of the factories where machinists walked off the job on Sep 13 after workers overwhelmingly voted down a tentative agreement the company had reached with their union.  The 2 sides are back at the negotiating table this week, though the union dismissed a sweetened offer from BA last month.  Sep deliveries also included 4 787 Dreamliner planes, which are made in BA's nonunion factory in South Carolina.  For the month, BA logged 66 gross orders for new aircraft.  BA has spent much of this year dealing with fallout after a near catastrophe on 1 of its new 737 Max 9s in Jan, when a door plug that was missing key bolts blew out.  The company's backlog is 5456 aircraft.  The stock fell 1.26.

Boeing delivers 33 jets in September but strike impact looms

Last week's jobs numbers confirm the US labor market remains strong even though it may be slowing, with a 4.1% unemployment rate around what is considered full employment and employers adding jobs faster than what is needed to account for population growth, Atlanta Federal Reserve Pres Raphael Bostic said.  The rise in the unemployment rate from last year's lows well below 4% "is actually a move to where most folks, before the pandemic, thought full employment was," Bostic said.  "The labor market ... is certainly slowed down, but is not slow," he said, while monthly job creation "is pretty robust."  US employers added 254K payroll jobs in Sep.  Bostic said a decline to under 100K jobs per month would cause him to wonder if the Fed should consider cutting rates faster than planned.  Job growth in Sep instead beat expectations & prior months' numbers were revised upward, causing traders to increase bets the Fed would cut its benchmark rate by just a qtr point at its Nov 6-7 meeting.  Meanwhile, the Atlanta Fed chief noted that inflation remained too high, with 1 key measure currently at 2.6%.  "We have to get it back to that 2% target," Bostic said.  "It's too high ... That's still quite a ways to go and I want people to understand that I'm still laser-focused on the inflation target."

Fed's Bostic says labor market slowing but not slow, jobs gains 'robust'

Gold prices fell over 1% & were on track for their biggest drop on a percentage basis in 1½ months as recent US employment data lowered expectations for a bigger rate cut, while markets awaited minutes of the Federal Reserve's latest policy meeting for fresh signals.  Spot gold fell 1.1% to $2614 per ounce, falling for the 5th-straight session & moving further from the Sep 26 record peak of $2685.  US gold futures settled 1.1% lower at $2635.  According to the CME FedWatch tool, markets priced out a 50-basis-point reduction at the Fed's Nov meeting after last week's strong jobs report.  They now see an 87% chance for a 25-bps cut.  Markets are focused on the minutes of the Fed's latest policy meeting, due tomorrow, followed by Consumer Price Index data on Thurs & Producer Price Index data on Fri.  Gold is reputed for its stability as a favored hedge against geopolitical & economic risks.  Global physically backed gold exchange-traded funds registered a 5th consecutive month of inflows in Sep as North America-listed funds added to their holdings, the World Gold Council said.

Gold Set for Biggest Drop in Over a Month as Bets on Large Fed Rate Cut Recede

West Texas Intermediate (WTI) crude oil closed sharply lower, falling for the first time in 6 sessions as China avoiding new stimulus measures to revive a flagging economy rose above worries over a spreading Middle Eastern war.  WTI crude for Nov closed down $3.57 to settle at $73.57 per barrel, while Dec Brent crude, the global benchmark, was last seen down $3.82 to $77.11.  Oil gained 13% in the 5 sessions after Iran's attack as traders worried Israel response would hit at Iran's oil infrastructure, potentially cutting into the country's 1.7M barrels per day of exports.  Fears that a wider war in the oil-rich Persian Gulf is on the horizon & could threaten nearly a 3rd of global oil output.  However the risk premium may be fading given the delay in Israel's response.  Oil's fundamentals remain weak as demand remains light during the autumn shoulder season even as OPEC+ begins adding 180K bpd of supply monthly for a year beginning in Dec to unwind 2.2M bpd of production cuts.  Demand from China, the #1 importer, remains light as the country's economy struggles with a debt crisis in its real-estate sector, weak consumer spending & high youth unemployment.  A report said that China's economic planning agency is confident it can meet its goal of 5% growth in its gross domestic product this year.  It declined to offer further stimulus measures even as major investment banks press for up to 3T yuan of additional spending.

WTI Crude Oil Falls as China Declining to Add Further Stimulus Tops Middle East Worries

Stocks moved higher as investors welcomed a rebound in tech & a pullback in surging oil prices, putting the focus back on interest rates & the state of the US economy.  Oil was under pressure after China failed to roll out another large stimulus package, a surprise to investors hoping to add more fuel to the unprecedented rally.  Stocks in the Hong Kong rally in Chinese stocks fizzled.