Markets slide with rate cuts and inflation data in focus

Dow dropped 234 (session lows), decliners over advancers about 5-2 & NAZ fell 134.  The MLP index added 1+ to 303 & the REIT index was flat in the 418s.  Junk bond funds hardly budged in price & Treasuries were sold which raised yields.  Oil slid back pennies but remained above 70 & gold dropped a very big 51 to 2705 (more on both below).

Dow Jones Industrials 

Adobe (ADBE) shares tumbled for their steepest drop since Mar after the software vendor issued disappointing revenue guidance.  Sales in the fiscal first qtr will be between $5.63-5.68B, ADBE said in its 4th-qtr earnings report.  Analysts were expecting revenue of $5.73B.  While its forecast trailed estimates, the 4th-qtr results exceeded expectations.  Adjusted EPS came in at $4.81, topping the estimate of $4.66.  Revenue in the 4th qtr increased 11% to $5.61B, beating the estimate of $5.54B.  Monetizing generative artificial intelligence, especially in stand-alone offerings such as Firefly image generation or additional offerings across the Creative Cloud, has been central to ADBE's growth strategy.  Analysts at Deutsche Bank maintained their buy rating but lowered their target price from $650 to $600.  “These results and guidance require a bit of faith in the full year next year,” the analysts wrote. Still, they said,  “We see tangible evidence that Adobe is one of few application software companies in our coverage successfully monetizing generative AI today.”  The stock plummeted 75.80 (13%).

Adobe shares plunge 13% on disappointing revenue guidance

The Consumer Financial Protection Bureau (CFPB) announced the final version of a rule limiting banks' ability to charge overdraft fees.  It says the rule will save American consumers $5B annually.  The regulator said that banks could opt to charge $5 for overdrafts, a steep drop from the average fee of around $35 per transaction, or limit the fee to an amount that covers the lenders' costs, or charge any fee while disclosing the interest rate of the loan.  “For far too long, the largest banks have exploited a legal loophole that has drained billions of dollars from Americans’ deposit accounts,” CFPB Director Rohit Chopra said.  “The CFPB is cracking down on these excessive junk fees and requiring big banks to come clean about the interest rate they’re charging on overdraft loans.”  While overdraft fees have been a lucrative line item for the industry, generating $280B in revenue since 2000 according to the CFPB, banks' revenue from the service has been on the decline.  That's because lenders have either reduced the fees or limited the types of transactions that trigger them, while some banks dropped the fee altogether.  The CFPB rule applies to banks & credit unions with at least $10B in assets.  The effort, part of a flurry of activity from the CFPB in the waning days of the Biden administration, faces stiff opposition from US banking groups that have successfully stymied other efforts from the regulator.  For instance, a rule capping credit card late fees at $8 per incident that was set to take effect in May has been held up in federal court.  The CFPB said its overdraft rule will take effect Oct 1, 2025, though the rule's ultimate fate is unclear.

CFPB announces rule limiting bank overdraft fees

US household wealth rose to a fresh record in the 3rd qtr, fueled by a stock-market rally ahead of the presidential election.  Household net worth increased nearly $4.8T (2.9%) from the prior qtr, to $169T, a Federal Reserve report showed.  The value of Americans' equity holdings rose $3.8T.  The value of real estate eased by almost $200B after sizable advances in the first ½ of the year.  In the 3rd qtr, investors benefited from a stock-market rally in anticipation of interest-rate cuts from the Fed & that Donald Trump would return to the White House next year.  Since his victory in the Nov 5 election, the S&P 500 has climbed to new highs amid expectations that the pres-elect will enact pro-business policies.  Households have been the main driver behind robust economic growth in recent years, as healthy balance sheets & strong wage growth have supported resilient consumer spending.  Economists generally expect a moderation in demand against a backdrop of still-elevated borrowing costs & a higher cost of living.  The Fed's report showed that consumers increased their borrowing at a faster pace last qtr, while business borrowing cooled.  Business debt outstanding increased at a 3% annualized rate, while consumer non-mortgage credit rose at a 2.5% pace.  Mortgage debt climbed 3.1% for a 2nd qtr.  In the public sector, state & local gov debt grew at a slower rate.  Household liquidity picked up to a record.  Deposits held by households & nonprofit organizations, which includes savings & checking accounts & money market funds, rose by $379B to $18.9T.

US household wealth climbs to record on higher stock values

Gold slipped over 1% as investors booked profits after it briefly reached a 5-week high earlier in the session & squared positions ahead of a US Federal Reserve meeting next week.  Spot gold lost 1.2% at $2684 per ounce, while US gold futures settled 1.7% lower at $2709.  Bullion climbed to its highest level since Nov 6 earlier in the session.

Gold slides from 5-week high, down over 1% on profit-taking

Oil prices were little changed in Asian trade as forecasts of weak demand & a higher-than-expected rise in US gasoline & distillate inventories stemmed gains from an additional round of EU sanctions threatening Russian oil flows.  Brent crude futures were up 14¢ at $73.66 a barrel & US West Texas Intermediate crude futures rose 6¢ to $70.35.  Both benchmarks rose over $1 each yesterday.  OPEC cut its demand growth forecasts for 2025 for the 5th straight month yesterday & by the largest amount yet.  Investors will be closely monitoring the IEA's market balance estimates for 2025, which will reflect OPEC's recent announcement.  In the world's top oil consumer, the US, gasoline & distillate inventories rose by more than expected last week, according to data from the Energy Information Administration.  Weak demand, particularly in top importer China & non-OPEC+ supply growth were 2 factors behind the move.  However, investors anticipate a rise in Chinese demand, after Beijing unveiled plans this week to adopt an "appropriately loose" monetary policy in 2025, which could spur oil demand.  Global oil demand rose at a slower-than-expected rate this month, but has remained resilient.

Oil little changed as demand weakness offsets sanctions-driven supply risks

Pres-elect Donald Trump rang the opening bell this morning as stocks edged lower after fresh inflation data cast doubt on investor confidence for the path of interest rates ahead.  The in-line consumer price index reading cleared 1 of the last remaining risks to easing by the Fed in Dec.  That boosted bets on a qtr-point rate cut in Dec to a near 99% chance, per the CME FedWatch tool.  But the Nov producer price index released today came in hotter than expected, rising 0.4% from the previous month.  Economists had been expecting an increase of 0.2% & that has put the chances of the Fed holding rates steady in Jan in focus, as several officials have voiced a cautious stance on policy.