Dow sold off 696 (near session lows), decliners over advancers 4-1 & NAZ gave back a very big 317. The MLP index was off 2+ to the 301s & the REIT index tumbled 9+ to the 382s on threats of higher interest rates. Junk bond funds remained weak & Treasuries saw heavy selling selling which raised yields. Oil gained 2+ to the 76s & gold shot up 27 to 2718 (more on both below).
Dow Jones Industrials
US consumers expect inflation to increase over
the next 12 months & beyond, likely reflecting concerns that broad
tariffs on imports pledged by Pres-elect Trump's incoming
administration could raise prices for households. The
University of Michigan's survey showed consumers' 1-year inflation
expectations jumped to 3.3% in Jan, the highest level since May,
from 2.8% in Dec. That raised the 12-month inflation expectations
above the 2.3%-3.0% range seen in the 2 years prior to the COVID-19
pandemic. Long-run inflation expectations soared to 3.3%, the highest level since Jun 2008, from 3.0% in Dec. "For
both the short and long run, inflation expectations rose across
multiple demographic groups, with particularly strong increases among
lower-income consumers and Independents," said Surveys of Consumers
Director Joanne Hsu. In addition to imposing
or massively raising tariffs on imports, Trump has also promised to
deport Ms of undocumented immigrants, policies that economists
have warned would stoke inflation. Anger over high prices swept Trump to victory in the Nov 5 election. Trump promised on the campaign trail to lower prices. The
surge in inflation expectations added to labor market strength in
reinforcing the message from the Federal Reserve about fewer interest
rate cuts this year. Economists expect the
central bank will keep its benchmark overnight interest rate
unchanged in the 4.25%-4.50% range thru the first ½ of the year.
US consumer inflation expectations soar in January on tariff fears
Mortgage rates ticked up for the 4th straight week, climbing toward 7% as elevated rates & high home prices continue to snuff out demand in the housing market. Freddie Mac's latest Primary Mortgage Market Survey, showed that the average rate on the benchmark 30-year fixed mortgage jumped to 6.93%, up from last week's reading of 6.91%. The average rate on a 30-year loan was 6.66% a year ago. "The continued strength of the economy has put upward pressure on mortgage rates, and along with high home prices, continues to impact housing affordability," said Sam Khater, Freddie Mac's chief economist. "The lack of entry-level supply also remains an issue, especially for those looking to become first-time homeowners." The average rate on the 15-year fixed mortgage climbed to 6.14% from 6.13% last week & 1 year ago, the rate on the 15-year fixed note averaged 5.87%.
Mortgage rates rise for fourth straight week, dissuading potential homebuyers
Delta Air Lines' (DAL) first-qtr outlook topped analyst expectations as the
carrier forecast strong travel demand to start the year, which CEO Ed
Bastian said will likely be the carrier's best ever. DAL
expects to generate more than $4B in free cash this year, up 18%
from 2024 & in the midpoint of its annual target of $3-$5B. For the full year, it expects annual adjusted EPS of more than of $7.35. “We
feel quite good coming into the new year,” Bastian told CNBC.
“Everywhere, we see consumers continue to prioritize experience over
goods.” That is setting up Delta for “our best financial year in our history,” Bastian added. DAL expects revenue to rise 7-9%, ahead of the roughly
5% growth analyst forecast bby analysts. The carrier expects
first-qtr EPS of 70¢ - $1.00, slightly
ahead of predictions for 65¢ - 97¢. Airlines have enjoyed strong post-pandemic travel
demand, which analysts said is likely to continue this year, with a few deals along the way for consumers. DAL has said it’s been capitalizing on a boom in premium travel as more customers shell out for roomier seats or rewards credit cards. “We
feel quite good coming into the new year,” Bastian said. “Everywhere, we see consumers continue to prioritize experience over
goods.” That is setting up Delta for “our best financial year in our history,” Bastian added. The stock rose 5.52 in a weak stock market.
Gold prices rebounded as uncertainty surrounding the incoming Trump administration's policies lifted safe-haven appeal, even as a stronger-than-expected US employment data reinforced expectations the Federal Reserve might not cut interest rates as aggressively this year. Spot gold was up 0.6% at $2686 while US gold futures settled 0.9% higher at $2715. Gold prices briefly slipped to $2663 an ounce after data showed the US added 256K last month, compared with the estimate for a 160K rise. The unemployment rate stood at 4.1%, compared with a forecast of 4.2%. Bullion prices, however, quickly rebounded & hit their highest levels since Dec 12, poised for a weekly gain of more than 1.7%. Gold's price action points to a lack of committed sellers of the metal; a diffidence well-learned from last year's remarkable rise. Gold is still acting resilient in the face of a much stronger-than-expected jobs report. 1 of the factors that's been supporting gold is this uncertainty that has been seen going into the US presidential inauguration.
Gold rebounds on Trump policy uncertainty despite robust US jobs data
Oil prices jumped more than 4% to their highest since Oct as traders focused on potential supply disruptions from further sanctions on Russia. Brent crude futures rose $3.50 (4.6%) to $80.42 a barrel, hitting $80 a barrel for the first time since Oct 7, & US West Texas Intermediate crude futures rose $3.57 (4.8%) to $77.49. The US is set to impose some of the toughest sanctions on Russia's oil industry to date, designating 180 vessels, dozens of traders, 2 major oil companies & several Russian oil execs'
Oil prices jump more than 4% on concerns over further sanctions on Russia
Stocks continued under selling pressure as investors digested a final 2024 jobs report that blew past expectations on hiring, raising more uncertainty about the path of interest rates this year. The Dec nonfarm payrolls report showed a very healthy labor market. The US economy added over 250K jobs in the month, while the unemployment rate fell to 4.1%. The 10-year Treasury yield continued a recent uptick, moving closer to 4.8% to touch its highest levels since late 2023. Dow dropped about 800 in the holiday shortened week of trading.
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