Markets hesitate after a record setting post election rally

Dow dropped 382, decliners over advancers better than 3-1 & NAZ was off 17.  The MLP index declined 3 to the 285s & the REIT index retreated 4+ to the 421s.  Junk bond funds slid lower & Treasuries saw heavy selling which raised yields after the holiday break.  Oil inched up pennies in the 68s & gold fell 11 to 2605 (more on both below).

Dow Jones Industrials 

Boeing's (BA), a Dow stock, more than 32K machinists who were on strike are required to return to their factories no later than tomorrow, but getting factories humming again will take weeks, the manufacturer said.  BA machinists approved a new contract last week that included 38% pay raises over 4 years & other improvements, ending a more than 7-week strike that halted output of most of BS's aircraft production.  They first walked off the job on Sep 13, turning down a proposal with 25% raises.  The company said that it handed over 14 jetliners in Oct, the fewest since Nov 2020, during the depths of the pandemic & the tail end of the worldwide grounding of BS's 737 Max in the wake of 2 fatal crashes.  9 of the deliveries last month were 737 Maxes.  A spokesman said workers unaffected by the strike performed the delivery procedures.  BA's troubles have put it further behind Airbus this year. The US manufacturer handed over 305 airplanes so far this year compared with its European rival’'s 559 aircraft.  As the workers return, BA has to assess potential hazards, restate machinist duties & safety requirements & ensure that all training qualifications are current.  “It’s much harder to turn this on than it is to turn it off,” CEO Kelly Ortberg said last month.  “So it’s absolutely critial that we do this right.”  The company is resuming production in Washington state & Oregon for the 737 Max, 767 & 777 programs, as well as military versions of its aircraft.  BA's 787 Dreamliner production continued during the strike because those planes are made in a nonunion factory in South Carolina.  Despite the strike pause, BA continued to sell dozens of aircraft in Oct, with 63 gross orders, 2 shy of Sep's total.  The stock fell 3.76.

Boeing delivers fewest planes since 2020, warns factory restart after strike will take weeks

Home Depot (HD), a Dow stock quarterly sales rose more than 6% year over year, as it folded in a newly acquired business & hurricane-related repairs & better weather in many parts of the country boosted demand for home improvement supplies.  The retailer also raised its full-year outlook to reflect its better-than-expected 3rd-qtr results & some increased hurricane-related demand in the current qtr.  It now projects total sales to increase about 4%, including the impact of acquiring SRS Distribution.  It previously expected total sales to rise 2.5-3.5% for the year.  Both of those outlooks include a lift from a 53rd week in the fiscal year & an approximately $6.4B contribution from SRS, which sells supplies to professionals in the roofing, landscaping & pool businesses.  The company expects comparable sales to decline about 2.5% for the 52-week period.  HD previously projected that industry metric, which includes the company's website & stores open for more than a year, would drop 3-4% compared with the prior fiscal year.  CFO Richard McPhail said consumers are still deferring purchases as they wait for lower mortgage rates & borrowing costs & expressed caution about the economy.  “There is pent-up demand for projects,” he said.  “Our customers tell us that their lives are changing. Their families are growing. They’re upsizing, they’re downsizing. They need to move for a job. There is demand for remodeling, and they are putting it on hold until they see a more favorable financing environment. And so the demand is there, the question is, when it’s unlocked.”  Customers have continued to put off projects, even though they're in good financial shape.  About 90% of the do-it-yourself customers own their homes.  EPS for the fiscal 3rd qtr dropped to $3.67 from $3.81 in the year-ago period.  Revenue climbed 6.6% from $37.7B in the year-ago period.  Comparable sales fell 1.3% in the qtr across the business.  That's better than the 3.3% drop that was expected.  The metric fell by 1.2% in the US.   The stock dropped 5.18.

Home Depot’s sales are improving, but it says consumers are still cautious about spending

Netflix's (NFLX) cheaper, ad-supported tier has reached 70M global monthly active users 2 years after it was launched.  More than 50% of its new sign-ups are for ad-supported plans in countries that offer the option & it continues “to see positive momentum and growth across all areas of the business,” adding it has seen “steady progress across all countries’ member bases.”  NFLX launched the option in Nov 2022 as 1 of its responses to a slowdown in subscriber growth.  Recently, subscriber growth hasn't been an issue.  Last month NFLX reported it added 5.1M subscribers during the 3rd qtr, beating the estimates.  In total, NFLX counts 283M memberships across all of its pricing tiers.  Beginning next year, it will no longer update investors on its subscriber numbers as it shifts focus toward revenue & other financial metrics as performance indicators.  NFLX in May announced it would air 2 National Football League games on Christmas Day this year as part of a 3-year deal & today said it sold out of its ad inventory for the 2 live games.  The stock rose 14.06.

Netflix ad-supported tier has 70 million monthly users two years after launch

Gold futures slipped 0.2% to $2612 a troy ounce.  US $-denominated commodities like gold have been pressured in the wake of Trump's victory in the US election.  Market expectations for fewer interest-rate cuts & a resurgence in inflationary pressures given Trump's planned tax & tariff laws have started to play against the precious metal.  In the short term, investor attitude toward gold has turned bearish, but gold isn't a hard sell just because the market expects fewer rate cuts. There is still plenty for investors to be concerned about.  Political & military conflicts, alongside weakening consumer demand in China & Europe will support gold.  Trump's tenure could also cause further frictions in intl relations, adding to safe-haven demand.

Gold Futures Slip But Long-Term Safe-Haven Demand Looks Intact

WTI crude oil prices edged higher by 0.1% to $68.10 per barrel, after a 5% decline over 2 sessions.  Investors reacted to OPEC's 4th consecutive cut to its 2024 global oil demand forecast & China's economic concerns.  China's Oct data showed the slowest consumer price growth in 4 months & deeper producer price deflation, raising deflation risks & disappointing investors due to a lack of significant stimulus.  Analysts said China's 10T-yuan ($1.4T) debt plan fell short of growth expectations.  Meanwhile, US policy may shift towards increased domestic shale production, as pro-oil North Dakota Governor Doug Burgum is considered for Energy Secretary under Trump.  The $ remained strong, near 4-month highs, as Trump's anticipated policies could keep interest rates elevated longer.  In a flat market, supply & demand concerns are magnified, which has affected oil sentiment.

Oil Settles Slightly Higher on Tuesday

The post-election surge in stocks sputtered.  The roaring rally in US stocks was paused after lifting the major gauges to record highs.  Investors have raised their exposure to stocks to an 11-year high & are weighing whether the Trump rally has been overdone.  Meanwhile yields have risen & Trump is hiring assistants to push his agenda forward.