Dow edged up 71, decliners over advancers 4-3 & NAZ inched 14 higher. The MLP index retreated 2 to the 325s following recent strength & the REIT index remained close to yesterday's close at 409. Junk bond funds continued to wobble & Treasuries were mixed. Oil crawled higher in the 72s & gold was off all of 1 to 2947 (more on both below).
Dow Jones Industrials
Federal Reserve officials in Jan agreed they would need to see inflation come down more before lowering interest rates further, & expressed concern about the impact Pres Trump’s tariffs would have in making that happen, according to meeting minutes. Policymakers on the Federal Open Market Committee unanimously decided at the meeting to hold their key policy rate steady after 3 consecutive cuts totaling a full percentage point in 2024. In reaching the decision, members commented on the potential impacts from the new administration, including chatter about the tariffs as well as the impact from reduced regulations and taxes. The committee noted that current policy is “significantly less restrictive” than it had been prior to the rate cuts, giving members time to evaluate conditions before making any additional moves. Members said that the current policy provides “time to assess the evolving outlook for economic activity, the labor market, and inflation, with the vast majority pointing to a still-restrictive policy stance. Participants indicated that, provided the economy remained near maximum employment, they would want to see further progress on inflation before making additional adjustments to the target range for the federal funds rate.“ Officials noted concerns they had about the potential for policy changes to keep inflation above the Fed’s target. The pres already has instituted some tariffs but in recent days has threatened to expand them. In remarks yesterday, Trump said he is looking at 25% duties on autos, pharmaceuticals & semiconductors that would accelerate thru the year. While he did not delve too far into specifics, the tariffs would take trade policy to another level & pose further threats to prices at a time when inflation has eased but is still above the Fed's 2% goal. FOMC members cited, “the effects of potential changes in trade and immigration policy as well as strong consumer demand. Business contacts in a number of Districts had indicated that firms would attempt to pass on to consumers higher input costs arising from potential tariffs.“ They further noted “upside risks to the inflation outlook. In particular, participants cited the possible effects of potential changes in trade and immigration policy.“
Fed officials are worried about tariffs’ impact on inflation, minutes show
Walmart (WMT), a Dow stock & Dividend Aristocrat, is known for its low prices & no frills approach. So it may come as a surprise that wealthier shoppers are helping to fuel the retailer's growth. For more than 2 years, the discounter has noticed more customers with 6-figure incomes shopping on its website & in its stores. Households earning more than $100K made up 75% of its market share gains in the fiscal 3rd qutr, CEO Doug McMillon said in Nov. Those newer & more frequent customers have helped support the company's aspirations to sell more higher-margin items, such as clothing & home goods. They are driving the e-commerce sales, which have grown by double digits for 10 consecutive qtrs. And they can boost the retailer's newer revenue streams, such as subscription-based membership program Walmart+ & its advertising business Walmart Connect. CEO John Furner acknowledged that the retailer has gained & then lost upper-income customers before, such as in 2008 & 2009 during the last recession. Affluent shoppers stretched their $s at the big-box retailer, but then ultimately returned to competitors. This time, Furner said the gains will last because WMT can save shoppers both time & money with e-commerce options. “It’s different because we deliver to you at the curb [of the store],” he said. “We deliver to your house. We deliver your refrigerator. That whole Supercenter, which is an amazing retail format, is available in an hour or two for a large part of the country and growing really quickly.” The stock rose 14¢.
Walmart is getting a bump from a surprising cohort: Wealthier shoppersMicrosoft (MSFT), a Dow stock, announced Majorana 1, its first quantum computing chip after the company has spent nearly 2 decades of research in the field. Technologists believe quantum computers could 1 day efficiently solve problems that would be taxing if not impossible for classical computers. Today's computers use bits that can be either on or off while quantum computers employ quantum bits, or qubits, that can operate in both states simultaneously. MSFT's quantum chip employs 8 topological qubits using indium arsenide, which is a semiconductor, & aluminum, which is a superconductor. MSFT won't be allowing clients to use its Majorana 1 chip thru its Azure public cloud, as it plans to do with its custom artificial intelligence chip, Maia 100. Instead, Majorana 1 is a step toward a goal of a M qubits on a chip, following extensive physics research. Rather than rely on another company for fabrication, it's manufacturing the components of Majorana 1 itself in the US. That's possible because the work is unfolding at a small scale. “We want to get to a few hundred qubits before we start talking about commercial reliability,” Jason Zander, a MSFT exec VP, reported. In the meantime, the company will engage with national laboratories & universities on research using Majorana 1. The stock rose 5.17.
Microsoft reveals its first quantum computing chip, the Majorana 1Gold eases as dollar holds ground, focus on Trump tariffs
Oil prices edged higher in European trading, as traders weighed supply disruption concerns in Russia & the US. Yet gains were limited by the prospect of easing sanctions of Russia, & a subsequent return of supplies from the major oil-producing country, in the event of a peace deal to halt the war in Ukraine. Brent crude futures rose 0.5% to $76.26 a barrel, while West Texas Intermediate crude futures had increased by 0.6% to $72.29 per barrel. Prices rose in the prior session after Ukrainian drone strikes targeted a key Russian crude-pumping station, disrupting supply from Kazakhstan. The attack reignited fears of further supply disruptions in a market already grappling with tight inventories. Russia reported that crude shipments via the Caspian Pipeline Consortium (CPC), a key export route for Kazakhstan's oil, declined by 30-40% yesterday following the drone attack. An estimate showed that a 30% reduction would remove approximately 380K barrels per day from global supply. Elsewhere, a spell of cold weather in the US has threatened supplies as well. The North Dakota Pipeline Authority has flagged that the state's output levels would be down by 150K barrels per day. Markets were also focusing on a meeting between top officials from the US & Russia on bringing a halt to the almost 3-year war in Ukraine.
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