Markets bounce on encouraging inflation data after a rough week

Dow bounced back 497, advanced over decliners better than 3-1 & NAZ rose 199.  The MLP index climbed jumped 4 to about 291 & the REIT index finished up 6+ to the 312s.  Junk bond funds continued higher & Treasuries remained in demand which reduced yields.  Oil was up pennies above $69 & gold recovered 40 to 2648 (more on both below).

Dow Jones Industrials 

Starbucks (SBUX) baristas in some locations are planning to strike thru Christmas Eve, starting with cafes in Los Angeles, Chicago & Seattle.  The strikes will escalate each day, covering new markets, as Starbucks Workers United pushes for better pay for baristas.  SBUX is “backtracking on our promised path forward,” the union said.  The stoppage could mean longer waits for holiday drinks & popular merchandise in the days leading up to Christmas, when many Americans will be off work & school or buying last-minute gifts.  Relations between the company & the union have turned frosty again, after a thaw earlier this year. In late Feb, both sides agreed to work together on a “foundational framework” that would include a process to achieve collective bargaining agreements for individual stores.  Since then, they've conducted more than nine bargaining sessions over 20 days.  Earlier this week, SBUX & the union met for the last scheduled bargaining session of the year.  But ahead of the meeting, Starbucks Workers United baristas voted to authorize a strike if the coffee giant didn't propose a comprehensive package that would address pay & other benefits.  In the bargaining session, SBUX proposed no immediate pay increase & only guaranteed annual pay hikes of 1.5% going forward, the union said.  SBUX said that Workers United prematurely ended the bargaining session this week.  “We are ready to continue negotiations to reach agreements. We need the union to return to the table,” the company added.  The union asked for a 64% increase to hourly wages immediately & a 77% pay hike over the life of a 3-year contract. “This is not sustainable,” the company said.  SBUX fell 79¢.

Starbucks baristas strike in three U.S. cities during pre-Christmas rush

The smooth economy that Donald Trump was poised to inherit suddenly looks a bit rockier, with critics saying the pres-elect is contributing to the uncertainty.  The Dow essentially ended yesterday flat after having posted 10 days of losses.  The Federal Reserve now sees inflation as staying stubbornly elevated as it has become cautious about further interest rate cuts planned for next year.  On Wed, Trump blew up a bipartisan budget deal, which means the gov could shut down after midnight tomorrow.  He then promoted a deal reached with Reps yesterday that Dem lawmakers & Pres Biden see as unacceptable.  It failed to get the two-thirds threshold needed for House passage.  This comes on top of a spate of tariff threats by Trump that the Congressional Budget Office said would raise prices & hurt growth without raising enough revenues to cover the rest of his planned tax cuts.  As Trump prepares for a 2nd term in the White House, his actions to undo a deal & replace it in under 24 hours test the proposition that markets, a favored Trump barometer of success, will accept his mix of uncertainty & reality TV drama.  But from the vantage of Trump world, the economy was already a mess.  That's because of inflation, which is currently 2.7% & public dissatisfaction with Biden.  The past few days are a reminder that the economic growth in the Rep's first term was often accompanied by turmoil.  It remains to be seen if voters already exhausted by inflation are ready for another round of blame games & uncertainty that the past few days have foreshadowed.  Trump vowed on social media  to “fight ’till the end” unless Dems agreed to lift the debt ceiling as a condition for the short-term funding to keep the federal gov open.  He & his billionaire friend & adviser Elon Musk also promised to fund challengers in the 2026 primary elections to any Rep lawmaker who opposed the pres-elect.

Trump was poised to inherit a strong economy. Things changed

The US gov could be headed for a shutdown this weekend after 2 failed attempts by House Reps in recent days to avert a stoppage.  First, Speaker Mike Johnson & his colleagues saw 1 bipartisan deal fall apart amid opposition from Elon Musk & Pres-elect Trump.  Then a 2nd GOP-negotiated deal collapsed due to 38 House Republicans joining nearly all Dems to vote no & tank that effort.  Johnson & his colleagues are still working feverishly to resolve a complex series of disputes on issues from the debt ceiling to various funding priorities but now have only hours to act to head off an array of impacts that could be felt across the country, as well as economic impacts that could grow with each passing day.  "We will regroup and we will come up with another solution, so stay tuned," was all Johnson was able to offer reporters after the latest failed vote.  For now, experts are downplaying the immediate economic effects & noting that lawmakers have intense motivation to find a deal & then get home for the holidays.  "Nobody wants the optics of shutting down the government," Stifel chief Washington policy strategist Brian Gardner noted, adding that a shutdown would include things like temporarily unpaid military personnel.  But with few options left, what could be a growing economic question for the coming days is the length of any stoppage, especially in the middle of the holiday travel season.

The US government faces shutdown. Here's what to expect

Gold is trading with a moderate positive tone following the sharp sell-off earlier this week.  Cooler-than-expected US Personal Consumption Expenditures (PCE) Price Index data has increased selling pressure on the $, although the precious metal is struggling to put a significant distance from the 1-month lows hit this week.  PCE Inflation has increased 0.1% in Nov, against expectations of a 0.2% increment.  The yearly rate accelerated to 2.4% from the previous month's 2.3% reading, still below the 2.5% anticipated by the market consensus.  Likewise, the Core PCE eased to 0.1% from 0.3% in Oct while the yearly inflation remained steady at 2,8% against market expectations of an uptick to 2.9%.  Yesterday, an upward revision to the 3rd qtr's GDP & the lower-than-expected jobless claims have endorsed the Federal Reserve's (Fed) hawkish stance for 2025.  

Gold maintains a moderate positive tone after soft US inflation

Oil prices edged higher as the $ eased from 2-year highs & as a slowdown in the inflation report bolstered expectations of 2 more rate cuts next year.  Brent crude futures edged up 16¢ to $73.04 a barrel & West Texas Intermediate (WTI) crude futures gained 21¢ to $69.59 per barrel.  The Brent benchmark was on track to end the week down about 2.5%, while WTI eased about 3%.  While the $ retreated from a 2-year high, it was heading for its 3rd consecutive week of gains, with data showing a cooling inflation 2 days after the Federal Reserve cut interest rates.  A weaker $ makes oil cheaper for holders of other currencies, while rate cuts could spur economic growth & boost oil demand.  Monthly inflation slowed in Nov after showing little improvement in recent months, pushing the main stock indices higher in volatile trading.  Chinese state-owned refiner Sinopec said in its annual energy outlook that China's crude imports could peak as soon as 2025 & the country's oil consumption would peak by 2027, as demand for diesel & gasoline weakens.  The Organization of the Petroleum Exporting Countries & allies (OPEC+) recently cut its growth forecast for 2024 global oil demand for a 5th straight month.

Oil edges higher as dollar eases, Fed rate cut fears soften

Stocks bounced back as investors digested key inflation data that showed a deceleration in price increases during Nov.  The latest reading of the Federal Reserve's preferred inflation gauge, the core Personal Consumption Expenditures (PCE) index, showed price increases decelerated in Nov on a monthly basis & came in below estimates.  But they still remained sticky as the central bank fights to bring inflation back down to its 2% target.  Trump is already making significant news.  "I told the European Union that they must make up their tremendous deficit with the United States by the large scale purchase of our oil and gas," Trump said in a post on Truth Social.  "Otherwise, it is TARIFFS all the way!!!"  This has been an unusually volatile week with the Dow finishing down 885.  Hopefully next week will bring some calm.