Markets hover while investors look for direction

Dow slid 68, advancers over decliners 2-1 & NAZ was off 172.  The MLP index jumped 5 to the 218s & the REIT index rose 8+ to the 399s.  Junk bond funds were mixed & Treasuries saw buying which lowered yields.  Oil dropped 1+ to the 78s & gold jumped 29 to 2746 (more on both below).

Dow Jones Industrials

Federal Reserve Governor Christopher Waller said that the central bank could lower interest rates multiple times this year if inflation eases as he is expecting.  The policymaker said he expects the first cut could come in the first ½ of the year, with others to follow so long as economic data on prices & unemployment cooperate.  “As long as the data comes in good on inflation or continues on that path, then I can certainly see rate cuts happening sooner than maybe the markets are pricing in,” Waller added.  When asked how many that could entail, he responded, “That’s all going to be driven by the data. I mean, if we make a lot of progress, you could do more,” which he said could mean 3 or4, assuming qtr percentage point increments.  “If the data doesn’t cooperate, then you’re going to be back to two and going maybe even one, if we just get a lot of sticky inflation,” he noted.  Traders increased their bets for a slightly more aggressive pace of rate cuts following his remarks.  Market-implied odds for a May move rose to about 50%, though Jun appeared to be the better bet, according to CME Group data.  Expectations for a 2nd reduction by the end of the year climbed to about 55%, or about 10 percentage points higher than before he spoke.  At the core of Waller's hopes for easing is a belief that inflation will ease further as the year goes on, despite several months' of data showing stickiness in some key prices.  The consumer price index  slowed to a 3.2% core reading, excluding food & energy, for Dec, down 0.1 percentage point from the prior month though still well above the Fed's 2% target.  “Right now, I think inflation is going to continue to come in towards our target.  The year over year, stickiness that we saw in 2024 I think will start to dissipate,” he said.  “So I may be a little more optimistic about inflation coming down than the rest of my colleagues, and that’s what’s driving my outlook for the path for policy.”  “Well, January, we need to kind of see what’s going to happen. ... We’re in really no rush to do things,” Waller continued.  

Fed Governor Waller sees potential for multiple interest rate cuts in 2025

Scott Bessent, Pres-elect Trump's choice to head the Treasury Dept said that extending Trump's 2017 tax cuts that are set to expire at the end of this year is "the single most important economic issue of the day."  "If we do not renew and extend, then we will be facing an economic calamity," Bessent told the Senate Finance Committee.  "We will see a gigantic middle class tax increase."

Bessent says extending tax cuts a top priority

Target (TGT), a Dividend Aristocrat, raised its 4th-quarter sales forecast after more consumers turned to its stores & website for holiday shopping, particularly on days known for deep discounts.  The big-box retailer now expects comparable sales in the fiscal 4th qtr to grow by about 1.5%.  That's better than its most recent outlook that the metric would be approximately flat.  Comparable sales includes sales on its website & stores open at least 13 months.  Yet the discounter did not lift its profit outlook, an indication that deals motivated shoppers.  TGT anticipates 4th-qtr EPS will be $1.85 - $2.45 & full-year EPS will be $8.30 - $8.90.  TGT cut its profit guidance in early Nov after it posted its biggest earnings miss in 2 years & blamed some of its troubles on softer sales of discretionary merchandise & the costs of preparing for a short-lived port strike in Oct.  The stock fell 1.29.

Target says its holiday sales were better than expected — but its profits weren’t

Gold traded at the highest in a month, climbing for a 3rd day as the $ & yields moved lower after US retail sales rose less than expected last month.  Gold for Feb was last seen up $34 to $2752 per ounce, the highest since Dec 11.  The Commerce Dept  reported retail sales rose by 0.4% in Dec, down from a revised 0.8% in Nov & under expectations for a 0.5% monthly rise.  The data follows on a slight drop in the core Consumer Price Index, excluding food & energy, reported yesterday that spurred hopes the Federal Reserve will speed interest-rate cuts, lowering the $ & yields.  Gold's data dependency is clearly present in pricing, especially with this week's inflation data & the related back to pricing in a rate cut by Jul.  This is indicative of the bouts of strength & weakness that is expected in gold & should lead to gold holding & its resiliency enduring.  The $ weakened, with the ICE dollar index last seen down 0.9 points to 109.0.  Treasury yields also weakened, with the US 2-year note last seen paying 4.245%. down 2.1 basis points, while the yield on the 10-year note was down 4.8 points to 4.609%.

Gold Climbs to Month-High as the Dollar and Yields Drop as U.S. December Retail Sales Lag Expectations

Oil prices gained for a 2nd session, supported by worries over potential supply disruptions amid US sanctions on Russia, a larger-than-forecast fall in US crude oil stocks & an improving global demand outlook.  Brent crude futures rose 23¢ to $82.26 per barrel after rising 2.6% in the previous session to their highest since Jul 26 last year.  West Texas Intermediate crude futures rose 28¢ to $80.32 a barrel, after gaining 3.3% yesterday to their highest since Jul 19.  US crude oil stocks fell last week to their lowest since Apr 2022 as exports rose & imports fell, the Energy Information Administration (EIA) said.  The 2M-barrel draw was more than the 992K-barrel decline that had been expected.  The drop added to a tightened global supply outlook after the US imposed broader sanctions on Russian oil producers & tankers.  New US sanction measures have sent Moscow's top customers scouring the globe for replacement barrels, while shipping rates have also surged.  The Biden administration on yesterday imposed hundreds of additional sanctions targeting Russia's military industrial base & evasion schemes.  Meanwhile. OPEC+ has been curtailing output over the past 2 years, are likely to be cautious about increasing supply despite the recent price rally.

Oil rises as US inventory decline heightens supply concerns

US stocks wobble around the flat-line as Pres-elect Trump's Treasury Secretary pick, Scott Bessent, is on Capitol Hill offering insights into what investors can expect from the upcoming administration.  Investors navigate market uncertainty around the Fed's next move & Pres-elect Trump's return to the White House.  Meanwhile the Dow has been stuck in a sideways rut for 3 months.