Dow was down all of 1, advancers over decliners 3-2 & NAZ went up 300. The MLP index was steady in the 292s & the REIT index added 3+ to the 422s after yesterday's selling. Junk bond funds saw limited interest & Treasuries had more buying which lowered yields after recent strength. Oil was fractionally higher to the 72s & gold recovered 20 to 2697 (more on both below).
Dow Jones Industrials
The Federal Reserve approved its 2nd consecutive interest rate cut, moving at a less aggressive pace than before but continuing its efforts to rightsize monetary policy. In a follow-up to Sep's big ½ percentage point reduction, the Federal Open Market Committee lowered its benchmark overnight borrowing rate by a quarter percentage point, or 25 basis points, to 4.50%-4.75%. The rate sets what banks charge each other for overnight lending but often influences consumer debt instruments such as mortgages, credit cards & auto loans. Markets had widely expected the move, which was telegraphed both at the Sep meeting and in follow-up remarks from policymakers since then. The vote was unanimous, unlike the previous move that saw the first "no" vote from a Fed governor since 2005. This time, Governor Michelle Bowman went along with the decision. On the labor market, the statement said “conditions have generally eased, and the unemployment rate has moved up but remains low.” The committee again said the economy “has continued to expand at a solid pace.” There is uncertainty over how far the Fed will need to go with cuts as the macro economy continues to post solid growth & inflation remains a stifling problem for US households. The post-meeting statement reflected a few tweaks in how the Fed views the economy. Among them was an altered view in how it assesses the effort to bring down inflation while supporting the labor market. "The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance," the document stated, a change from Sep when it noted "greater confidence" in the process.
Federal Reserve cuts interest rates by a quarter point
Mortgage rates marched higher for the 6th straight week while purchase demand continues to decline in the stagnant housing market. Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate on the benchmark 30-year fixed mortgage surged to 6.79% from last week's reading of 6.72% & the average rate on a 30-year loan was 7.50% a year ago. "It is clear purchase demand is very sensitive to mortgage rates in the current market environment," said Sam Khater, Freddie Mac's chief economist. "As soon as rates began to rise in early October, purchase applications fell and over the last month have declined 10 percent." Many would-be buyers & sellers are holding out to see if rates fall further. Currently, about 80% of mortgage holders have a rate below 5%, according to a Zillow survey. The average rate on the 15-year fixed mortgage also rose to 6% from 5.99% last week. One year ago, the rate on the 15-year fixed note averaged 6.81%.
Mortgage rates climb again, hurting demand further
Gilead Sciences (GILD) increased its growth forecast for the year on strong 3rd qtr
results, marking a shift away from its COVID revenues & spurring
investor anticipation for new products in the near future. The company increased its 2024
guidance, bucking the opposite trend by large pharma peers this qt, & beat on both top- & bottom-line results. CEO Daniel O'Day said the company's 3rd qtr was the its best this year. "This
has been the strongest quarter of the year for us. It really shows the
strength of our business model ... and that's true for both ... our
legacy business, our HIV business, our virology business, but also for
the new business areas of oncology and also inflammation," he added. CFO Andrew Dickinson said the
company's beat was due to surprise increased sales of the COVID-19
antibody drug Veklury, as well as the legacy HIV portfolio sales. "We
... expect full‐year 2024 total product sales in the range of $27.8 to
$28.1 billion, an increase of $650 million at the midpoint compared to
the prior range," Dickinson said. The company
reported revenue of $7.5B, up 7% year over year, beating estimates by about 7%. In addition, GILD reported adjusted EPS of $2.02, beating expectations by nearly
30%. The stock rose 6.21 (7%).
Gilead increases 2024 outlook, expects new drug filing by end of year
Gold prices rose more than 1%, helped by a retreat in the $, while the Federal Reserve cut interest rates by a qtr of a percentage point as widely expected. Spot gold was up 1.2% at $2691 per ounce, after dropping to a 3-week low yesterday. US gold futures settled 1.1% higher at $2705. At the end of a 2-day policy meeting, the central bank lowered the benchmark overnight interest rate to 4.50-4.75% range, with policymakers taking note of a job market that has "generally eased." The dollar index was down 0.6% against its rivals after rising to a 4-month high after Pres Donald Trump's win in the presidential election. Traders are currently pricing in another 25 basis point cut by the Fed in Dec.
Gold holds firm after US Fed rate cut, softer dollar
Crude futures reverse course & settled higher as the market continues to debate implications for oil of a 2nd Trump administration, from facilitating more US output to settling geopolitical conflicts that have added a premium to prices, or tightening sanctions against producers such as Iran & Venezuela. While Hurricane Rafael is seen tracking well south of the US Gulf coast, platform evacuations had shut in around 22% of offshore production versus 17% yesterday, according to the Bureau of Safety & Environmental Enforcement. Earth Science Associates estimates overall output losses due to the storm of 1.5 - 2.4M barrels of oil. WTI settles up 0.9% at $72.36 a barrel & Brent roses 0.9% to $75.63 a barrel.
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