VerySmartInvesting: Markets rise as investors rotate out of tech stocks

Thursday, November 21, 2024

Markets rise as investors rotate out of tech stocks

Dow soared 469. advancers over decliners about 4-1 & NAZ crawled up 16. The MLP index surged 5 to over 301 & the REIT index added 3+ to the 426s. Junk bond funds continued to be in demand & Treasuries had some selling which lifted yields. Oil remained 1+ higher, above 70 on Russia - Ukraine tensions, & gold advanced 20 to 2672 (more on both below).

Dow Jones Industrials

Walmart CFO John David Rainey warned that Pres-elect Trump's proposed tariffs could lead to higher prices for its shoppers. "Tariffs are going to be inflationary. There's no disputing that," Rainey said. "Likely consumers are going to pay more for the items that they pay and that these tariffs are applied to." Under the proposals, a universal 10%-20% tariff would be imposed on imports from all foreign countries & an additional 60%-100% tariff would be imposed on imports specifically from China. While Rainey said 2/3 of the items the company sells are made, grown or assembled in the US, he said it's "in no way immune to this." The company has suppliers from all over the world, including China & other countries throughout Asia. "We're going to work with our suppliers as well as our own private brand assortment to continue to try to bring down prices for customers," Rainey said. A WMT spokesperson said in a statements that the company remains "concerned that significantly increased tariffs could lead to increased costs for our customers at a time when they are still feeling the remnants of inflation." WMT, a Dow stock & Dividend Aristocrat ended up 1.19.

Walmart warns of higher prices if President-elect Trump implements proposed tariff agenda

Mortgage rates climbed closer to 7% this week while sales of existing homes saw a revival from a dip in rates 2 months ago. Freddie Mac's latest Primary Mortgage Market Survey, showed that the average rate on the benchmark 30-year fixed mortgage rose to 6.84% from last week's reading of 6.78%. The average rate on a 30-year loan was 7.29% a year ago. Meanwhile, the National Association of Realtors reported that existing home sales jumped 3.4% in Oct from the month before to 3.96M, lifting off a 14-year low in Sep. "Home sales surged in October because mortgage rates plunged below 6.25% in September," said Holden Lewis, home & mortgage expert at NerdWallet. "When rates dropped, buyers acted quickly – making successful offers in September and closing in October." 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 fell slightly to 6.02% from 5.99% last week. 1 year ago, the rate on the 15-year fixed note averaged 6.67%.

Mortgage rates rise after home sales jump in October

Alphabet (GOOG) shares slid, following news that the Dept of Justice (DOJ) is calling for GOOG to divest its Chrome browser to put an end to its search monopoly. The proposed break-up would, according to the DOJ in its filing, “permanently stop Google’s control of this critical search access point and allow rival search engines the ability to access the browser that for many users is a gateway to the internet.” This development is the latest in a years-long, bipartisan antitrust case that found in an Aug ruling that the search giant held an illegal monopoly in both search & text advertising, violating Section 2 of the Sherman Act. The potential break-up would include preventing GOOG from entering into exclusionary agreements with competitors like Apple (AAPL), a Dow stock, & Samsung, part of a set of remedies that would last 10 years. GOOG stock dropped 8.08 (5%).

Alphabet shares slide 6% following DOJ push for Google to divest Chrome

Spot gold rose for a 4th consecutive session, hitting an over 1-week high as safe-haven demand soared following AI bellwether NVDA's lackluster revenue forecast & intensifying Russia-Ukraine tensions. Spot gold was up 0.6% at $2666 per ounce, while US gold futures rose 0.6% to $2668. Investors flock to safe-haven assets during global crises, & gold has soared to multiple record highs since the Middle East conflict erupted in Oct last year. With the US vetoing a UN ceasefire resolution in Gaza & renewed Russia-Ukraine tensions, geopolitical risk premiums remain elevated, ensuring gold's enduring appeal. The move to the downside in equities after NVDA earnings has supported precious metals from a safe-haven perspective. Global stocks eased after AI bellwether NVDA revenue growth forecast failed to excite investors. Spot gold prices are up 4% so far this week, their best performance since Apr, recovering from last week's sharpest weekly drop in over 3 years. The decline in bullion was driven by a soaring $, boosted by "Trump Trade" euphoria. Brokerages expect Pres-elect Trump's proposed tariffs to spur global market volatility & inflation, limiting central banks' ability to ease monetary policy. Meanwhile, a new poll shows most economists anticipate a Federal Reserve rate cut in Dec, with smaller reductions projected for 2025.

Gold climbs to over 1-week high on safe-haven demand

Oil rose on signs that the Russia-Ukraine conflict is escalating further. Brent climbed toward $74 a barrel after Ukraine said Russia launched an intercontinental ballistic missile at the central city of Dnipro, following the expanded use of Western-provided long-range weapons by Kyiv's forces. The Russian strike, if confirmed, appears to be the first use of such a weapon since its development at the inception of the Cold War. There have also been some bullish signs for prices in recent days, with premiums of refined products over crude climbing to multi-month highs. In the US, a proxy of the margins obtained from turning crude into gasoline & diesel hit the highest level since Aug as Gulf Coast fuel makers step up production to meet rising exports. Oil has swung between gains & losses since mid-Oct, buffeted by a range of factors including concerns over Chinese demand & a stronger $ that makes commodities priced in the greenback less appealing. The market is facing a supply glut next year & investors are watching for a decision from OPEC+ on plans to start reviving idled supply. That has kept a lid on any rally fueled by geopolitical concerns. Brent for Jan was 1.4% higher at $73.83 a barrel & WTI for Jan rose 1.5% to $69.79 a barrel.