Markets hesitate as investors wait for key inflation data

Dow fell 154 with selling into the close, decliners over advancers about 3-2 & NAZ went down 49.  The MLP index slid back 2+ to the 299s & the REIT index fell 7+ to the 419s.  Junk bond funds remained weak & Treasuries had limited selling which increased yields slightly.  Oil was even at 68 & gold shot up 31 to 2717 (more on both below).

Dow Jones Industrials 

Boeing (BA), a Dow stock, delivered 13 commercial jets in Nov, less than a qtr of the 56 jetliners it handed over to customers 12 months earlier, the planemaker reported.  Deliveries were down from 14 in Oct, when most of its aircraft production was still shut down during a 7-week-long strike that ended Nov 5.  BA restarted production of its best-selling 737 MAX last week.  The planemaker is trying to increase 737 production to a rate of 38 a month to generate much-needed revenue after it burned Bs of $s in cash during the first 3 qtrs.  However, it has been under heightened oversight by the Federal Aviation Administration since a door plug blew out of a nearly new Alaska Airlines (ALK) 737 MAX 9 during a Jan flight.  The company plans to resume production of its 767, 777 & 777X in Everett “in the days ahead,” BA said.  BA 787 production in South Carolina was not affected by the strike.  BA has said that it is taking a cautious approach to restarting production & has prioritized quality, safety & worker training.  That approach is reflected in the month's lower delivery numbers.  Nov's deliveries included 9-737s, 2-777 freighters & 2-787-9s.  US carrier United Airlines (UAL) took delivery of 3 aircraft, including 2-737 MAXs & 1-787.  By comparison, after BAs last strike ended in Nov 2008, it delivered 4 aircraft that month.  The company booked 49 gross orders during the month with 14 cancellations, including 34 737s & 15 767s for the US Air Force's KC-46 program. Germany-based TUI canceled orders for 14 & will instead lease the planes from BOC Aviation, resulting in a net addition of 20 new 737 MAX orders.  YTD, BA has booked 427 gross orders & 370 net orders after cancellations & conversions.  After also adjusting for accounting standards, BA booked 191 net orders.  BA stock went up 7.11 (5%).

Boeing jet deliveries fall to 13 in November after strike ends

The US reversed its forecast for a crude glut next year & is now calling for a small oil-market deficit.  Global oil consumption should exceed output by 100K barrels a day in 2025, according to a monthly report from the Energy Information Administration (EIA).  That compares with a 300K barrel-a-day surplus forecast last month.  The forecast comes after OPEC & its allies deferred supply increases for 3 months, which the EIA expects will tighten the market.  The US outlook, however, runs counter to that of the Intl Energy Agency (IEA), which last month predicted a 1M barrel-a-day surplus in 2025 despite the OPEC+ decision.  The IEA is due to update its forecast later this week.  The downward revision points to “a market that got too bearish and has since revised away worst-case-scenario outcomes,” said Jon Byrne, analyst at Strategas Securities.  The forecast reversal likely won't have a major impact, since markets have already priced in an OPEC+ production delay, he added.  “We maintain our outlook for a range-bound market in the $65-75 range for WTI,” Byrne said, referring to West Texas Intermediate.  Futures traded just above $68 a barrel today.

US Sees Small Global Oil Deficit in 2025 in Outlook Reversal

Shares of Walgreens (WBA) jumped on a report that the company is in talks to sell itself to private equity firm Sycamore Partners.  WBA Sycamore have been discussing a deal that could be completed early next year.  New York-based Sycamore would likely sell off pieces of WBA's business or work with partners.  WBA, squeezed by the transition out of the Covid pandemic, a leadership shakeup, pharmacy reimbursement headwinds & its wobbly push into health care, has underperformed earnings expectations for 2straight qtrs.  The pharmacy business in particular has been flailing  due to falling reimbursement rates for prescription drugs & several factors pressuring the front of the store, such as inflation & increased competition.  The company is trying to regain its footing with a new CEO, health-care industry veteran Tim Wentworth.  Since stepping into the role in Oct 2023, Wentworth has moved to slash costs at WBA.  In Oct, WBA said it plans to close roughly 1200 of its drugstores over the next 3 years, including 500 in fiscal 2025 alone.  WBA has around 8700 locations in the US, a qtr of which it says are unprofitable.  The company has also scaled back its push into primary care by cutting its stake in primary care provider VillageMD.  WBA stock jumped 1.57 (18%).

Walgreens shares pop on report pharmacy chain could sell itself to PE firm Sycamore

Gold prices hit a 2-week high, underpinned by rising geopolitical tensions & expectations of a 3rd US rate cut by the Federal Reserve next week, while the market's gaze shifted to tomorrow's US inflation data.  Spot gold was up 1.3% at $2692 per ounce & US gold futures settled 1.2% higher at $2718.  The spotlight is moving to the US Consumer Price Index (CPI) tomorrow, which is expected to rise by 0.3% in Nov & the Producer Price Index (PPI) on Thurs, both pivotal in shaping the Fed's rate-cut decisions.  With 2 US rate cuts so far this year, traders predict an 86% chance of a further 25-basis-point cut at the Fed's Dec 17-18 meeting, according to the CME FedWatch tool.

Gold hits two-week high in the run-up to US inflation data

Oil prices fell slightly in trade, losing some ground after pledges of more stimulus in top importer China & heightened geopolitical tensions in Syria sparked strong gains.  Anticipation of more economic signals from China & the US in the coming days also kept traders to the sidelines, as did caution over a monthly report from the OPEC.  Brent oil futures expiring in Feb fell 0.2% to $72.00 a barrel, while West Texas Intermediate crude futures fell 0.2% to $67.96 a barrel. Oil prices rose over 1% yesterday after China's top political body announced a shift towards looser monetary policy & flagged plans for more stimulus measures.  Beijing said it will support stock & property markets while "vigorously" supporting local consumption- its most clear signal yet of more targeted stimulus measures.  The announcement sparked a rally across commodity markets, with oil also benefiting from hopes that an improvement in China's economy will boost its appetite for raw materials.  Beyond China, oil markets are bracing for a string of key economic readings & central bank meetings scheduled for the last few weeks of 2024.  Oil prices saw a higher risk premium this week, after rebel forces ousted Syrian Pres Bashar al-Assad & installed a new regime, ending a 13-year civil war.  Syria's new regime is likely to be backed by groups with ties to the Sunni Islamic sect, putting it at odds with Iran.  This could give the US gov more headroom to impose stricter sanctions against Iran.  Syria's oil production was also eroded by over a decade of civil war, but could pick up under a new regime, increasing global oil supplies.  At its peak, the country produced over 600K barrels of oil per day.

Oil Prices Edge Lower With China Stimulus, Syria Tensions in Focus

US stocks wavered as investors wait for consumer & producer price inflation reports seen as key to the path of interest rates.  Hopes are that Nov inflation readings will provide further evidence of a soft landing for the economy, justifying widespread bets on a Federal Reserve rate cut next week.