Dow slid back 17, decliners barely ahead of advancers & NAZ fell 39. The MLP index was even in then 286s & the REIT index slid 1 to 421. Junk bond funds were weak & Treasuries had modest buying which lowered yields slightly (more below). Oil crawled up to 69 & gold dropped another 10 to 2576.
Dow Jones Industrials
Wholesale prices nudged higher in Oct, though largely in line with expectations & mostly consistent with the Federal Reserve cutting interest rates again in Dec, the Bureau of Labor Statistics reported. The producer price index (PPI), which measures what producers get for their products, increased a seasonally adjusted 0.2% for the month, up one-tenth of a percentage point from Sep though matching the forecast. On a 12-month basis, headline wholesale inflation was at 2.4%. Excluding food & energy, core PPI rose 0.3%, also one-tenth more than Sep & also matching expectations. The 12-month rate was at 3.1%. Though the readings are above the Fed's 2% inflation goal, the trend is showing that price increases are generally moderating & inflation is being pushed by isolated factors. Services rose 0.3% on the month, accounting for most of the PPI increase & was driven largely by a 3.6% surge in portfolio management prices. Food prices fell 0.2% on the month while energy was off by 0.3%. Goods prices nudged higher by 0.1% after falling the previous 2 months. Wholesale prices nudged higher in Oct, though largely in line with expectations & mostly consistent with the Federal Reserve cutting interest rates again in Dec. Food prices fell 0.2% on the month while energy was off by 0.3%. Goods prices nudged higher by 0.1% after falling the previous 2 months. Traders expect the Fed to follow up rate cuts in Sep & Nov with another qtr percentage point reduction at the Dec 17-18 meeting. After that, market pricing points to the Fed skipping Jan & moving at a slower easing pace thru 2025.
Wholesale prices rose 0.2% in October, in line with expectations
The holiday shopping season may not be as merry for retailers this year, with a recently-released report suggesting they could see less sales growth over the festive period. The growth rate for holiday sales will be roughly 3% this year, S&P Global Ratings predicted in the "US Holiday 2024 Sales Outlook" report. It marks a slower pace than 2023, when holiday sales grew 4.7%. S&P Global Ratings suggested retailers will "lean on deals to bring the holiday cheer" & put more money toward advertising to draw in more shoppers. Some companies have already started rolling out discounts ahead of the holidays, something that the report said they might be doing to "pull forward sales" as shoppers "grow more cautious during the weeks leading up to the holiday, particularly during an election year & a shortened holiday shopping window." Retailers will likely hold more "deal events" prior to Black Friday & Cyber Monday. In 2024, those 2 major post-Thanksgiving shopping dates will fall on Nov 29 & Dec 2, respectively. When it came to the consumer, S&P Global Ratings characterized them as "price-sensitive" & expected to "maintain tight budgets and seek value in the form of promotions as they enter the holiday season" amid the current economy & labor market. For the 2024 holiday season, cost-cutting & inventory management strategies will "mostly offset promotional pressures" & help retailers see "flat margins." S&P Global Ratings said retailers that "have the financial flexibility to compete on price and convenience will continue to fare better" during the holidays. The report predicted value retailers that "cater to the more resilient middle and higher income consumer" & big box retailers with the "ability to effectively communicate value to consumers" will do better during the holiday seasons than other types. "We expect other sectors, such as department stores and apparel retailers, will rely on higher discounts to increase traffic and manage inventory," it said. "Furthermore, soft demand in specialty categories like consumer electronics and home furnishings will also necessitate promotional activity to spark demand." Retailers who sell lots of discretionary products like department & furniture stores will "rely on promotions to generate demand" & "risk a disappointing holiday season" if they don't. Over the course of Nov & Dec, retailers are expected to see $979-989B spent by holiday shoppers, the National Retail Federation separately predicted.
Holiday shopping may not be merry for retailers this year
Treasury yields were little changed as investors monitored a fresh batch of economic data & a flurry of speeches from Federal Reserve policymakers (some later today). The 10-year Treasury yield traded marginally lower at 4.445%, while the yield on the 2-year Treasury fell less than 1 basis point to 4.275%. Yields & prices move in opposite directions & 1 basis point equals 0.01%. The speeches come as investors & economists scrutinize what Pres-elect Trump's return to the White House could mean for US interest rates. The central bank delivered its 2nd consecutive interest rate cut earlier in the month, in line with expectations, & traders see a decent chance of another trim in Dec.
Treasury yields are little changed as investors weigh economic data
Stocks are trading water with Powell's speech later today & the Trump-led sweep in focus. Though the mood is muted, stocks are still riding high near records after the latest consumer inflation data kept hopes for a Dec rate cut on the table. Initial jobless claims fell last week to 217K, their lowest level since May & less than the 220K claims expected.
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