Markets fall after Powell says the Fed is in no 'hurry' on rate cuts

Dow dropped 207 (near session lows), decliners over advancers better than 3-2 & NAZ was off 123.  The MLP index added 1+ to the 288s & the REIT index fell 3+ to the 409s.  Junk bond funds slid a little lower & Treasuries had more selling which raised yields.  Oil edged a little higher in the 68s & gold fell 5 to 2581 (more on both below).

Dow Jones Industrials 

Disney (DIS), a Dow stock, reported its fiscal 4th-qtr earnings, narrowly beating estimates as streaming growth helped propel its entertainment segment.  The streaming business' growth & profitability — combined with a blockbuster summer at the box office & further investments in the company's theme parks business — comes during a time of turmoil across the media industry.  DIS has been restructuring the Mouse House under the stewardship of returnee CEO Bob Iger, who's getting the company into shape before handing it off to a successor in early 2026.  Execs touted DIS's significant progress during the last year & said they’re “confident in the long-term prospects for the business,” issuing guidance that includes its fiscal 2025, 2026 & 2027.  During its fiscal 2025, the company expects high-single-digit adjusted earnings growth compared with the prior fiscal year.  The company expects double-digit adjusted EPS growth in both fiscal 2026 & 2027.  “I think the fact that we have had such a strong ’24 overall has been an important part of the guidance we are getting,” said CFO Hugh Johnston.  “If you think of the big initiatives we have invested, putting creativity back at the center of the company, and on top of that, we said we wanted to improve profitability and we are clearly doing that in a substantive way.”  EPS was 25¢, up from 14¢ during the same qtr last year.  Adjusting for 1-time items, including restructuring & impairment charges, EPS was $1.14.  Overall revenue was up 6% to $22.6B compared with the same prior fiscal qtr.  Total segment operating income increased 23% to $3.7B compared with the same period in 2023.  Revenue for the entertainment segment – which includes the traditional TV networks, direct-to-consumer streaming &films – increased 14% year over year to $10.8B after a hot summer at the box office.  Its combined streaming business, which includes Disney+, Hulu & ESPN+, reported operating income of $321M for the Sep period compared with a loss of $387M during the same period last year.  Company execs said they are confident streaming “will be a significant growth area” for DIS.  The stock rose 6.40 (6%).

Disney stock surges on streaming growth, guidance

Pres-elect Trump's transition team is planning to kill the $7500 consumer tax credit for electric-vehicle purchases as part of broader tax-reform legislation, 2 sources said.  Ending the tax credit could have grave implications for an already stalling US EV transition.  And yet representatives of Tesla (TSLA) — by far the nation's largest EV seller — have told a Trump-transition committee they support ending the subsidy, said the 2 sources.  Elon Musk, 1 of Trump's biggest backers & the world's richest person, said earlier this year that killing the subsidy might slightly hurt TSLA sales but would devastate its US EV competitors, which include legacy automakers such as General Motors (GM).  Repealing the subsidy, which has been a signature measure of Pres Biden's Inflation Reduction Act (IRA), is being discussed in meetings by an energy-policy transition team led by billionaire oilman Harold Hamm, founder of Continental Resources & North Dakota Governor Doug Burgum, the 2 sources said.  Trump's energy transition team views the consumer EV credit as an easy target, believing that eliminating it would get broad consensus in a Rep-controlled Congress as part of a larger tax-reform bill.  TSLA stock sank 19.06 (5%) & GM stock lost 8¢.

Trump’s transition team aims to kill Biden EV tax credit

Federal Reserve Chair Jerome Powell said that strong US economic growth will allow policymakers to take their time in deciding how far & how fast to lower interest rates.  “The economy is not sending any signals that we need to be in a hurry to lower rates,” Powell said.  “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.”  In an upbeat assessment of current conditions, the central bank leader called domestic growth “by far the best of any major economy in the world.”  Specifically, he said the labor market is holding up well despite disappointing job growth in Oct largely that he attributed to storm damage in the Southeast & labor strikes.  Nonfarm payrolls increased by just 12K for the period.  Powell noted that the unemployment rate has been rising but has flattened out in recent months & remains low by historical standards.  On the question of inflation, he cited progress that has been “broad based,” noting that Fed officials expect it to continue to drift back towards the central bank’s 2% goal.  Inflation data this week, though, showed a slight uptick in both consumer & producer prices, with 12-month rates pulling further away from the Fed mandate.  Still, Powell said the 2 indices are indicating inflation by the Fed's preferred measure at 2.3% in Oct, or 2.8% excluding food & energy.  “Inflation is running much closer to our 2 percent longer-run goal, but it is not there yet. We are committed to finishing the job,” said Powell, who noted that getting there could be “on a sometimes-bumpy path.”

Powell says the Fed doesn’t need to be ‘in a hurry’ to reduce interest rates

Gold traded at a 2-month low, falling for a 5th-straight session as the $ continued its post-election rally & rose to the highest in more than 2 years while another US inflation measure rose last month.  Gold for Dec was last seen down $11 to $2575 per ounce, the lowest since Sep 11. The Bureau of Labor Statistics reported the Oct Producer Price Index (PPI) rose by 0.2% from Sep, up from a revised 0.1% pace a month earlier, but met the forecast.  Core PPI, excluding 1-time items, rose by 0.3%, up from 0.2% & ahead of the estimate for a 0.2% rise.  The $ rose again following the data, with the ICE dollar index last seen up 0.19 points to 106.67, the highest since Oct 2022.  Treasury yields fell, with the 2-year note last seen paying 4.296%, up 0.4 basis points, while the yield on the 10-year note was down 5.8 points to 4.41%.

Gold Falls to Two-Month Low as Dollar's Post-Election Rally Continues

Oil rose after US data showed a drop for national gasoline inventories, but gains were capped by the Intl Energy Agency's (IEA) forecast of a large crude glut next year.  West Texas Intermediate climbed near $69 a barrel.  A US gov report showed that gasoline stockpiles slid to the lowest in 2 years.  Data also showed that inventories at the key Cushing, Okla, storage hub fell by the most in about 2 months, though the nation's total crude inventories posted a build.  The IEA warned that the oil market faces a surplus of more than 1M barrels a day next year, which could swell further if OPEC+ decides to press ahead with supply hikes.  Crude has alternated between weekly gains & losses since mid-Oct, with traders weighing OPEC+ supply moves, US monetary policy & the risks to oil-demand growth, especially in China.  Oil consumption in the world's largest importer will grow this year at just 10% of the rate seen in 2023, according to the EIA report.  The Middle East was also in focus.  Israel was rushing to prepare a cease-fire deal in Lebanon as the gov adjusted to the prospect of Trump's White House return.  WTI for Dec rose 0.8% at $68.95 a barrel & Brent for Jan was up 0.7% at $72.81 a barrel.

Oil Holds Gains as US Data Shows Declines for Gasoline Supplies

Oct inflation readings out this week have shown little progress toward the Fed's 2% inflation target, putting into question how deeply the Federal Reserve will cut interest rates in 2025.  The readings are adding to an overall picture of persistent, sticky inflation within the economy.  Economists don't see the data changing the Fed's outlook in Dec.  Markets agree with the CME FedWatch Tool currently placing a nearly 80% chance the Fed cuts rates by 25 basis points at the Dec meeting.  But investors are nervous about prospects for rate cuts next year.