Dow extended its losing streak after Fed signals fewer rate cuts

Dow dropped an enormous 1123, only 210 stocks on Dow were higher & NAZ sank 716.  The MLP index was off 2 to 292 & the REIT index tumbled 14+ to the 398s.  Junk bond funds were sold & Treasuries saw selling which brought higher yields.  Oil was fractionally higher above 70 & gold tumbled 24 to 2637 (more on both below).

Dow Jones Industrials 

The Federal Reserve announced its 3rd straight interest rate cut, lowering the benchmark rate by 25 basis points amid economic data showing that inflation remains above the central bank's target rate.  With the 25-basis-point cut, the benchmark federal funds rate will sit at 4.25 - 4.50%.  The Fed's move follows a 25-basis-point cut in Nov & a larger-than-normal cut of 50 basis points at its Sep meeting, which was the first reduction in rates since Mar 2020 & brought them down from 5.25% - 5.50%, the highest level since 2001. The Federal Open Market Committee (FOMC), the group within the Fed responsible for setting monetary policy, said that "labor market conditions have generally eased, and the unemployment rate has moved up but remains low" & while inflation has made progress towards the 2% objective, it "remains somewhat elevated."  "The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate," the FOMC added.  One member of the FOMC, Cleveland Fed Pres Beth Hammack, dissented from the decision to cut rates & preferred to hold the benchmark rate at 4.50% - 4.75%.  The FOMC also released a summary of economic projections, which reflected 2 rate cuts in 2025, 2 cuts in 2026 & 1 cut in 2027.  The summary shows the median of the federal funds rate at 4.4% at the end of 2024, before declining to 3.9% in 2025, 3.4% in 2026 & 3.1% in 2027.  Those forward-looking projections are higher than the Fed's Sep projections, with the 2025 & 2026 medians each a ½-point higher & the 2027 figure 0.2 percentage points higher.  It also projects that the personal consumption expenditures (PCE) index, which is the Fed's favored inflation gauge, will finish this year at 2.4% & will be 2.5% in 2025, up from 2.1% in the previous projection released in Sep.  PCE would then decline to 2.1% in 2026 before reaching 2% in 2027 & over the longer run.

Federal Reserve cuts interest rates by quarter-point in December

Vultr, a startup that rents out graphics processing units & other cloud infrastructure to businesses, has raised $333M in a transaction that values the company at $3.5M.  AMD's (AMD) venture arm & hedge fund LuminArx Capital Management led the round.  Founded in 2014 & known as a low-cost virtual server provider, Vultr offers GPUs from AMD & rival Nvidia (NVDA), which are in high demand due to the boom in generative artificial intelligence.  NVDA, the biggest beneficiary thus far of the AI wave, has invested in specialist cloud providers CoreWeave.  AMD's central processing units are also available thru Vultr, alongside Intel's (INTC).  Unlike some top cloud providers, Vultr doesn’t have its own AI chip that competes with AMD or NVDA.  “We will never seek to build GPUs and compete with that layer,” Vultr CEO J.J. Kardwell said.  AMD offers very good prices based on performance for the inference stage of working with AI models, which tends to be critical for organizations deploying AI at scale, Kardwell said.  Companies generally train AI models with large quantities of data & vast fleets of GPUs before moving on to the inference stage, when the models respond to, or make inferences about, new information.  The fresh infusion of capital will go toward intl expansion, Vultr said.  The company currently has 32 data center locations, mostly outside North America.  AMD stock fell 3.61.

AMD invests in GPU cloud provider Vultr at $3.5 billion valuation

Stellantis (STLA) said it will further delay an all-electric Ram pickup from 2025 until 2026, as the automaker confronts slower-than-expected adoption of EVs & competitors struggle to make profits on electric trucks.  The decision to delay the full battery-electric model, which had already been postponed from this year, will help in prioritizing an electric range-extended version of the truck called the Ramcharger that features a gas engine combined with EV technologies.  “The decision to launch Ramcharger first was driven by overwhelming consumer interest, maintaining a competitive advantage in the technology and slowing industry demand for half-ton BEV pickups,” Ram added.  Ramcharger will be open for customer orders in the first ½ of 2025, followed by the Ram 1500 REV launch in 2026.  The change in priorities is the first major announced shift since Ram CEO Tim Kuniskis returned earlier this month, following a management shake-up that included STLA CEO Carlos Tavares leaving the company.  Kuniskis had retired from STLA in May before coming back to the automaker.  He said earlier this month to expect changes for the embattled brand, which reported a 24% sales decline thr the 3rd qtr of this year.  Kuniskis attributed current problems with the brand's sales to a slower-than-expected rollout of its redesigned Ram 1500 model as well as delays to its upcoming heavy-duty trucks.  “It’s getting better every day, but we got a lot of work to do,” said Kuniskis, who referred to the Ramcharger pickup as the brand's “Goldilocks truck” — equating to the right mix of power, range & capabilities.  The stock lost 54¢.

Stellantis further delays electric Ram pickup to prioritize plug-in ‘EREV’ model

Gold prices dropped after the Federal Reserve decided to lower borrowing costs as expected & upward revised the fed funds rate to 3.87%, for 2025.  Currently, volatile gold is around $2,610-$2,630.  The Federal Reserve cut rates by 25 basis points to 4.25%-4.50%, yet the decision was not unanimous, as Cleveland Fed Pres Beth Hammack opted to keep rates unchanged.  When comparing the statement to the past meeting, there was little change, though traders were focused on the Summary of Economic Projections (SEP).  According to the SEP, the dot plot suggests that Fed officials see just 2 cuts for 2025 & 2  more for 2026.  Officials estimate the Fed funds rate to end at 3.9% in 2025 & 3.4% in 2026.  Other projections suggest that the Fed's favorite inflation gauge, the Core PCE, is expected to end at 2.8% in 2024, 2.5 % in 2025 & 2.2% in 2026. Regarding growth, the economy is foreseen to end at 2.5% in 2024, 2.1% in 2025 & 2% in 2026.  The Unemployment Rate is expected to end the current year at 4.4% & remain unchanged at 4.3% in 2025 & 2026.  After the data, Gold prices plunged sharply as traders assessed the cut as hawkish, with just 100 basis points of easing for the next 2 years.

Gold price plummets on Fed hawkish cut, traders eye Powell

Oil futures posted a gain for the session after back-to-back losses, with prices getting a lift from official US data showing a 4th consecutive weekly decline in domestic crude inventories.  Traders also looked to a decision by the Federal Reserve on interest rates for hints on prospects for energy demand.  West Texas Intermediate crude for Jan rose $1 (1.4%) to $71.08 a barrel, ahead of the contract's expiration at the end of tomorrow's session.  The more actively traded Feb contract was up 90¢ (1.3%) at $70.55 a barrel.  Feb Brent crude, the global benchmark, gained 74¢ (1%) to $73.93 a barrel on ICE Futures Europe.  Oil futures extended their early gains today after the Energy Information Administration reported a 4th weekly decline in a row for domestic, commercial crude inventories, which edged down 900K barrels for last week.  The report was expected to show a fall of 1.8M barrels.  Late yesterday, the American Petroleum Institute reported a crude inventory drop of 4.7M barrels, according to a source citing the data.

Crude Oil Prices Rise Ahead of EIA Figures This Week

The Dow & other indices declined after the FOMC announced a qtr percentage point reduction in interest rates & just 2 more interest rate cuts in 2025, which is lower than previously projected.  In its final interest rate decision of the year, the Fed implemented its 3rd consecutive cut, bringing the interest rate down to 4.25% - 4.50%.  The central bank indicated that it could carry out just 2 more reductions to the federal funds rate in 2025, given qtr-point cuts, according to its updated Summary of Economic Projections.  Fed Chair Jerome Powell similarly signaled that the Fed will take a “more cautious” approach to monetary policy next year.  “As for additional cuts, we’re going to be looking for further progress on inflation as well as continued strength in the labor market,” Powell said.  “And as long as the economy in the labor market are solid, we can be cautious as we consider further cuts.”  Powell said that the decision to cut rates was a “closer call” than previous reductions, but that the FOMC ultimately decided it was “the right call” to balance inflation & labor market goals.  Following the announcement of the FOMC, the Dow plunged about  700.  One dreary day which will not be forgotten!