Markets climb although were a little lower in the shortened week

Dow shot up 339, advancers over decliners 3-1 & NAZ advanced 340.  The MLP index remained in the 299s & the REIT index rose to the 399s.  Junk bond funds continnued mixed & Treasuries had limited selling, allowing yields to ease higher.  Oil was up about 1 to 74 from buying into the close & gold slid back 15 to 2653 (more on both below).

Dow Jones Industrials 

Microsoft (MSFT), a Dow stock, plans to spend $80B in fiscal 2025 on the construction of data centers that can handle artificial intelligence workloads, the company said.  Over ½ of the expected AI infrastructure spending will take place in the US,  Vice Chair & Pres Brad Smith wrote.  Its  fiscal year ends in Jun.  “Today, the United States leads the global AI race thanks to the investment of private capital and innovations by American companies of all sizes, from dynamic start-ups to well-established enterprises,” Smith said.  “At Microsoft, we’ve seen this firsthand through our partnership with OpenAI, from rising firms such as Anthropic and xAI, and our own AI-enabled software platforms and applications.”  Several top-tier technology companies are rushing to spend Bs on graphics processing units for training & running AI models.  The fast spread of OpenAI’s ChatGPT assistant, which launched in late 2022, kicked off the AI race for companies to deliver their own generative AI capabilities.  Having invested over $13B in OpenAI, MSFT provides cloud infrastructure to the startup & has incorporated the startup’s models into Windows, Teams & other products.  MSFT reported $20B in capital expenditures & assets acquired under finance leases worldwide, with $14.9B spent on property & equipment, in the first qtr of fiscal 2025.  Capital expenditures will increase sequentially in the fiscal 2nd qtr, CFO Amy Hood said in Oct.  The stock fell 94¢.

Microsoft expects to spend $80 billion on AI-enabled data centers in fiscal 2025

Despite the lingering uncertainty around what’s coming for the US as Pres-elect Donald Trump takes office & works to enact his campaign proposals, Richmond Fed PresTom Barkin has an upbeat outlook on the economy for the year ahead.  In remarks Barkin said that his baseline expectation for 2025 is positive.  “With what we know today, I expect more upside than downside in terms of growth,” Barkin said, adding that expectations for economic expansion are likely behind a recent uptick in business optimism.  Barkin said his sunny outlook is based, in part, on the fact that he believes the momentum around consumer spending will likely keep economic growth healthy in the coming months.  Consumer spending makes up nearly 70% of GDP growth.  As long as Americans can keep their jobs & asset values remain solid, Barkin believes they will continue to spend.  “With business optimism so high and labor supply unlikely to continue to grow so robustly, it feels like the current labor market equilibrium is more likely to break toward hiring than toward firing,” Barkin added.  Of course, some sectors will likely fare better than others.  In his district, for example, there are concerns about the outlook for the federal workforce.  In addition to solid economic growth, Barkin also predicts that the more cost-conscious consumer that has emerged in recent months will put pressure on companies to limit price increases, which should continue to push inflation down.  “Overall, that would be a good outcome for the U.S. economy,” Barkin said.

Richmond Fed’s Barkin Sees More Blue Skies Ahead for Economy

The US surgeon general issued a new advisory warning about the link between alcohol consumption & increased cancer risk, & pushed for policy changes to help reduce the number of alcohol-related cancers.  Surgeon General Dr Vivek Murthy said there is a “well-established” link between drinking alcohol & at least 7 types of cancer, including breast, colorectum, esophagus & liver.  For cancers including breast, mouth & throat cancers, increased risk may start around 1 or fewer drinks per day, according to his office.  As part of the advisory, the surgeon general called for policy changes that could help reduce alcohol-related cancer.  He pushed for alcohol labels to be more visible & include a warning about the increased risk of cancer, to reassess recommended limits for alcohol consumption based on the latest research & expand education to increase general awareness that alcohol consumption increases cancer risk.  The efforts outlined in the advisory are similar to those already implemented to lessen tobacco use, including a slew of mandated warnings on packaging & in stores.  The surgeon general advised people to consider the link between alcohol consumption & greater cancer risk when deciding whether to drink or how much to have.  Alcohol consumption is the 3rd leading preventable cause of cancer in the US, behind only tobacco & obesity.  “Alcohol is a well-established, preventable cause of cancer responsible for about 100,000 cases of cancer and 20,000 cancer deaths annually in the United States — greater than the 13,500 alcohol-associated traffic crash fatalities per year in the U.S. — yet the majority of Americans are unaware of this risk,” Murthy said.  According to the advisory, 72% of US adults said they had 1 or more drinks per week between 2019 & 2020, but less than ½ of all adults are aware of the link between drinking & cancer risk.  Worldwide, 741K cases of cancer were attributed to alcohol consumption in 2020.

U.S. surgeon general calls for cancer risk warnings on alcohol labels

Gold prices retreated from a 3-week high, pressured by a robust $, while markets braced for potential economic & trade shifts under Pres-elect Donald Trump.  Spot gold eased to $2649 an ounce, after hitting its highest level since Dec 13.  Bullion is up about 1.1% for the week.  US gold futures were down 0.2% at $2663.  The new pres's agenda that supports higher tariffs has boosted the $ & created significant underlying pressure on metal markets.  The dollar index was set for its strongest weekly performance since mid-Nov, making gold pricier for overseas buyers.  For most of the metals, the slowing of global trade has typically been coupled with a slowing economy & therefore slowing demand for metals (referring to the potential impact of Trump's proposed trade tariffs).  A headwind from a stronger $ is likely to persist for gold, but it looks like debts will continue rising in the US & other countries & geopolitical issues aren't going to end soon, so it should stay supported.  Trump is set to take the oath of office on Jan 20 & his proposed tariffs & protectionist policies are expected to fuel inflation.  This could slow the Federal Reserve's interest rate cuts, limiting gold's upside.  After 3 rate cuts in 2024, the Fed projects only 2 reductions in 2025 due to persistent inflation.  Gold, which thrives in low-rate environments, is currently benefiting from seasonal demand.

Gold slips from three-week high as strong dollar weighs

Oil prices were little changed after closing at their highest in more than 2 months in the previous session, amid hopes that govs around the world could step up policy support to revive economic growth that would boost fuel demand.  Brent crude futures edged up 1¢ to $75.94 a barrel after settling at their highest since Oct 25 yesterday.  West Texas Intermediate crude also rose 1¢ to $73.14 a barrel, with yesterday's settlement the highest since Oct 14.  Both contracts were on track for a 2nd weekly gain after investors returned from holidays, boosting trading liquidity.  Factory activity in Asia, Europe & the US ended 2024 on a weak note as expectations for the New Year soured on rising trade risks from Donald Trump's return to the presidency & China's fragile economic recovery.  Dec PMIs for Asia were mixed, & manufacturing activity & GDP growth in the region is expected to remain subdued in the near term.  With growth expected to be difficult & inflation below target in most countries, central banks in Asia should continue to ease policy.  Lower interest rates would spur greater economic growth & would likely lead to higher fuel consumption.  Investors are eyeing further interest rate cuts by the Federal Reserve this year to support the US economy, while Chinese Pres Xi Jinping has promised more proactive policies to boost growth.

Oil Set for Weekly Gain; Focus on U.S., China Policy

Stocks went higher, shaking off a downbeat start to 2025.  After a 5-session losing streak, the longest since Apr, the popular stock averages ended the holiday-shortened week with modest losses.  Dow declined 260 last week.  Stocks markets will close on Thurs to remember former Pres Carter.

Markets are higher although weekly losses loom

Dow rose 247, advancers over decliners about 5-2 & NAZ gained 188.  The MLP index was up 2 to 301 & the REIT index recovered 2+ to the 297s.  Junk bond funds were mixed & Treasuries were flattish which kept rates about even.  Oil traded higher in the 73s & gold fell 9 to 2659.

Dow Jones Industrials

Rivian Automotive's (RIVN) 2024 vehicle production & deliveries were in line with the company's previously announced expectations.  The electric vehicle maker produced 49K vehicles last year, including 12,727 trucks & vans during the 4th qtr & delivered 51K vehicles, including 14K models during the last 3 months of the year.  In Oct it lowered its 2024 production target to a range of 47-49K vehicles, down from 57K units.  The company had expected deliveries of 50-52K vehicles.  The company in Oct said the adjusted target was because of a “production disruption due to a shortage of a shared component” for its current vehicles — the R1T pickup, R1S SUV & a commercial delivery van.  The company said the previously discussed shortage “is no longer a constraint on Rivian’s production.”  The stock jumped 2.83 (21%).

Rivian meets its 2024 vehicle production target after lowering projections

Ford's (F) U.S. new vehicle sales increased 4.2% last year to represent the automaker's best year since 2019, led by increased sales of hybrid & all-electric models.  The Detroit automaker reported 2024 sales of 2.08M vehicles, up from just under 2M in 2023.  In 2019, the automaker sold 2.4M vehicles in the US.  For the 4th qtr, the company reported an 8.8% year-over-year increase in sales to 531K vehicles sold.  Full-year sales of its vehicles with traditional internal combustion engines increased 0.2% compared to 2023, while sales of electrified vehicles increased 38.3% year over year.  Electrified vehicles, including hybrids & EVs, represented 13.7% of the automaker's total annual sales.  The stock went up 11¢.

Ford reports best annual U.S. sales since 2019

US manufacturing moved closer to recovery in Dec, with production rebounding & new orders rising further, though factories faced higher prices for inputs as the year ended.  The Institute for Supply Management (ISM) said that its manufacturing PMI increased to 49.3 last month, the highest reading since Mar, from 48.4 in Nov.  A PMI reading below 50 indicates contraction in the manufacturing sector, which accounts for 10.3% of the economy.   Dec was the 9th consecutive month that the PMI remained below the 50 threshold.  The forecast was for the PMI to be unchanged at 48.4.  Manufacturing was battered by the Federal Reserve's aggressive monetary policy tightening in 2022 & 2023 to tame inflation.  But sentiment surveys, including the PMI, have exaggerated the magnitude of the decline in factory production.  Gov data last month showed manufacturing growing at a 3.2% annualized rate in the 3rd qtr & contributing to the economy's 3.1% expansion pace during that period.  The central bank is cutting interest rates, lowering its benchmark overnight interest rate by 25 basis points to 4.25%-4.50% last month.  It was the 3rd consecutive rate cut since the Fed started its easing cycle in Sep.

US manufacturing PMI rises to nine-month high in December

US stocks stepped higher today, looking to shake off a downbeat start to 2025 as Tesla (TSLA), up 3.3%, looked for a comeback.  But hopes are dim for a Santa Claus rally after benchmarks fell again yesterday to notch a 5-session losing streak, the longest since Apr.

Markets waver while investors hope for a new year comeback

Dow declined 151, advancers were modestly ahead of decliners & NAZ was off 30.  The MLP index gained 2+ to 297 & the REIT index fell 3+ to the 394s.  Junk bond funds saw modest purchasing & Treasuries trended sideways so yields hardly budged.  Oil remained in demand, up 1+ to the 73s, on stronger demand outlook & gold roared ahead 27 to 2668 (more on both below).

Dow Jones Industrials 

Mortgage rates are up for a 3rd straight week to the highest since Jul, further hindering demand in the already-stagnant housing market.  Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate on the benchmark 30-year fixed mortgage jumped to 6.91%, up from last week's reading of 6.85%.  The average rate on a 30-year loan was 6.62% a year ago.  "Inching up to just shy of seven percent, mortgage rates reached their highest point in nearly six months," said Sam Khater, Freddie Mac’s chief economist.  "Compared to this time last year, rates are elevated and the market’s affordability headwinds persist."  The average rate on the 15-year fixed mortgage climbed to 6.13% from 6.0% last week.  1 year ago, the rate on the 15-year fixed note averaged 5.89%.

Mortgage rates kick off 2025 with an increase, nearing 7%

Weekly unemployment claims hit their lowest level since Apr during the final full week of 2024.  In  the latest sign that layoffs remain low, data from the showed 211K initial jobless claims filed last week were down from 220K the week prior & below the 221K estimate.  Meanwhile, 1.84M continuing claims were filed, down from the 1.89M seen the week prior.  Economists largely believe the continued low number of weekly jobless claims combined with relatively steady continuing claims reflects a low hire, low fire type of labor market.  The holidays could've impacted the recent claims numbers.  But zooming out, this data falls in line with the recent trend that the labor market deterioration remains gradual.  With the unemployment rate moving higher throughout most of 2024 & monthly job gains slowing, the labor market is ending the year having cooled from where it started.  The hiring rate fell from 3.7% at the end of 2023 to 3.3% at the end of 2024, further showing that while Americans aren't losing their jobs, it's becoming increasingly harder to find them too.

Jobless claims hit 8-month low as 'low hire, low fire' market persists

Apple (AAPL), a Dow stock, is offering discounts on its top-end iPhones & other products in China for the upcoming Chinese New Year as the tech giant faces heightened competition in 1 of its most crucial markets.  The Cupertino giant is giving customers 500 Chinese yuan ($68.50) off of the iPhone 16 Pro or iPhone 16 Pro Max, & 400 yuan off the iPhone 16 or iPhone 16 Plus.  Offers also include discounts for the iPhone 14 & iPhone 15.  For a long time AAPL has resisted offering discounts thru its own retail channels.  Instead, 3rd-party retailers would offer deals at certain times of the year.  However, as competition ramps up, AAPL has been more inclined in the last year to post seasonal deals.  AAPL offered a similar Chinese New Year deal last year & in May, the company offered hefty discounts as part of China’s 618 shopping festival.  The firm's latest challenge has come from a resurgent Huawei & other domestic brands.  Its smartphone shipments fell 6% year-on-year in mainland China in the 3rd qtr of 2024, according to Canalys & the company's market share also slipped to 14% from 16% a year earlier.  AAPL stock fell 6.57 (3%).

Apple offers holiday discount in China as Huawei competition heats up

Gold prices extended gains near $2650 in the North American open after the New Year holiday.  The precious metal gained as its appeal as a safe-haven asset increased, with investors focused on Pres-elect Donald Trump taking office on Jan 20.  Trump's expected incoming policies, such as higher import tariffs & lower taxes, would be a boon for Gold.  Higher import tariffs would lead to a potential global trade war & lower taxes would increase inflationary pressures in the US.  Gold tends to outperform amid economic uncertainty as a safe-haven bet & higher price pressures, given that investors use the precious metal as a hedge against inflation.  The 10-year US Treasury yield fell near 4.54% earlier in the year as its rally stalled.  In general, lower yields on interest-bearing assets result in lower opportunity costs for non-yielding assets, such as gold, making them attractive bets.

Gold surges near $2,650 as investors weigh Trump's impact on global economy

Oil prices edged higher, the first trading day for 2025, as investors returning from holidays cautiously eyed China's economy & fuel demand following Pres Xi Jinping's pledge to boost growth.  Brent crude futures were up 16¢ at $74.80 a barrel after closing up 65¢ on Tues, the last trading day for 2024.  US West Texas Intermediate crude futures were up 16¢ at $71.88 a barrel after closing up 73¢ in the previous session.  Xi said Tues in his New Year's speech that the country will implement more proactive policies to boost growth by 2025.  China's factory activity grew in Dec, a Caixin/S&P Global private sector survey showed, but at a slower pace than expected amid concerns over the trade outlook & risks from tariffs proposed by US Pres-elect Donald Trump.

Oil Prices Rise as Investors Return From Holidays

Stocks erased session gains today to kick off the first trading day of the new year as investors returned from holiday.  Markets were eyeing a comeback after a year-end slide to begin the week, but buyers were largely absent today.  Tesla (TSLA) shares slid almost 6% after the electric vehicle maker posted its first decline in annual deliveries, &, along with AAPL's fall (above), kept buyers away.

Markets rise cautiously to kick off 2025

Dow was off 20, advancers over decliners 2-1 & NAZ went up 30.  The MLP index added 3+ to the 297s & the REIT index slid back 1 to the 397s.  Junk bond funds eased higher & Treasuries had very limited buying, keeping yields little changed.  Oil gained 1+ to the 73s boosted by China stimulus hopes & gold jumped 26 to 2667.

Dow Jones Industrials

Tesla (TSLA) posted its 4th-qtr vehicle production & deliveries report.  The key numbers are:

Total deliveries Q4 2024: 495,570

Total production Q4 2024: 459,445

Total annual deliveries 2024: 1,789,226

Total annual production 2024: 1,773,443

Results for the qtr represented the first annual drop in delivery numbers, which reported 1.8M deliveries in 2023 & it reported 485K deliveries in the 4th qtr of 2023.  The forecast had expected deliveries of 505K, including 474K Model 3 & Model Y EVs.  TSLA sent some investors a company-compiled delivery consensus of 507K vehicles, based on a survey of 26 analysts.  A widely followed independent TSLA researcher, who publishes as Troy Teslike, predicted deliveries of 501K.  Deliveries are the closest approximation of sales reported by TSLA but are not precisely defined in the company's shareholder communications.  The 4th-qtr report comes after a huge late-year rally in its stock, which finished 2024 up 63%.  In mid-Dec, the shares reached a record, eclipsing their prior all-time high from 2021.  The stock dropped 22 (6%).

Tesla shares slide after it reports first drop in annual deliveries

A sharp rise in mortgage interest rates toward the end of Dec took its toll on mortgage demand, hitting just as the housing market entered its typically slowest stretch of the year.  Total mortgage application volume for the last 2 weeks dropped 21.9% compared with the week before that period, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index.  An additional adjustment was made to account for the Christmas holiday.  The MBA released 2 weeks of data after being closed over the holiday.  During that time, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $766K or less increased to 6.97% from 6.89%, with points rising to 0.72 from 0.67, including the origination fee, for loans with a 20% down payment.  Mortgage rates, which had been lower than the previous year for much of 2024, were 21 basis points higher annually.  “Mortgage rates moved higher through the last full week of 2024, reaching almost 7% for 30-year fixed-rate loans,” said Mike Fratantoni, chief economist at the MBA.  “Not surprisingly, this increase in rates — at a time when housing activity typically grinds to a halt — resulted in declines in both refinance and purchase applications.”  Applications to refinance a home loan, which are most sensitive to interest rate gyrations, fell 36% from 2 weeks before.  Still, they remained 10% higher than the same period 1 year ago.  The refinance share of mortgage activity decreased to 39.4% of total applications from 44.3% the previous week.  Applications for a mortgage to purchase a home fell 13% during the 2 weeks & were 17% lower than the same period 1 year ago.  While Dec is typically the slowest month of the year for home sales, these numbers are seasonally adjusted & the annual comparison shows considerable weakness.  While there are more homes on the market now than there were last year at this time, many of those houses have been sitting for months, due to high prices & higher interest rates.  Mortgage rates started this week above 7% on the 30-year fixed, according to a separate survey from Mortgage News Daily.  Given the holidays falling midweek this year, there is significant volatility in all of these numbers.  “There’s no way to know where the bond market will open up on Thursday,” wrote Matthew Graham, chief operating officer at Mortgage News Daily.  “The final or first trading day of any given year can see some excess volatility/momentum for reasons that have nothing to do with the normal motivations (economic data, news, policy changes).”

Mortgage demand dives nearly 22% to end 2024

The € & £ hit multi-month lows against the $, as the fresh trading year kicked off & investors geared up for the return of Donald Trump to the White House this month.  The € was 0.66% lower against the greenback at $1.0285, hitting its weakest level since Nov 2022 & the £ dropped 1.14% to $1.237, an 8-month low.  Optimism around the US economy & equities was in focus as markets reopened following disrupted trade over Christmas & the New Year.  “Already [U.S.] growth has kept outpacing forecasts as consumers and companies have shrugged off the impact of high interest rates, with the unemployment rate remaining low,” Susannah Streeter, head of money & markets at Hargreaves Lansdown, said.  “Investors are hopeful that a goldilocks scenario will be the story of 2025, amid promises of lower taxes and deregulation under a second Trump presidency.”  Some improvement in growth is expected in 2025, but forecasts for Europe remain comparatively downbeat, particularly with Trump's threat of sweeping tariffs & a potential trade war clouding the picture.  Revised figures published last week showed the UK economy stagnated in the 3rd qtr, while economists warn that political instability & structural issues will drag on Germany, France & other euro zone nations this year.  Those outlooks have significantly pulled on currency markets in recent months, with inflationary risks from Trump's tariff proposals expected to lead to fewer Federal Reserve interest rate cuts in 2025.  The ECB & Bank of England meanwhile appeared slightly more dovish at their Dec meetings.  Higher interest rates are generally supportive of the domestic currency.

Euro and British pound tumble against U.S. dollar as markets brace for Trump return

Stocks rose to kick off the first trading day of the new year as traders returned from holiday.  Markets are eyeing a comeback after a  year-end slide to begin the week dented hopes for a Santa Claus rally.  The decline capped a blowout 2024 for US stocks that saw the S&P 500 post 2 years in a row of over-20% gains, something it hasn't achieved in almost 3 decades.  However early buying of stocks has faded in the last hour.