Markets rise for best week since November on rate hopes

Dow climbed 334, advancers over decliners 3-2 & NAZ gained 291.  The MLP index was up 1+ to 321 & the REIT index held steady at 400.  Junk bond funds inched higher & Treasuries remained little change, keeping yields flattish.  Oil fell to the high 77s & gold declined 8 to 2742 on profit taking (more below).

Dow Jones Industrials

Tesla (TSLA) stock jumped amid speculation that CEO Elon Musk could potentially buy TikTok. The social media platform needs to find an American buyer, or it will effectively face a countrywide ban starting next week & Musk is reportedly the most likely candidate.  The Supreme Court  rejected an appeal from TikTok to overturn a federal law effectively banning the social media platform.  The ban would penalize major companies for offering TikTok in their app stores.  It's set to take effect Jan. 19 unless TikTok's Chinese parent company ByteDance sells the app to an American owner, per a federal law signed by Pres Biden in 2024, which cited national security concerns related to the platform.  TSLA stock jumped 13.27.

Tesla stock jumps amid speculation Musk could buy TikTok

The Federal Trade Commission (FTC) said that it is suing PepsiCo (PEP), a Dividend Aristocrat, for illegal price discrimination, alleging the food & beverage giant gave an unnamed retailer more favorable prices than its competition.  The FTC alleges PEP violated the Robinson-Patman Act, which bars sellers from giving competing buyers different prices for the same "commodity" or selectively providing allowances, like compensation for advertising.  The agency argues PEP gave promotional payments & allowances, as well as advertising & promotional tools, that it didn't offer to the retail giant's rivals.  PEP denied the allegations & said the FTC's lawsuit is wrong, both factually & legally.  "PepsiCo strongly disputes the FTC's allegations, and the partisan manner in which the suit was filed. We will vigorously present our case in court," the company said.  "PepsiCo's practices are in line with industry norms and we do not favor certain customers by offering discounts or promotional support to some customers and not others."  The FTC also said that a "substantial portion" of the alleged violations are redacted in the lawsuit, citing legal protections given to PEP & a large, big box retailer.  The commission is seeking to lift the redactions to show how PEP broke the law & how those alleged actions led to higher prices for competing retailers.  The stock rose 1.76.

FTC sues PepsiCo, alleging price discrimination is raising costs for consumers

The Federal Reserve said that it is leaving an intl grouping of central banks that focused on how the financial system could help combat climate change.  The Fed's membership has been criticized by Reps in Congress.  In a short statement, the Fed said it had “appreciated” working with the Network of Central Banks & Supervisors for Greening the Financial System, the organization “has increasingly broadened in scope, covering a wider range of issues that are outside of the Board’s statutory mandate.”  Five of the Fed's 7 governors voted in favor of leaving the network, including Chair Jerome Powell.  Governors Michael Barr & Adriana Kugler abstained.

Federal Reserve says it will leave climate change organization

Gold prices were pressured by an uptick in the $, but remained on track for a weekly gain as uncertainties around Pre-elect Trump's policies & renewed bets of further rate cuts lifted bullion above the key $2700 level.  Spot gold eased 0.1% to $2710 per ounce while US gold futures slid 0.1% to $2753.  Gold hit over one-month high yesterday, $65 away from its all-time high of $2790 hit in Oct.  Prices have gained 0.8% this week, their 3rd straight weekly gain after softer-than-expected US core inflation figures on Wed intensified speculation of more than a single rate cut from the Fed.  Traders are pricing in 2 rate cuts by year-end, with Fed Governor Christopher Waller hinting at the possibility of more cuts should economic data weaken further.  Markets now keenly await Trump's inauguration on Jan 20 & his broad trade tariffs are expected to further ignite inflation & trigger trade wars, potentially increasing bullion's safe-haven appeal.

Gold eyes third weekly gain as markets look to Trump inauguration

Oil prices edged lower but remained on course for a 4th consecutive week of gains, as the latest US sanctions on Russian energy trade added to worries about oil supply disruptions.  Brent crude futures were down 41¢, at $80.87 per barrel, having gained 1.4% this week.  US West Texas Intermediate crude futures were down 89¢ (1.1%) at $77.81 a barrel, having climbed 1.6% for the week.  Sanctions on Russia are causing tightness of supply in Europe, India & China as they scramble for supply.

Oil set for fourth week of gains on US sanctions

Stocks jumped amid a tech stock revival, as investors assessed a week of key data & earnings reports and eyed likely policy shifts under a Trump administration.  Markets have turned upbeat as investors take stock of recent big bank earnings & inflation readings, which are favorable for interest-rate cuts.  Stocks had a major rally on Wed, while the 10-year Treasury yield pulled back to trade around 4.6% today.  Dow finished up an important 1549 this week.

Markets climb as techs and rate-cut hopes are revived

Dow jumped 432, advancers over decliners better than 5-2 & NAZ advanced 305.  The MLP index added 1+ to 321 & the REIT index went up 2 to the 401s.  Junk bond funds eased a little higher & Treasuries were little changed, keeping yields about even.  Oil slid back to the high 77s on supply fears & gold inched up 1 to 2752 following recent strength.

Dow Jones Industrials

Mortgage rates continued their upward climb this week, leaping above 7% & adding further pressure on the 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 7.04%, up from last week's reading of 6.93%.  The average rate on a 30-year loan was 6.60% a year ago.  "Mortgage rates ticked up for the fifth consecutive week and crossed seven percent for the first time since May of 2024," said Sam Khater, Freddie Mac's chief economist.  "The underlying strength of the economy is contributing to this increase in rates."  The average rate on the 15-year fixed mortgage climbed to 6.27% from 6.14% last week.  1 year ago, the rate on the 15-year fixed note averaged 5.76%.

Mortgage rates climb to the highest level for the first time in months

Pres-elect Trump said he spoke on the phone with Chinese Pres Xi Jinping about, TikTok, fentanyl, trade & more.  “The call was a very good one for both China and the U.S.A.,” Trump said.  “It is my expectation that we will solve many problems together, and starting immediately,” said the pres-elect, who is set to be sworn into office on Mon.  “We discussed balancing Trade, Fentanyl, TikTok, and many other subjects. President Xi and I will do everything possible to make the World more peaceful and safe!” Trump added.  Xi after the call said that he & Trump both expressed hope for greater progress in US-China relations.  Trump's talk with Xi about TikTok came shortly before the Supreme Court upheld a federal law that will effectively ban the popular video-sharing app in the US.  The law is set to take effect Sun.  It is unclear how Trump, who has credited TikTok with helping him defeat VP Kamala Harris in the Nov 5 election, will handle the impending ban.

Trump and China’s Xi discuss TikTok, trade, fentanyl, president-elect says

Treasury yields fell, pulling back further from recent highs as investors assess the US inflation outlook.  The 10-year Treasury fell more than 2 basis points to 4.584% & the 2-year Treasury yield slipped around 1 basis point to 4.23%.  1 basis point is equal to 0.01%, & yields & prices have an inverted relationship.  Treasury yields plummeted on Wed, with the 10-year yield sliding 13 basis points & the 2-year yield dropping 10 basis points.  Earlier this week, the benchmark yield hit its highest level in 14 months.  That was after Dec's consumer price index was published & the core inflation rate slowed to 3.2% on an annual basis, lower than the 3.3% forecast.  Core inflation, excluding volatile food & energy prices, grew 0.2% on a monthly basis, which was also lower than expected.  Headline inflation was up 0.4% on a monthly basis & 2.9% on an annual basis.  After the release of this data, Federal Reserve Governor Christopher Waller said that the central bank may lower interest rates multiple times this year if inflation continues to ease.  “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 noted.

10-year Treasury note yield falls, continuing retreat from 14-month high

Stocks jumped amid a tech stock revival, as investors assessed a week of key data, earnings reports & eyed likely policy shifts under a Trump administration.  Markets have turned upbeat as investors took stock of recent big bank earnings & inflation readings, which have revived bets on interest-rate cuts.  Stocks are on track for big weekly wins after a major rally on Wed, while the 10-year Treasury yield pulled back to trade around 4.6%.

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.

Markets struggle as yesterday's rally was not extended

Dow slid back 87, advancers over decliners 4-3 & NAZ declined  28.  The MLP index added 2+ to the 316s & the REIT index rose 4+ to the 396s.  Junk bond funds were little changed & Treasuries had limited buying which reduced yields.  Oil was off 1+ to the 78s after its recent rise & gold soared 36 to 2754.

Dow Jones Industrials

The backbone of the US economy, the American small business, may be breaking beyond repair without some serious intervention, a new study by private digital lender Biz2Credit shows.  Data from the study was pulled from more than 100K financing applications submitted to Biz2Credit between Jan 2022 & Dec 2024 shows a sharp decline in the earnings of small businesses toward the end of 2024, a trend the lender sees continuing into 2025.  The study underscores concern about the economy after 4 years of Bidenomics, or Pres Biden's policies that involve taxes & regulations on the business community while providing tax incentives for some targeted industries that align with his progressive agenda.  Despite strong headline numbers of GDP growth & low unemployment, problems such as inflation & regulatory costs have hit certain segments of the economy harder than others.  "Small business owners went on a roller coaster ride in 2024. Earnings grew until July and declined every month through December," said Rohit Arora, Biz2Credit's CEO & co-founder.  "Average monthly earnings dropped by almost $68,000 in comparison to 2023 and also were lower than they were in 2022."  The reason for the decline is that small businesses don't have the scale to spread costs over a large balance sheet & are hit hardest by inflation, which, while abating, has led to high prices for goods that haven't.  The incoming Trump administration has vowed to lighten regulations & taxes on small businesses to regain the growth lost during the Biden years.  "Trump was elected based on his promise to fix the economy, and he says it will be a priority from Day 1," said Arora.  "Based on our data on later months of 2024, the start of 2025 could be a rocky one for small businesses."  The survey, for instance, shows that small businesses suffered a 43% decline in profits during 2024.  The average monthly earnings of surveyed businesses for the first 11 months of 2024 came out to $87K compared with $150K in 2023, the worst yearly average since 2020.  1 major problem for small businesses has been the persistence of high prices.  Business-related costs have dramatically increased with average monthly expenses coming in at $664K compared with $364K the year prior.  On a bright note, the National Federation of Independent Business (NFIB) published its latest Small Business Optimism Index, showing that optimism on Main Street jumped 3.4 points to 105.1 in Dec.  It marked the highest reading since Oct 2018, as small business owners hope for improving economic conditions under Trump.

Small business earnings plunge despite US GDP growth

Bank of America (BAC) posted results that topped expectations for profit & revenue on better-than-expected investment banking & interest income.  4th-qtr profit more than doubled to $6.7B (82¢ per share) from a year earlier, when the bank had a $2.1B Federal Deposit Insurance Corp assessment tied to the 2023 regional bank failures & a $1.6B charge tied to accounting on interest rate swaps.  Revenue jumped 15% to $25.5B on rising fees from investment banking & asset management & stronger trading results.  EPS rose to 82¢ vs 77¢ expected & revenue was $25.5B vs $25.2B expected.  Investment banking fees surged 44% to $1.65B, roughly $180M expected.  That indicates the company's bankers had a strong end to the year, as just last month, CEO Brian Moynihan said investors that investment banking fees would jump 25% in the qtr.  The firm said that net interest income, 1 of the most watched figures for the lender, rose 3% to $14.5B, exceeding estimates by about $170M.  Perhaps more than other megabanks, the firm’s fortunes seem to hinge on rates & their impact on net interest income.  Investors will be keen to hear about the company’s target for 2025, especially as expectations for rate cuts have been reined in.  The stock fell 77¢.

Bank of America tops estimates on better-than-expected investment banking, interest income

Sales of all-electric vehicles & hybrid models reached 20% of new car & truck sales in the US for the first time last year, marking a landmark year for “green” vehicles but coming at a slower pace than many had previously anticipated.  Auto data firm Motor Intelligence reports more than 3.2M “electrified” vehicles were sold last year, or 1.9M hybrid vehicles, including plug-in models, & 1.3M all-electric models.  Traditional vehicles with gas or diesel internal combustion engines still made up the majority of sales, but declined to 79.8%, falling under 80% for the first time in modern automotive history.  Regarding sales of pure EVs, Tesla (TSLA) continued to dominate, but Cox Automotive estimated its annual sales fell & its market share dropped to about 49%, down from 55% in 2023.  The Tesla Model Y & Model 3 were estimated to be the bestselling EVs in 2024.  Following TSLA in EV sales was Hyundai Motor, including Kia, at 9.3% of EV market share; General Motors (GM) at 8.7%; & then Ford (F) at 7.5%, according to Motor Intelligence.  BMW rounded out the top 5 at 4.1%.

EV, hybrid sales reached a record 20% of U.S. vehicle sales in 2024

Stocks wavered, with the major indices struggling to build on the previous day's surge amid another round of big bank earnings.  Investors also watched as the Senate hearing kicked off for Pres-elect Trump's pick for Treasury Secretary, Scott Bessent.  Markets are coming off a major 1-day rally on the heels of a surprise easing in consumer inflation that prompted questions about whether the pricing out of interest-rate cuts this year had gone too far.  Stocks ripped higher yesterday on the back of the data & stellar earnings from major US lenders.  Traders have now adjusted thinking that the Federal Reserve could lower rates before Jul, reversing the pile-out that was sparked by the stronger-than-expected Dec jobs report.

Markets zoom as cooling inflation fuels Fed rate cut hopes

Dow skyrocketed 703, advancers over decliners an impressive 6-1 & NAZ soared 466.  The MLP index gained 3+ to the 315s & the REIT index added 1 to 392.  Junk bond funds traded higher along with the stock market & Treasuries saw more buying which reduced yields sharply.  Oil finished up 3 to go over 80 from late session buying & gold zoomed 37 to 2719 (more on both below).

Dow Jones Industrials

US economic activity increased slightly to moderately in late Nov & Dec, the Federal Reserve said, with employment ticking up & prices rising moderately amid concerns about the potential impact of policies under Pres-elect Trump.  The findings, which draw on observations from the business & community contacts of each of the Fed's 12 regional banks, provide a snapshot of the economy.  "Contacts expected prices to continue to rise in 2025, with some noting the potential for higher tariffs to contribute to price increases," the central bank said in its summary of surveys & interviews from across the country known collectively as the Beige Book.  "More contacts were optimistic about the outlook for 2025 than were pessimistic about it, though contacts in several Districts expressed concerns that changes in immigration and tariff policy could negatively affect the economy."  Fed policymakers cut the policy rate by a full percentage point in the final 4 months of last year at 4.25%-4.50%.  Most project a smaller reduction this year, given slowing progress toward the Fed's 2% inflation goal in recent months & a strong labor market.  Consumer prices rose 2.9% in the 12 months thru Dec, the largest rise since Jul & an acceleration from Nov's 2.7% increase.  Dec's unemployment rate was 4.1%, lower than the prior month.  Going forward, uncertainty around how Trump's planned tariffs, tax cuts & other policies will affect the economy also has Fed policymakers in wait-&-see mode.  Financial markets are betting on no policy-rate reduction until June at the earliest.

US businesses optimistic but flag concerns, Fed survey shows

Fresh inflation data released today is likely to keep the Federal Reserve on pause during its next policy meeting this month, even though a new reading did show some signs of easing.  On a "core" basis, which eliminates the more volatile costs of food & gas, the Dec& Consumer Price Index (CPI) climbed 0.2% over the prior month, a deceleration from Nov's 0.3% monthly gain.  On an annual basis, prices rose 3.2%.  It was the first drop on a core basis after 3 months of being stuck at 3.3%.  "This latest inflation reading confirms a Fed rate cut skip at the January FOMC meeting," said EY chief economist Gregory Daco.  The new print "won’t change expectations for a pause later this month, but it should curb some of the talk about the Fed potentially raising rates,” said Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management.  The Fed next meets on Jan 28-29 & investors are nearly unanimous in their view the central bank will leave rates unchanged after reducing them by a full percentage point in late 2024.  "We are making progress on inflation, it's just very slow," former Federal Reserve economist Claudia Sahm said Yahoo Finance.  "Cuts are not coming later this month, but that doesn't mean they aren't coming later this year."

CPI reading keeps Fed on hold — but curbs hike talks

Wells Fargo & Company (WFC) reported a net income of $5.08B, up 47% year over year in the 4th qtr 4th qtr of 2024 & EPS was $1.43, beating the consensus of $1.34.  Revenue remained almost flat at $20.4B.  Analysts expected $20.6B.  The banking giant reported a 7% year-over-year drop in net interest income to $11.8B driven by deposit mix & pricing changes, the impact of lower rates on floating rate assets, & lower loan balances, partially offset by lower market funding.  Noninterest income increased 11% to $8.5B, driven by improved results from venture capital investments, an increase in asset-based fees in Wealth & Investment Management on higher market valuations, & higher investment banking fees, as well as increases in most other fee categories, partially offset by net losses on debt securities related to a repositioning of the investment portfolio & lower net gains from trading in Markets business.  For fiscal year 2025, WFC expects net interest income to be ~1 to 3% higher than 2024 net interest income of $47.7B, down 9% year over year.  Average loans (4Q25 vs. 4Q24) are expected to grow modestly due to anticipated growth in Corp & Investment Banking Markets & Banking, & auto & credit card sales.  Average deposits in all operating segments are expected to grow modestly, which should reduce the need for higher-cost market funding.  The stock jumped 4.92 (5%).

Wells Fargo Q4 Earnings: Investors Cheer 50% Jump In Net Profit, ROE Improvement, Bank Expects Up To 3% Jump In 2025 NII

Gold rose to the $2690 per ounce mark, extending gains from the prior session to its highest in over 1 month as cooling underlying inflation in the US favored bets of less restrictive monetary policy by the Fed this year.  Core consumer inflation unexpectedly slowed on an annual basis, while headline consumer prices refrained from showing aggressive upside surprises.  The results supported bullion & Treasuries across all durations as progress in disinflation would allow FOMC members to ease monetary restriction, lowering the opportunity cost of holding non-yielding assets.  Consequently, markets anticipated bets of a Fed rate cut to Jul instead of Sep.  Concerns of stubborn price growth had recently been magnified by pro-inflationary policies advocated by Pres-elect Trump, including tariffs on major trade partners & increased deficit spending.  In turn, more support from bullion was capped by signals of a potential rate hike by the Bank of Japan next week.

Gold Rises to Over 1-Month High

Oil prices were little changed, after falling the previous day, as a dip in US crude stockpiles & expectations of supply disruptions from sanctions on Russian tankers lent support amid forecasts for lower global fuel demand.  Brent crude futures were up 2¢ to $79.94 a barrel, after dropping 1.4% in the previous session.  US West Texas Intermediate crude rose 12¢ to $77.62 a barrel after a 1.6% drop.  Prices slipped yesterday after the US Energy Information Administration predicted oil will be under pressure over the next 2 years as supply should outpace demand.  However, the market found support today from a drop in crude stockpiles in the US, the world's biggest oil consumer, reported by the American Petroleum Institute late yesterday & expectations for supply disruptions after the Treasury Dept imposed sanctions Russian oil producers & its shadow fleet of tankers.  The API reported US crude oil stocks fell by 2.6M barrels last week.  But gasoline inventories rose by 5.4M barrels while distillate stocks climbed by 4.88M barrels.  In its report, the EIA expects Brent prices to fall 8% to average $74 a barrel in 2025, then fall further to $66 a barrel in 2026, while WTI will average $70 in 2025 & fall to $62 next year.  Global demand is expected to average 104M barrels per day in 2025, down from the prior estimate of 104.3M bpd. 

Oil little changed as falling U.S. stockpiles outweigh soft demand outlook

Stocks rallied as high hopes for bank earnings paid off & a crucial consumer inflation update reported key prices increased less than expected in Dec.  Stocks took a leg higher after the Consumer Price Index raised hopes for progress by the Fed reaching its 2% inflation target.  Favorable bank earnings reports were also helpful.

Markets soar after encouraging inflation report, strong bank earnings

Dow surged 630, advancers over decliners about 6-1 & NAZ gained 400.  The MLP index added another 3 to the 315s & the REIT index was up 2 to the 393s.  Junk bond funds went higher & Treasuries were heavily bought, taking yields sharply lower (more below).  Oil rose 1+ to the 79s (5 month high) as traders weigh demand forecasts & gold advanced 21 to 2703.

Dow Jones Industrials

Inflation rose again in Dec as stubbornly high prices continued to strain consumers' finances ahead of the Federal Reserve's next decision on interest rates.  The Labor Dept said that the consumer price index (CPI), a broad measure of how much everyday goods like gasoline, groceries & rent cost, increased 0.4% in Dec while ticking up to 2.9% on an annual basis.  The 2.9% reading is the highest since Jul 2024.  The month-to-month reading came in slightly hotter than expected, while the annual figure was in line with expectations.  The headline figure was up compared with Nov's reading of 2.7%, while monthly price growth continued at the same pace as a month ago.  Core prices, which exclude more volatile measurements of gasoline & food to better assess price growth trends, were up 0.2% on a monthly basis in Dec, in line with expectations & down from 0.3% the prior month.  Core prices were up 3.2% in Dec compared with a year ago, slightly cooler than expected& down from 3.3% in Nov.  Inflationary pressures in the US economy continue to persist despite progress in bringing inflation closer to the Federal Reserve's 2% target over the past year.  High inflation has created severe financial pressures for most US households, which are forced to pay more for everyday necessities like food & rent.  Price hikes are particularly difficult for lower-income Americans, because they tend to spend more of their already-stretched paycheck on necessities & have less flexibility to save money.  Energy costs accounted for over 40% of the monthly CPI increase, with the Bureau of Labor Statistics' energy index rising 2.6% in Dec after energy prices showed little change in recent months.  Gasoline prices were up 4.4% for the month of Dec & food prices also rose by 0.3% on a monthly basis.  Both food at home & food away from home increased by 0.3% last month.  Prices for meat, poultry, fish & eggs were up 0.6% for the month & 4.2% from a year ago.  Egg prices rose 3.2% & are up 36.8% compared with a year ago amid a bird flu outbreak that has impacted production.  Housing costs  rose by 0.3%, the same as the increase observed in Nov.  The shelter index is up 4.6% over the past year, which is the smallest 12-month increase since Jan 2022.

Inflation rises again in December during Biden's final full month as president

JPMorgan Chase (JPM), a Dow stock, posted record quarterly & annual earnings & revenue, reinforcing the company's status as the biggest & most profitable bank in US history.  Profit rose 50% to $14B in the 4th qtr as noninterest expenses fell 7% from a year earlier, when the firm had a $2.9B FDIC assessment tied to regional bank failures.  Revenue climbed 10% to $43.7B, helped by financial operations & better-than-expected net interest income of $23.5B, exceeding the estimate by almost $400M.  CEO Jamie Dimon said in the release that the economy was “resilient,” buoyed by low unemployment & healthy consumer spending, as well as optimism for the Trump administration's pro-growth agenda.  “However, two significant risks remain,” Dimon said.  “Ongoing and future spending requirements will likely be inflationary, and therefore, inflation may persist for some time. Additionally, geopolitical conditions remain the most dangerous and complicated since World War II. As always, we hope for the best but prepare the firm for a wide range of scenarios.”  CFO Jeremy Barnum said that net interest income for 2025 would be about $94B.  The stock went up 3.28.

JPMorgan Chase posts record profit as the bank’s massive scale pays off

The  10-year Treasury yield dropped as investors parsed key inflation data.  The 10-year yield fell around 14 basis points to 4.651%, further pulling back from the 14-month high reached yesterday.  The yield on the 2-year Treasury retreated by about 10 basis points at 4.27%.  One basis point is equal to 0.01% & yields & prices move in opposite directions.  Bond yields took a leg down after core inflation in the consumer price index, which excludes volatile food & energy prices, slowed to 3.2% on an annualized basis in Dec.  This data comes a day after the producer price index showed wholesale prices rose less than expected in Dec, easing investor concerns over a resurgence in inflation.  However, the data did not alter market expectations for the Federal Reserve to hold interest rates steady at its Jan 28-29 meeting.   Later in the week, investors will turn attention to figures on retail sales & housing starts.

10-year Treasury yield pulls back aggressively after core inflation is light in December

US stocks rallied as high hopes for bank earnings paid off & a crucial consumer inflation update reported prices increased less than expected in Dec.  Stocks took a leg higher after the CPI showed progress toward the Fed's 2% inflation target in Dec.  The  annual core CPI had been stuck at a 3.3% gain for the 4 months.   Dec was the first time since Jul that the metric reflected a deceleration in price growth.

Markets edge higher ahead of more inflation data

Dow finished up 221 in very chopping trading, advancers over decliners 5-2 & NAZ dropped 43.  The MLP index jumped 8+ to the 413s & the REIT index gained 4+ to the 391s.  Junk bond funds fluctuated & Treasuries saw a little buying & yields slid lower.  Oil was of 1 to the high 77s after a recent rise & gold rose 10 to 2689 (more on both below).

Dow Jones Industrials

The federal budget sank further into red ink during Dec, leaving the first fiscal qtr deficit nearly 40% higher than it was the prior year.  For the final calendar month of 2024, the shortfall totaled $87B, which actually represented a 33% decline for the same period a year prior, according to a Treasury Dept report.  However, that brought the 3-month fiscal year total to $711B, some $200B more than the comparable period in the prior year, or 39.4%.  Rising financing costs along with continued spending growth & declining tax receipts have combined to send deficits spiraling, pushing the national debt past the $36T mark.  Though short-term Treasury yields have held fairly steady over the past month, rates at the far end of the duration curve have surged.  The benchmark 10-year note most recently yielded close to 4.8%, or about 0.4 percentage point above where it was a month ago.  At the same time, outlays during the first qtr were 11% higher than a year ago while receipts fell by 2%.  Interest on the national debt has totaled $308B in fiscal 2025, up 7% from a year ago.  Financing costs are projected to top $1.2T for the full year, which would top 2024's record.  The gov this year has spent more on interest payments than any other category but Social Security, defense & health care.

Budget deficit rose in December and is now 40% higher than it was a year ago

Meta (META) is set to cut about 5% of its workforce, focusing on the company’s lowest-performing staffers.  CEO Mark Zuckerberg informed employees about the decision to “move out low performers faster” posted on the company's internal Workplace forum.  Zuckerberg told employees 2025 will “be an intense year.”  The company specified that it is “exiting approximately 5% of our lowest performers” in a separate message posted by a company director. META has more than 72K employees.  META said employees affected by the layoffs will be notified by Feb 10 & receive severance in line with what the company has provided previously.  The cuts represent its largest layoffs since it eliminated 21K jobs, nearly a qtr of its workforce, in 2022 & 2023.  The move follows several major operational changes within META aimed at building closer ties with Pres-elect Trump.  Last week, Zuckerberg announced META would end its 3rd-party fact-checking program in favor of a “Community Notes” model used on Elon Musk's platform X, where individual users provide more context to posts.  “The recent elections also feel like a cultural tipping point towards once again prioritizing speech, so we’re going to get back to our roots and focus on reducing mistakes, simplifying our polices and restoring free expression on our platforms,” Zuckerberg said in a video.  The stock dropped 14.08 (2%).

Meta announces 5% cuts in preparation for ‘intense year’

America's small business owners are feeling better about the economy than they have in 6 years, in anticipation of Pres-elect Trump returning to the White House.  The National Federation of Independent Business' (NFIB) latest Small Business Optimism Index jumped 3.4 points to 105.1 in Dec, the highest reading since Oct 2018.  This is the 2nd consecutive reading above the 50-year average, after the Nov index broke a 2.5-year streak that same month as Trump's win.  At the same time, the NFIB's Uncertainty Index plunged 12 points last month, falling to 86.  "Optimism on Main Street continues to grow with the improved economic outlook following the election," said NFIB Chief Economist Bill Dunkelberg.  "Small business owners feel more certain and hopeful about the economic agenda of the new administration."  Dunkelberg added, "Expectations for economic growth, lower inflation, and positive business conditions have increased in anticipation of pro-business policies and legislation in the new year."  The survey comes as the outgoing Biden-Harris administration continues to tout its economic policies, pointing to growth & low unemployment numbers.  But the high inflation & heavy regulations of the past 4 years were felt on Main Street.  Trump has vowed to slash regulations, as he did during his first term & to make his signature tax cuts permanent when he returns to the Oval Office.  In the NFIB's latest survey, the net percent of owners expecting the economy to improve rose 16 points from Nov to a seasonally adjusted 52%, the highest since the 4th qtr of 1983.  The percent of small business owners believing it is a good time to expand their business also climbed, rising 6 points to a seasonally-adjusted 20%, which is the highest reading since Feb 2020.  The net percent of owners expecting higher real sales volumes rose 8 points to a net 22%, which is the highest reading since Jan 2020.  Inflation remained small business owners' single most important problem in operating their business according to the Dec survey, with 20% of respondents listing it as their biggest headache.  But finding quality labor was not far behind, with 19% saying that was their greatest problem.

Small business optimism jumps to 6-year high following Trump win

Gold edged higher as the $ fell after a US inflation measure rose less than expected last month, while a report said the Trump Administration plans to gradually introduce tariffs on US imports.  Gold for Feb was last seen up $4 to $2683 per ounce.  The US Bureau of Labor Statistics reported the Producer Price Index (PPI) rose 0.2% in Dec from the prior month, under expectations for a monthly rise of 0.3%.  The data comes ahead of tomorrow's release of the Dec Consumer Price Index, which is expected to show a monthly rise of 0.3%, unchanged from Nov.  A report said Trump's economic team may be planning a slow ramp up in planned tariffs, raising levies monthly to boost negotiating leverage & avoid spiking inflation that could lead to interest-rate hikes from the Federal Reserve.  The $ fell following the inflation data & the report, with the ICE dollar index last seen down 0.67 points to 109.29.  Treasury yields were mixed, with the US 2-year note last seen paying 4.377%, down 1.7 basis points, while the yield on the 10-year note was up 1.2 points to 4.799%.

Gold Edges Up as the Dollar Weakens After a U.S. Inflation Measure Comes in Below Expectations

WTI crude fell to around $78.10 a barrel after a 3-day rally.  Yesterday, crude hit a 5-month high as tighter US sanctions on Russia's energy industry threatened global supplies.  The restrictions have targeted major producers & hundreds of ships & tankers, forcing major buyers such as India & China to look for alternative sources.  Early signs of disruption are already visible, with a senior Indian official saying sanctioned ships would be barred from unloading, & China securing oil supplies from the UAE & Oman.  In a related move, 6 European countries asked the EU to ease a $60-a-barrel price cap on Russian oil to curb Russia's war efforts in Ukraine.  However, weaker demand from China could limit the impact of tighter supplies, after data showed the country's crude imports fell in 2024 for the first time in 2 decades, excluding the pandemic period.

Oil Halts Rising Rise

US stocks edged higher as investors took in the first of 2 key inflation reports this week, which showed prices rose less than expected in Dec.  Also in focus was a report that the incoming Trump administration could hike tariffs more gradually to ease inflationary pressures.  The Producer Price Index, which tracks price changes companies see at a wholesale level, rose 3.3% over last year, up from 3% in Nov but less than economists expected.  Meanwhile, Pres-elect Trump's team is considering a month-by-month rollout  of promised tariff increases rather than imposing higher levels in a single move in a bid to help prevent inflation spikes.

Markets hesitate after light inflation report

Dow fell 70, but advancers over decliners 5-2 & NAZ was off 79.  The MLP index was higher again, up 5+ to 410, & the REIT index added 2+ to 390.  Junk bond funds saw a little more selling & Treasuries crawled higher, reducing yields slightly (more below).  Oil pulled back almost 1 to 78 & gold recovered 8 to 2686.

Dow Jones Industrials

US producer prices increased moderately in Dec, but that is unlikely to change views that the Federal Reserve would not cut interest rates again before the 2nd ½ of this year amid labor market resilience.  The producer price index (PPI) for final demand rose 0.2% last month after an unrevised 0.4% advance in Nov, the Labor Dept's Bureau of Labor Statistics said.  The forecast called for the PPI climbing 0.3%.  In the 12 months thru Dec, the PPI accelerated 3.3% after increasing 3.0% in Nov.  The surge in the year-on-year rate reflected last year's lower prices, especially for energy products, dropping out of the calculation.  The report followed news last week of a sharp rise in nonfarm payrolls in Dec & decline in the unemployment rate, which led economists to expect that the central bank would keep rates unchanged through Jun.  Bank of America Securities believes the Fed's easing cycle is over.  Goldman Sachs now expects 2 cuts this year in Jun & Dec, revised down from 3 previously.  The central bank kicked off its easing cycle in Sep & has lowered its benchmark overnight interest rate by 100 basis points to 4.50%-4.75%.  The last reduction was in Dec when policymakers also projected 2 rate cuts this year instead of the 4 they had forecast in Sep.  The policy rate was hiked by 5.25 percentage points in 2022 & 2023 to tame inflation.  Fears are escalating that pledges by Pres-elect Trump to impose or massively raise tariffs on imports & deport Ms of undocumented immigrants could stoke inflation.  That was evident in the spike in consumers' inflation expectations in Jan.

US producer prices rise moderately in December

Treasury yields pulled back as wholesale prices rose less than expected in Dec.  The 10-year yield fell around 2 basis points to 4.786% after hitting a fresh 14-month high in the previous session & the 2-year Treasury yield was about 3 basis points lower at 4.373%.  One basis point is equal to 0.01% & yields & prices move in opposite directions.  The decline yields came amid a lighter-than-expected inflation reading ahead of tomorrow's consumer price index.  US bond yields spiked last week, after a hotter-than-expected jobs report fueled expectations for a slow pace of Federal Reserve cuts.  The central bank next meets from Jan 28-29 & markets have priced in a more than 97% probability of a rate hold.

10-year Treasury yield eases slightly as first of two key inflation reports comes in light

Tesla (TSLA) stock popped on the heels of promising global electric vehicle sales data & media reports indicating Chinese authorities could allow the EV giant's CEO Elon Musk to buy the US operations of social media platform TikTok.  The sale would be part of a contingency plan as a deadline approaches for the platform owned by Chinese parent company ByteDance to either divest or face a US ban.  A report said that Chinese officials have discussed the option of selling TikTok's US unit to Musk, who is also the CEO of X, formally known as Twitter.  Although sales slowed for a 2nd consecutive month, 2024 proved to be a record year with 17.1M units sold.  Traders have been taking note of Elon Musk's reach across a variety of companies & data collection spanning across everything from electric vehicles & satellites to social media.  The stock rose 5.15.

Tesla pops on encouraging EV data, Musk's possible TikTok buy

Stocks have been wavering.  Investors have been watching inflation reports closely, including the cool Dec PPI report above, to try to figure out when the Federal Reserve may resume cutting rates.  Dow is back to where it was in early Nov.