Markets wobble after today's inflation report

Dow finished up 47, advancers over decliners 2-1 & NAZ rose 144.  The MLP index added 1+ to the 271s & the REIT index went up 4+ to the 383s.  Junk bond funds continued to be in demand & Treasuries were higher, reducing yields.  Oil was fractionally lower to 78 & gold added 10 to 2053 (more on both below).

AMJ (Alerian MLP Index tracking fund)

The number of Americans filing for unemployment benefits rose more than expected last week as high-profile companies continue to announce major job cuts.  The Labor Dept weekly jobless report shows initial claims last week jumped by 13K to 215K, above the 210K estimate.  However, that is slightly below the 2019 pre-pandemic average of 218K claims.  Continuing claims, filed by Americans who are consecutively receiving unemployment benefits, hit 1.9M in the prior week, up 45K from the previous week & the highest level since Nov.  The labor market has remained historically tight over the past year, defying expectations for a slowdown.  Economists anticipate the labor market will continue to slow in coming months as higher interest rates work their way thru the economy.  The Federal Reserve raised interest rates 11 times beginning in Mar 2022 in an effort to rein in inflation & cool the labor market.  Policymakers have suggested that fast wage growth, the product of a strong labor market, was a contributing factor to the inflation crisis that ravaged Ms of Americans' pocketbooks over the past few years.  There are growing signs the labor market is beginning to weaken in the face of higher interest rates & stubborn inflation.  There has been a wave of notable layoffs since the start of the new year, & the list grows longer by the day.  Still, job growth unexpectedly surged at the start of the year as employers added a whopping 353K new jobs & the unemployment rate also held steady at 3.7%.  The surprisingly strong report painted a picture of a job market that has gone largely unscathed despite higher interest rates, but it also diminished the odds of an imminent rate cut.

Jobless claims jumped more than expected last week

Mortgage rates continue to march higher, climbing again for the 4th consecutive week.  Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate on the benchmark 30-year fixed mortgage climbed to 6.94% this week, up from 6.90% last week.  The average rate on a 30-year loan was 6.65% a year ago.  But the average rate on the 15-year fixed mortgage fell a bit to 6.26% after coming in last week at 6.29%.  One year ago, the rate on the 15-year fixed note averaged 5.89%.  "The recent boomerang in rates has dampened already tentative homebuyer momentum as we approach the spring, a historically busy season for homebuying," Freddie Mac chief economist Sam Khater said.  "While sales of newly built homes are trending in a positive direction, higher rates and elevated prices continue to pose affordability challenges that may leave potential homebuyers on the sidelines," Khater added.  Buying activity tends to pick up in the spring following slower winter months, but elevated rates & sky-high home prices have stalled the housing market as more would-be buyers & sellers are priced out or opting not to move.  Housing demand has ground to a halt as rates move higher.  Applications for a mortgage to purchase a home dropped 5% from last week, the Mortgage Bankers Association reported.  Application volume is down 12% compared with the same time last year.

Mortgage rates climb for fourth straight week

Former Federal Reserve Bank of St Louis Pres & CEO James Bullard explained how Personal Consumption Expenditures (PCE) got its reputation & why it's here to stay.  "Alan Greenspan in the 90s did a review of all the different ways to measure inflation, and the outcome of that was that the personal consumption expenditures was viewed as a broader measure of inflation and, maybe, a better signal of the overall inflation picture," Bullard said.  "And ever since then, there hasn't been another review," he continued.  The PCE rose again in Jan as the Fed continues to grapple with the country's fluctuating economy.  The personal consumption expenditures (PCE) index showed that consumer prices rose 0.3% from the previous month, according to the Labor Dept.  On an annual basis, prices climbed 2.4%, down slightly from the 2.6% reading recorded the previous month.  Speculation has been swirling around the Fed as experts are trying to pinpoint when the central bank will eventually start cutting rates.  "I think if you're sitting on the committee and the economy looks like it's been rebounding here some and inflation seems to be coming down, but maybe not as fast as you thought. Why do anything? Why not just sit where you are?," Bullard said.  He went on to add that as inflation comes down, the Fed will "have to get to a lower value of the policy rate."  "But exactly when the committee will get to that is what everyone's arguing about," Bullard stressed.

Fed is ‘stuck’ in Greenspan era, former St. Louis Fed president says

Gold closed at a 4-week high as a key US inflation measure showed price increases slowed last month, pushing treasury yields down on hopes US interest rates will soon be lowered.  Gold for Apr closed up $12 to settle at $2054 per ounce, the highest since Feb 1.  The US personal consumption expenditures index (PCE), the Federal Reserve's preferred inflation measure, rose by 2.4% annualized in Jan, down from 2.6% in Dec & in line with expectations.  Core PCE rose 2.8% annualized, down from 2.9% a month earlier & also matching the consensus forecast.  The result is likely to spur expectations for lower interest rates as inflation falls closer to the Fed's 2% target, though central bank officials have indicated they want to see inflation drop further before cutting rates.  The $ fell following the release of the data, making gold more affordable for intl buyers.  The ICE dollar index was last seen down 0.15 points & Treasury yields were also lower on hopes lower interest rates are on the way.  The 2-year note was last seen paying 4.646%, down 0.5 basis points, while the yield on the 10-year note was down 0.7 basis points to 4.259%.

Gold Rises as a Key US Inflation Measure Fell in January, Sending Yields Lower

West Texas Intermediate (WTI) crude oil closed lower as a key US inflation measure fell more than expected last month.  WTI crude for Apr closed down 28¢ to settle at $78.86 per barrel, while Apr Brent crude, the global benchmark, was last seen down 3¢ to $83.65.  The US personal consumption expenditures index (PCE), the Federal Reserve's preferred inflation measure, rose by 2.4% annualized in Jan, down from 2.6% in Dec & in line with expectations.  Core PCE rose 2.8% annualized, down from 2.9% a month earlier & also matching the consensus forecast.  The result is likely to spur expectations for lower interest rates as inflation falls closer to the Fed's 2% target, though central bank officials have indicated they want to see inflation drop further before cutting rates.

WTI Crude Oil Closes Lower as a Key US Inflation Measure Shows a Drop in Line With Expectations in January

Dow began trading today with a solid gain.  Then it went flat until the end when there was late day buying.  In Feb Dow was up 846 & YTD had a 1310 gain.  However there is more talk of a coming recession as layoff announcements from major companies continue.

Dow Jones Industrials

Markets hesitate as investors weigh fresh US inflation data

Dow was off 10, advancers over decliners about 3-1 & NAZ added 66.  The MLP index gained 2 to the 272s & the REIT index added 3+ to the 382s.  Junk bond funds crawled higher & Treasuries were purchased which reduced yields (more below).  Oil hardly budged in the 78s (more below) & gold rose 13 to 2056.

AMJ (Alerian MLP Index tracking fund)

An inflation measure closely watched by the Federal Reserve rose again in Jan as high prices continued to weigh on Ms of Americans.  The personal consumption expenditures (PCE) index showed that consumer prices rose 0.3% from the previous month, according to the Labor Dept.  On an annual basis, prices climbed 2.4%, down slightly from the 2.6% reading recorded the previous month.  The figures were both in line with estimates.  Prices for services increased 0.6% for the month & remain up 3.9% from the same time last year, while the cost of goods dropped 0.2% on a monthly basis despite a 0.5% increase in the cost of food.  Goods prices are down 0.5% from the prior year.  In a sign the Fed's fight against inflation is slowly making progress, core prices, which strip out the more volatile measurements of food & energy, climbed 0.4% from the previous month & 2.8% from the previous year.  It marked the best reading for core inflation since Feb 2021.   While the Fed is targeting the PCE headline figure as it tries to wrestle consumer prices back to 2%, Chair Jerome Powell previously said that core data is actually a better indicator of inflation.  Both the core & headline numbers point to inflation that is slowly returning to the Fed's preferred 2% target.  Other figures included in the report showed that consumer spending rose just 0.2% in Jan compared with a 0.7% increase in Dec, suggesting that Americans are pumping the brakes on spending after the pivotal holiday season.  Many economists anticipate that spending will slow further in the coming months as consumers continue to grapple with expensive goods, high interest rates & the resumption of federal student loan payments.  The report also showed a surprise jump in personal income, which climbed 1%, more than double the 0.4% estimate.

Fed's favorite inflation gauge rises in January as Americans feel the squeeze

Treasury yields inched lower after the latest inflation data was in line with predictions.  The 10-year Treasury yield fell nearly 4 basis points to 4.236% & the yield on the 2-year Treasury declined almost 2 basis points to 4.629%.  Yields & prices have an inverted relationship & 1 basis point equals 0.01%.  Jan's personal consumption expenditures (PCE) report matched expectations.  Headline PCE came in at 0.3% month over month & 2.4% on an annualized basis.  Excluding volatile food & energy costs, the PCE increased 0.4% in the month & 2.8% from a year prior.  Yields were marginally higher immediately after the PCE index numbers were released before pulling back.  The PCE is the Federal Reserve's favored inflation gauge, meaning investors were closely watching the data for clues into the future path of monetary policy.  Expectations for interest rates have already moved to later in the year, with markets now widely expecting the first cut to take place in Jun rather than the Mar date that was expected at the start of the year.  New York Federal Reserve Pres John Williams said a lot of progress had been made on inflation, but more work needed to be done to reach the Fed’s 2% target.  His comments echoed the sentiment conveyed by various Fed officials in recent months & weeks, who have repeatedly said their decision-making would be data-led & they were still looking for more evidence of inflation falling sustainably before cutting rates.

Treasury yields wobble after inflation data comes in as expected

Crude oil futures are headed for a 2nd consecutive monthly gain as OPEC+ is expected to extend its production cuts thru at least the 2nd qtr.  The West Texas Intermediate contract for Apr gained 10¢ to $78.64 a barrel & the Apr Brent contract, which expires today, fell 2¢ to $83.66 a barrel.  US & Brent have gained about 6% month to date with first month contracts trading at a premium to later months.  A premium for immediate versus later delivery typically indicates a tightening oil market.  OPEC+ is considering extending its production cuts thru at least the 2nd qtr & the cartel is considering keeping the cuts in place for the rest of the year.  OPEC+ agreed in Nov to slash 2.2M barrels per day in the 1st qtr of 2024 as the US, Canada, Guyana & Brazil pumped crude at a breakneck pace, putting pressure on oil prices late last year.  Prices have also risen as the conflict in the Middle East rages on, with tensions rising on the Israel-Lebanon border & Houthi militants continuing their attacks in shipping in the Red Sea.  The conflict has not disrupted crude production in the region so far, though analysts have warned there is a risk of a direct confrontation between Iran & the US that would impact the oil market.

Oil on pace for monthly gain as OPEC+ expected to extend production cuts

Stocks opened higher as investors digested a crucial inflation reading key to assess how quickly the Federal Reserve will start cutting interest rates & whether the recent rally will revive.  The data while good was not good enough to get rave reviews.  The first rate cut continues to look to be several months away.

Dow Jones Industrials 

Markets slide while traders wait for fresh inflation data tomorrow

Dow dropped 23 with a little buying into the close, decliners ahead of advancers about 5-4 & NAZ retreated 87.  The MLP index fell 1+ to the 271s & the REIT index gained 4 to the 379s.  Junk bond funds were mixed & Treasuries rose which reduced yields.  Oil was lower in the 78s & gold edged down 1 to 2042 (more on both below).

AMJ (Alerian MLP Index tracking fund)

The US economy grew at a solid clip in the 4th qtr amid strong consumer spending, the gov confirmed, but it appears to have lost some speed early in the new year.  Gross domestic product increased at a 3.2% annualized rate last qtr, revised slightly down from the previously reported 3.3% pace, the Commerce Dept's Bureau of Economic Analysis said in its 2nd estimate of 4th-qtr GDP growth.  The forecast had expected that GDP growth would be unrevised.  The modest downward revision reflected a downgrade to private inventory investment.  Inflation was fairly mild last qtr, though revised slightly up from previously reported estimates.  The economy grew at a 4.9% pace in the Jul-Sep qtr.  It expanded 2.5% in 2023, an acceleration from 1.9% in 2022 & is growing above what Federal Reserve officials regard as the non-inflationary growth rate of 1.8%.  There are, however, signs that momentum has ebbed.  Retail sales, housing starts, durable goods orders & production at factories declined in Jan.  Some of the weakness in data last month has been blamed on freezing temperatures as well as difficulties adjusting the data for seasonal fluctuations at the start of the year.  Economists are not forecasting a recession.  Financial markets expect the Fed to start cutting interest rates in Jun, pushed back from May.  Since Mar 2022, the central bank has raised its policy rate by 525 basis points to the current 5.25%-5.50% range.

US fourth-quarter economic growth revised slightly lower

Novavax (NVAX) vaccine maker 4th-qtr revenue & earnings that missed estimates & said it expects full-year 2024 sales to come in flat or lower than last year.  Still, NVAX narrowed its losses in the qtr from the same period a year ago, even as demand for the biotech company's Covid vaccine, its only marketable product, & other shots & treatments that combat the virus continue to plummet worldwide.  The company posted a net loss of $1.44 per share for the qtr.  That compares with a net loss of $2.28 per share in the year-earlier quarter.  4th-qtr sales of $291.3M were down from the $357.4M in the year-earlier period.  CEO John Jacobs said that the company had some revenue move from 2023 into 2024 due to the timing of some advance purchase agreements for doses of its Covid shot.  But Jacobs also said that NVAX is “disappointed” with its performance in the US Covid vaccine market last season.  Several factors, such as the later entry of its updated Covid shot last fall, affected the company's ability to gain Covid vaccine market share in the US, COO John Trizzino said.   But he said factors “outside of our control,” including a smaller-than-expected Covid market size & an overwhelming number of vaccinations that took place in retail pharmacies, led NVAX to perform below expectations.  It expects full-year 2024 revenue to come in at $800M - $1B.  That forecast reflects an expected $500-$600M in revenue from advanced purchase agreements & $300-400M from commercial market product sales, royalties & other revenue from the company's “partner-related activity.”  Analysts expect 2024 revenue of $969M.  NVAX anticipates 1st-qtr revenue to come in at $100M, which reflects the tail end of the current Covid vaccination season.  The company previously expected $300M in sales for the period.  The stock fell 1.61 (27%).

Novavax stock falls as vaccine maker misses quarterly estimates, sees sluggish 2024

The Federal Aviation Administration (FAA) announced that it is giving Boeing (BA), a Dow stock, 90 days to develop a comprehensive action plan that will address "systemic quality-control issues."  FAA Administrator Mike Whitaker said the airplane manufacturer, still reeling from an incident involving a Max 9 jet that lost a door plug mid-flight earlier this year, "must commit to real and profound improvements."  Whitaker informed top BA officials, including CEO Dave Calhoun, of the agency's demands during a safety discussion at FAA headquarters in DC.  "Making foundational change will require a sustained effort from BA's leadership & we are going to hold them accountable every step of the way, with mutually understood milestones and expectations," Whitaker said.  It has been exactly a week since BA replaced the head of its 737 Max program at the company's Renton, Washington, facility.  Elizabeth Lund, senior VP & general manager of Airplane Programs, was appointed to a newly created role that will focus on quality control initiatives.  The stock rose 5.67 (3%).

FAA gives Boeing 90 days to develop plan to address 'quality-control' issues

Gold closed with a small loss as the $ rose & treasury yields weakened after US 4th-qtr GDP growth was revised down to 3.2% from 3.3%.  Gold for Apr closed down $1 to settle at $2042 per ounce.  The Bureau of Economic Analysis revised its estimate for economic growth slightly downward while the consensus estimate expected the original 3.3% report would remain unchanged.  The $ rose following the revision, making gold more expensive for intl buyers.  The ICE dollar index was last seen up 0.13 points to 103.96.  Treasury yields weakened, bullish for gold since it offers no interest.  The 2-year note was last seen paying 4.666%, down 2.1 basis points, while the yield on the 10-year note was down 1.5 basis points to 4.287%.

Gold Edges Down as the Dollar Rises and Yields Dip as US Q4 GDP Growth Revised Downward

West Texas Intermediate (WTI) crude oil closed lower as a report said US oil inventories rose more than expected last week, though expectations OPEC+ will extend voluntary production cuts offered some support.  WTI crude for Apr closed down 33¢ to settle at $78.54 per barrel, while Apr Brent crude, the global benchmark, was last seen down 17¢ to $83.46.  In its weekly report, the Energy Information Administration said US oil inventories rose by 4.2-M barrels last week, above the estimate for a 2.7M barrel rise.  Gasoline & distillate inventories declined by 2.8-M barrels & 0.5-M barrels, respectively.  Yesterday a report said OPEC+ will likely extend voluntary production cuts into the 2nd qtr & possibly thought 2024, as the group continues to manage supply as production in the US, Canada & elsewhere outside the cartel rises.

WTI Crude Closes Lower as US Oil Inventories Rose More Than Expected Last Week

Stocks retreated, coming off a mixed close as caution prevailed ahead of a crucial inflation PCE report that will guide expectations for interest rate cuts.  Also from the Atlanta Fed, the GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first qtr of 2024 is 3.2% on Feb 27, up from 2.9% on Feb 16.

Dow Jones Industrials 

Markets meander, looking for direction

Dow fell 58, advancers over decliners 4-3 & NAZ was off 54.  The MLP index added 1 to the 274s & the REIT index went up 2+ to the 377s.  Junk bond funds were sold & Treasuries had only very limited buying.  Oil pulled back fractionally in the 78s & gold slid back 1 to 2042.

AMJ (Alerian MLP Index tracking fund)

Higher mortgage rates continue to hit demand from both current homeowners & potential homebuyers.  Total mortgage application volume dropped 5.6% last week from the previous week, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index.  An additional adjustment was made to account for the Presidents Day holiday.  The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766K or less) decreased to 7.04% from 7.06%, with points increasing to 0.67 from 0.66 (including the origination fee) for loans with a 20% down payment.  The rate was about a qtr percentage point higher than it was one year ago.  As a result, applications to refinance a home loan were 7% lower than the previous week & were 1% lower than the same week one year ago.  “Higher rates in recent weeks have stalled activity, and last week it dropped more for those seeking FHA and VA refinances,” said Mike Fratantoni, MBA's chief economist.  FHA & VA loans are generally used by lower-income borrowers because they have lower down payment requirements.  Applications for a mortgage to purchase a home dropped 5% for the week & were 12% lower than the same week one year ago.  Fratantoni noted, however, that mortgage demand from buyers looking at newly built homes jumped 19% year over year in Jan.  “This disparity continues to highlight how the lack of existing inventory is the primary constraint to increases in purchase volume. However, mortgage rates above 7% sure don’t help,” he added.  Rates were in the 6% range for all of Jan.

7% interest rates hit weekly mortgage demand hard

Apple (AAPL), a Dow stock,  reportedly abandoning efforts to build an electric car after spending nearly a decade & Bs of $s on the project.  AAPL announced internally that it was canceling its EV endeavor, dubbed Project Titan, surprising the nearly 2000 employees that have been working on it.  The outlet said some of the workers would be redirected to focus on AAPL's generative artificial intelligence division, while others will be laid off.  Rumors have swirled for years that AAPL was trying to build an autonomous electric taxi in an effort to take on EV giant Tesla (TSLA).  Initial reports about the secretive project emerged in 2015.  CEO Cook said the effort was "the mother of all AI projects… probably one of the most difficult AI projects."  The stock fell 1.04.

Apple scraps EV project after nearly a decade and billions of dollars as it shifts its focus to AI

TJX (TJX) holiday sales jumped 13% as shoppers hunting for deals flocked to the off-price retailer.  Despite the strong qtr & end to its fiscal year, the company issued guidance that came in light of  expectations as it prepares for tougher comps in the year ahead & an uncertain growth trajectory.  For the qtr ended Feb 3, the company reported EPS of $1.22, compared with 89¢ a year earlier.  Excluding an additional week in the qtr, TJX reported EPS of $1.12.  Sales rose to $16.4B, up about 13% from $14.5B a year earlier.  The prior-year period's sales included one fewer week.  For the current qtr, it expects EPS of 84-86¢, light of the higher end of expectations of 82-93¢.  For the full year, it expects EPS of $3.94-4.02, compared to estimates of $3.88-4.40.  Over the last year, it raised its sales & profit guidance numerous times.  Ahead of the holiday season, it struck a positive tone as other retailers issued cautious or disappointing guidance amid slowing demand & an uncertain economy.  During the holidays, consumers were laser-focused on finding the best deals & discounts, spending record amounts on Black Friday & Cyber Monday & pulling back when promotions weren't available.  TJX was well-positioned during the period because consumers were able to shop for a wide range of gifts & at prices that tend to be lower than competitors.  The stock went up 40¢.

TJX tops earnings estimates but issues light guidance ahead of uncertain growth path

Stocks opened with significant selling, but buyers returned to trim early losses.  Traders are still are looking for direction while they wait for important inflation data tomorrow.

Dow Jones Industrials 

Markets stumble as rally to record highs cools

Dow retreated 96, advancers over decliners 5-4 & NAZ went up 59.  The MLP index inched up to the 273s & the REIT index was even.  Junk bond funds had limited buying & Treasuries saw a little selling bringing higher yields.  Oil gained 1+ to the high 78s & gold was flattish at 2039 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Home prices rose for the 11th consecutive month in Dec, as housing inventory remained painfully low.  Prices increased 5.5% nationally in Dec when compared with the previous year.  That is up from the 5% annual increase recorded the prior month.  On a monthly basis, prices fell 0.4%, according to the index.  The 10-city composite, which encompassed Los Angeles, Miami & New York, rose 7% annually, compared with an increase of 6.3% in Nov.  The 20-city composite, which also tracked housing prices in Dallas & Seattle, posted an annual gain of 6.1%, which also marks an increase from the 5.4% figure recorded the previous month.  There was a major discrepancy in the price gains in the 20 cities: San Diego reported an 8.8% annual gain in Dec, followed by Los Angeles & Detroit, each with an 8.3% increase.  Portland, Oregon, saw the smallest gain in Dec, with home prices climbing just 0.3% from the prior year.  However, it marked the first time in 2023 that all 20 cities reported a year-over-year gain.  "While we are not experiencing the double-digit gains seen in the previous two years, above-trend growth should be well received considering the rising costs of financing home mortgages," said Brian Luke, head of commodities, real & digital assets at S&P DJI.  The interest-rate-sensitive housing market entered a deep freeze last year in the wake of the Federal Reserve's aggressive interest-rate hike campaign.  However, prices have quickly recovered as buyers adjust to higher mortgage rates & compete for a limited supply of homes.  The problem is unlikely to be resolved anytime soon.  With mortgage rates hovering near the highest level in 2 decades, sellers who locked in a low rate before the pandemic began have been reluctant to sell, leaving few options for eager would-be buyers.  Available home supply is still down a stunning 34.3% from the typical amount before the COVID-19 pandemic began in early 2020, despite a recent drop in mortgage rates, according to a separate report published by Realtor.com.

Home prices hit a new all-time high in December

Americans' attitudes toward the economy soured in Feb after a 3-month streak of improving moods, according to The Conference Board's latest consumer survey.  The survey's index fell in February to 106.7, down from a reading of 110.9 in Jan.  Americans became less worried about rising food & gas prices, but more concerned about the job market.  “The drop in confidence was broad-based, affecting all income groups except households earning less than $15,000 and those earning more than $125,000,” Dana Peterson, chief economist at The Conference Board, said.  “Confidence deteriorated for consumers under the age of 35 and those 55 and over, whereas it improved slightly for those aged 35 to 54.”  Americans' outlook for the economy in the following months, including their expectations for income & business conditions, declined this month, slipping below a threshold that “often signals recession ahead,” according to the report.  Inflation expectations for the year ahead edged lower this month to 5.2%, well below a peak of 7.9% in mid-2022 when inflation was running at its fastest pace in 4 decades.  While the survey showed waning concerns over inflation, it captured rising worries over the job market.  A similar survey by the University of Michigan released earlier this month showed that Americans' moods held steady in Feb, though a 2nd estimate is due later this week.  Respondents of the survey also expressed some concerns over “the US political environment,” Peterson said.  “The [job] market is still strong, it’s just much less strong than a year ago when job swapping for higher pay was easy,” Robert Frick, corp economist with Navy Federal Credit Union, said.  “And now the contentious election season is coming closer into view, and national elections strongly influence perceptions of the economy.”

US consumer confidence soured in February for the first time in three months

Orders for long-lasting US manufactured goods fell by the most in nearly 4 years in Jan, while business investment on equipment appeared to have eased, signs that the economy lost momentum at the start of the year.  Concerns about the economy's outlook, especially the labor market, & the upcoming presidential election were uppermost in consumers' minds in Feb resulting in confidence retreating after 3 straight monthly increases.  The decline in confidence reported by the Conference Board was despite inflation expectations over the next 12 months falling to the lowest level in almost 4 years.  The reports joined a stream of weak data, including retail sales, housing starts & manufacturing production.  Some of the softness has been blamed on freezing temperatures last month as well as difficulties adjusting the data for seasonal fluctuations at the start of the year.  Nonetheless, economists are not forecasting a recession this year.  Orders for durable goods, items ranging from toasters to aircraft meant to last 3 years or more, plunged 6.1% last month amid a sharp drop in commercial aircraft bookings, the Commerce Dept's Census Bureau said.  That was the largest decline since Apr 2020, when the economy was reeling from the first wave of COVID-19 infections.

US Durable Goods Orders Fall More Than Expected in January

Gold closed with a gain on mixed US treasury yields continues while the $ moved lower.  Gold for Apr closed up $5 to settle at $2044 per ounce.  The rise comes as treasury yields were mixed as expectations for US interest-rate cuts in the near term dim, with Federal Reserve officials unwilling to risk seeing inflation rise by trimming rates too soon.  The yield on the 2-year note was last seen down 1.0 basis points to 4.704%, while the 10-year note was up 2.1 basis points to 4.303%.  The $ weakened, making gold more affordable for intl buyers.  The ICE dollar index was last seen down 0.06 points to 103.77.

Gold Closes Higher on Mixed Treasury Yields and a Weaker Dollar

West Texas Intermediate (WTI) crude oil closed higher after a report said OPEC+ may extend voluntary production cuts set to expire at the end of Mar into the 2nd qtr & could extend them thru 2024.  WTI crude oil for Apr delivery closed up $1.29 to settle at $78.87 per barrel, while Apr Brent crude, the global benchmark, closed up $1.12 to $83.65.  A report said OPEC+ is considering extending the voluntary cuts thru the 2nd qtr, while 2 sources said the group could keep the cuts in place thru the year, tightening supply during the high-demand summer months.  The cartel is meeting early next month to review 2nd-qtr production targets & has been expected to keep the cuts in place thru the end of Jun.

WTI Crude Oil Closes Higher on Report OPEC+ to Extend Voluntary Quota Reductions

Little was accomplished in trading today.  I have followed oil for many years & learned about it while many know little or even nothing.  West Texas Intermediate (WTI) had wild gyrations during the Covid period, even going over $100 for a short time.  However in the last couple of years it has been trending sideways in the 70s.  It is an exciting commodity & is especially important for the global economy because just about every business uses it.  Now that the inflation topic is important, it gets more attention.  As a commodity is subject to wild & unforeseen price swings.  Investors need to keep abreast of its price changes.

Dow Jones Industrials 

Markets waver as traders assess fresh earnings

Dow dropped 146, advancers over decliners about 2-1 & NAZ added 30.  The MLP index was up 1+ to the 174s & the REIT index hardly budged in the 375s.  Junk bond funds inched higher & Treasuries saw a little buying which reduced yields slightly (more below).  Oil went up to the 78s & gold crawled up 4 to 2023.

AMJ (Alerian MLP Index tracking fund)

Macy's (M) sales fell nearly 2% in the holiday qtr, as the 166-year-old department store operator unveiled its strategy to get back to growth.  It expects sales to remain stagnant, projecting net sales of $22.2-22.9B for this fiscal year, down from $23.09B in 2023.  Macy's anticipates comparable sales, which take out the impact of store openings & closures, will range from a decline of about 1.5% to a gain of 1.5% compared with the year-ago period on an owned-plus-licensed basis & including 3rd-party marketplace sales.  Yet the new CEO, Tony Spring, laid out a brighter outlook for the following fiscal year & how Macy's plans to get there.  Spring is the former CEO of Macy's higher-end department store Bloomingdale's, weeks after Macy's announced layoffs & as it faced pressure from activist investors.  In the fiscal year that starts in early 2025, Macy's expects low-single-digit comparable sales growth on an annual basis, including owned, licensed & marketplace sales.  It said it expects capital spending to fall below 2024 levels & free cash flow to drop to pre-pandemic levels.  The outlook does not include any potential impact from a proposed credit card late fee ruling by the federal gov.  For the fiscal 4th qtr, Macy's swung to a loss of 26¢ per share, versus EPS of $1.83 per share, a year earlier.  The losses included $1B of impairment & restructuring costs related to its plans to close about 150 locations, which are part of its turnaround strategy.  Revenue fell from $8.26B in the year-ago period.  Digital sales declined 4% compared with the prior-year qtr, & brick-&-mortar sales were roughly flat.  Across the company, comparable sales on an owned-plus-licensed basis fell 4.2% from the year-ago period.  That was better than the 5.8% decline that was expected.  The stock rose 70¢.

Macy’s posts another quarter of falling sales as it unveils new strategy

Lowe's (LOW) beat quarterly earnings & revenue estimates, even as the company continued to see customers tackle fewer home projects.  The home improvement chain was going up against lower expectations for its 4th qtr.  It had cut its full-year forecast in Nov after CEO Marvin Ellison said the company had felt a “greater-than-expected pullback” on pricier items & discretionary home projects.  LOW factored economic uncertainty into its forecast for the current fiscal year, too.  It expects total sales of $84-85B, which would be a drop from $86.4B in fiscal 2023.  Comparable sales will decline 2-3% compared with the prior year, & expects EPS of $12.00 - $12.30.  “Our perspective of 2024 is that we’re going to feel this DIY [do-it-yourself project] pressure throughout the year and we’re going to perform at a high level irrespective of what kind of macroeconomic environment we’re dealing with,” Ellison said.  EPS for the 3-month period that ended Feb 2 was $1.77, compared with $1.58, a year earlier.  Excluding the costs associated with the sale of its Canadian retail business, EPS were $2.28.  Sales fell from $22.4B in the year-ago period.  The prior-year qtr included an additional week & sales from its Canadian business.  Comparable sales dropped by 6.2% year over year, as the home improvement retailer saw weaker demand for do-it-yourself projects & poor weather in Jan.  Comparable sales for home professionals, a category that includes plumbers, electricians & contractors, were flat year over year in the qtr, however.  The stock jumped 6.17.

Lowe’s beats earnings estimates as sales fall — and the company expects revenue to slide this year

Treasury yields slipped after a large drop in durable goods orders raised some questions about the stability of the economy.  The moves were muted as investors awaited a key inflation report later in the week.  The yield on the 10-year Treasury yield was down 1 basis point at 4.289% & the 2-year Treasury yield was last trading at 4.689% after dipping by around 3 basis points.  Yields & prices move in opposite directions & 1 basis point is equivalent to 0.01%.  Investors considered the state of the economy as they looked to data for hints about how it is faring amid higher interest rates & persistent inflation.  Data from the Dept of Commerce showed that orders for long-lasting goods declined more than expected in Jan, with the leading factor being a large drop in demand for transportation.  Durable goods orders tumbled 6.1% on the month, worse than the downwardly revised 0.3% decline in Dec & the estimate for a drop of 5%.  Transportation was the main culprit for Jan's slide, down 16.2%.  Several further key economic reports are slated for the week that could also provide insight on what the path ahead for Federal Reserve interest rates could look like.  This includes the personal consumption expenditures price index, which is a key inflation measure for the Fed.  Fed officials have repeatedly said their decision-making would be data-led & are looking for further evidence that inflation is moving toward the 2% target.  The most recent inflation data for Jan, however, came in hotter than expected, suggesting to investors that inflation could be more persistent than anticipated.

U.S. Treasury yields ease on weak economic data as investors await key inflation report

The stock market is quiet today while traders are digesting economic data.

Dow Jones Industrials 

Markets pause following record highs last week

Dow crawled up only 12 after a strong opening, decliners over advancers about 3-2 & NAZ added 17.  The MLP index was steady in the 274s & the REIT index was off 2+ to 377.  Junk bond funds slid lower & Treasuries had limited selling which increased yields (more below).  Oil was bid higher in the 76s & gold fell 11 to 2037.

AMJ (Alerian MLP Index tracking fund)

The blue-chip stock index is getting a shakeup this week that will make its roster look more modern & potentially help reverse its recent underperformance. Today, Amazon (AMZN) officially becomes a member of the Dow Jones Industrial Average, replacing Walgreens Boots Alliance (WBA).  Shares of the dominant e-commerce platform have surged more than 80% over the past year, making it one of several large stocks that have powered the S&P 500 to new highs while the Dow has struggled to keep up.  The Dow is a smaller average than the S&P 500, with just 30 components, & it's weighted by the share price of the individual stocks rather than the companies' total market value.  That makes some investors view the Dow, begun in May 1896, as a poor representation of the American stock market.  And as technology has become a larger part of the US economy & market over the past 2 decades, the industrial-heavy Dow has perpetually been playing catch-up in gaining more exposure to the fastest growing companies.  The 3 largest tech stocks in the Dow by market cap as of Fri were Apple (AAPL),  Microsoft (MSFT) & Salesforce (CRM).  AMZN is officially a consumer discretionary stock, according to a commonly followed classification system, but it is broadly accepted as a tech giant & its addition will help chip away at the gap between the Dow & the S&P.   AMZN stock was up 3 pennies.

Amazon joins the Dow Monday, giving the 127-year old index a needed upgrade as it trails the S&P 500

Treasury yields declined as investors awaited key economic data set to be published this week which could provide hints about the outlook for interest rates & the state of the economy.  The yield on the 10-year Treasury was less than 1 basis points lower to 4.258% & the 2-year Treasury  yield was last up nearly 2 basis points at 4.705%.  Yields & prices have an inverted relationship & 1 basis point equals 0.01%.  Investors looked ahead to economic data due this week, some of which could inform the Federal Reserve's decisions on interest rate policy.  This includes the Fed's favored inflation gauge, the personal consumption expenditures price index, which is slated for Thurs.  Fed officials have in recent weeks repeatedly said they are looking to data for more evidence that inflation is moving toward the 2% target to become more confident about cutting interest rates.  Both the latest consumer price index & producer price index readings came in higher than expected, prompting concerns about how long it will take for inflation to ease & whether this means interest rates could stay higher for longer than previously hoped.  Markets were last widely expecting the first interest rate cut to take place in Jun.  Other key data this week includes updated GDP figures on Wed.  Questions about whether the economy will be able to avoid a recession as rates remain elevated have been rife among investors.

U.S. Treasury yields fall as investors look ahead to key economic data this week

Intuitive Machines' (LUNR) cargo lander, Odysseus, returned its first images from the moon's surface over the weekend, as the spacecraft settles in to its lunar destination.  The company’s historic IM-1 mission is now operating on the moon after landing on Thurs, becoming the first privately developed spacecraft to soft land on the lunar surface.  LUNR initially reported Odysseus was standing upright.  But, in an update Friday, company execs said they believe the spacecraft caught its landing gear sideways in the moon's surface while touching down & tipped over.  Despite resting on its side, Odysseus is still sending back data.  LUNR expects Odysseus to operate until tomorrow, when its solar panels will no longer be exposed to the sun.  The Odysseus lander carried 12 gov & commercial payloads, 6 of which are for NASA under a $118M contract thru the agency's Commercial Lunar Payload Services (CLPS) initiative.  NASA leadership emphasized the IM-1 mission was still successful despite the spacecraft tipping over, calling the landing “a gigantic accomplishment.”  LUNR stock is volatile stock & fell 2.81 (29%)

Lunar landing photos: Intuitive Machines’ Odysseus sends back first images from the moon

Some traders may be away & spending some of their profits made last week.  Thoughts about lingering relatively high interest rates & how they will affect the economy are common.

 Dow Jones Industrials 

Markets waffle as the rally struggles

Dow went up 62 (below early highs), advancers ahead of decliners about 2-1 & NAZ was off 44.  The MLP index crawled up 1+ to the 275s & the REIT index was off a fraction to the 379s.  Junk bond funds were little changed & Treasuries saw more buying which lowered yields.   Oil dropped almost 2 to the 76s & gold advanced 16 to 2047 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Credit card interest rates have ballooned to record highs in recent years — & the growing portion of the formula that generates profit for card issuers is partly to blame, according to a new analysis by the Consumer Financial Protection Bureau (CFPB).  The average consumer paid  a 22.8% interest rate on their credit card balance at the end of 2023, the highest since the Federal Reserve began tracking data in 1994.  Interest charges, expressed as an annual percentage rate, are up about 10 points in the past decade, from 12.9%.  Total credit card debt & average balances are also at record highs.  “By some measures, credit cards have never been this expensive,” wrote CFPB’s Dan Martinez, senior credit card program manager & financial analyst Margaret Seikel.  Credit card APRs began moving sharply higher in 2022 as the Fed raised its benchmark interest rate to tame inflation.  Interest rates on credit cards (& other consumer loans) generally move in tandem with Fed policy, according to a barometer known as the “prime rate.”  However, credit card companies have also simultaneously raised their average “APR margin,” according to the CFPB.  APR margin is the difference between the total APR & the “prime” rate.  It's a proxy for card issuers' profits commensurate with their lending risk.  Those margins are at record highs: They averaged 14.3% in 2023, up from 9.6% in 2013.  Almost ½ the increase in total credit-card interest rates in the past decade is due to issuers raising their APR margins.  Major credit card issuers got $25B in extra interest by raising their average APR margin over the last 10 years, the CFPB estimated.  The average consumer with a $5300 balance across credit cards would have paid an extra $250 in 2023 due to this increase.  “Increases to the average APR margin ... have fueled issuers’ profitability for the past decade,” Martinez & Seikel wrote.  “Higher APR margins have allowed credit card companies to generate returns that are significantly higher than other bank activities.”

Credit card interest rates have ‘never been this expensive,’ CFPB says

After a sharp spike upwards last week, the average national gas price held steady this week at $3.27, according to AAA.  Demand for gas also held steady, according to information from the Energy Information Administration & remained flat at 8.2M barrels per day.  Gas prices were stagnant after an announcement that the BP-Whiting refinery in Indiana would reopen soon.  The refinery has been closed since early Feb due to a power outage.  "Old man winter is shuffling toward the exit, and with milder weather and longer days looming, the seasonal rise in gas prices is primed to begin," said Andrew Gross, AAA's spokesperson.  "But it will probably be a slow, wobbly start to rising prices."  The national average price of gas is still 20¢ higher than last month but has gone down 12¢ since this time last year.

After weeks of rising prices, gas prices remained steady last week

Shares of Intuitive Machines (LUNR) jumped after the company's successful first moon landing.  LUNR's Nova-C cargo moon lander known as “Odysseus” yesterday became the first privately developed spacecraft to land on the lunar surface, as well as the first US spacecraft to soft-land on the moon in more than 50 years.  The company, based in Houston, Texas, confirmed that the IM-1 mission lander was standing upright & sending data back to earth.  “Odysseus has found his new home,” Tim Crain, Intuitive Machines' CTO & IM-1 mission director, said from the mission control.  LUNR stock initially ripped 40% higher from its previous close of $8.28 a share before paring gains with heavy trading volume.  The company has a market valuation of about $1B & the stock has been rallying over the past month as excitement built in the lead-up to & progress of the IM-1 mission.  LUNR went public via a SPAC a year ago & shares had steadily slid to all-time lows near $2 in Jan.  Today the stock zoomed up $1.31 to $9.59.

Intuitive Machines stock jumps in wild trading after moon landing

Gold closed with a gain as the $ weakened & treasury yields were mixed.  Gold for Apr closed up $18 to settle at $2049 per ounce.  The rise comes as the $ weakened, making the metal more affordable for intl buyers.  The ICE dollar index was last seen down 0.08 points to 103.88.  Treasury yields were mixed following 2 rising sessions, as a series of robust economic reports push off the prospect of lower interest rates in the near term.  The yield on the 2-year note was last seen up 0.6 basis points to 4.707% & the 10-year note was last seen paying 4.246%, down 8.1 basis points.

Gold Closes Higher as the Dollar Weakens amid Mixed Treasury Yields

West Texas Intermediate (WTI) crude oil closed with a loss on demand concerns, losing ground a day after a smaller than expected rise in US inventories buoyed the market.  WTI crude oil for Apr closed down $2.12 to settle at $76.49 per barrel, while Apr Brent crude, the global benchmark, was last seen down $1.86 to $81.81.  The drop comes as demand worries continue, with the economy of China, the #1 importer, faltering amid a debt crisis for its real estate sector.  The Energy Information Administration yesterday reported US oil inventories rose by 3.5M barrels, under expectations for 4.3M barrel increase, offering some support to the market, while Middle East violence also remains a focus, as Israel continues its war against Hamas & Yemen's Houthi militants increase attacks on Red Sea shipping.

WTI Oil Slumps on Demand Concerns, though Mideast Tensions and Lower US inventories Offer Support

Popular stock averages hit new records which took Dow over 39K, up 504 this week.  However Dow has rallied more than 6K from its 4 month lows, shown in the chart below.  That is extremely overbought while interest rates are at very highs levels which could last for months.  The Fed will be busy at its meeting next month.

Dow Jones Industrials 

Markets edge higher as earnings season winds down

Dow rose 120 (but off early highs), advancers over decliners 3-2 & NAZ was off 24.  The MLP index added 2+ to the 275s (see the chart below) & the REIT index was fractionally lower to 381.  Junk bond funds fluctuated & Treasuries were purchased, reducing yields (more below).  Oil fell 1+ to the 77s & gold gained 11 to 2042.

AMJ (Alerian MLP Index tracking fund)

Federal Reserve Governor Christopher Waller said he will need to see more evidence that inflation is cooling before he is willing to support interest rate cuts.  In a policy speech with the question, “What’s the rush?” on cutting rates, the central bank official said higher-than-expected inflation readings for Jan raised questions on where prices are heading and how the Fed should respond.  “Last week’s high reading on CPI inflation may just be a bump in the road, but it also may be a warning that the considerable progress on inflation over the past year may be stalling,” Waller said.  While he said he still expects the Federal Open Market Committee to begin lowering rates at some point this year, Waller said he sees “predominately upside risks” to his expectation that inflation will fall to the Fed's 2% goal.  He added that there are few signs inflation will fall below 2% anytime soon based on strong 3.3% annualized growth in GDP & employment, with few signs of a potential recession in sight.  Waller is a permanent voting member on the FOMC.  “That makes the decision to be patient on beginning to ease policy simpler than it might be,” Waller added.  “I am going to need to see at least another couple more months of inflation data before I can judge whether January was a speed bump or a pothole.”  The remarks are consistent with a general sentiment at the central bank that while further rate hikes are unlikely, the timing & pace of cuts is uncertain.  The inflation data Waller referenced showed the consumer price index (CPI) rose 0.3% in Jan & was up 3.1% from the same period a year ago, both higher than expected.  Excluding food & energy, core CPI ran at a 3.9% annual pace, having risen 0.4% on the month.  Reading thru the data, Waller said it's likely that core personal consumption expenditures prices, the Fed's preferred inflation gauge, will reflect a 2.8% 12-month gain when released later this month.  Such elevated readings make the case stronger for waiting, he said, noting that he will be watching data on consumer spending, employment, & wages & compensation for further clues on inflation.  Retail sales fell an unexpected 0.8% in Jan while payroll growth surged by 353K for the month, well above expectations.  “I still expect it will be appropriate sometime this year to begin easing monetary policy, but the start of policy easing and number of rate cuts will depend on the incoming data,” Waller continued.  “The upshot is that I believe the Committee can wait a little longer to ease monetary policy.”

Fed’s Waller wants more evidence inflation is cooling before cutting interest rates

Treasury yields were higher as investors considered the path ahead for interest rates after fresh comments from Federal Reserve speakers.  The yield on the 10-year Treasury was up 1.4 basis points at 4.333% & the 2-year Treasury  yield was last 2.7 basis points higher at 4.728%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Investors considered the uncertain outlook for interest rates, especially when & how often they would be cut this year.  Fed Governor Christopher Waller said that he was looking for more evidence that inflation was cooling before cutting interest rates.  “I am going to need to see at least another couple more months of inflation data before I can judge whether January was a speed bump or a pothole,” he said.  Jan's consumer price index & producer price index readings had both come in hotter than expected, raising concerns about whether inflation is more persistent than many had hoped for.  Waller's comments were also echoed by Fed Governor Lisa Cook, who said that while she expects rates to be cut this year, she also wanted more confidence in inflation easing.  Their comments were in line with the general sentiment presented by the Fed in recent weeks, including by the minutes from the central bank's Jan policy meeting which were released earlier this week.  They showed that policymakers were keen to not rush any decisions around rate cuts & instead make them cautiously, depending on data, but also highlighted that central bankers were not expecting any further interest rate hikes.

Treasury yields rise as investors consider monetary policy path

Home foreclosures saw a "notable" increase in Jan as Americans continue to grapple with the ongoing cost-of-living crisis.  That is according to a new report published by real estate data provider ATTOM, which found that lenders repossessed 3954 US properties in Jan, a 13% increase from the previous month.  It marked the first monthly increase in completed foreclosures since Jul 2023.  Foreclosures are up just 1% from the same time one year ago.  "We observed a slight uptick in foreclosure filings, which may be partially attributed to the typical post-holiday progression of filings through the legal system," said ATTOM CEO Rob Barber.  "However, other external factors may be at play such as escalating interest rates, inflation, employment shifts and other market dynamics."  The report also indicated that there were 37K properties with foreclosure filings, which includes default notices, scheduled auctions& bank repossessions, in Jan, up 10% from the previous month & up 5% from 2023.  Although foreclosures are on the rise, they remain well below the levels recorded during the 2008 financial crisis.  But the problem could soon get worse as high home prices, mortgage rates & property taxes bite Americans.  Housing affordability is the worst it's been in decades, thanks to a spike in home prices & mortgage rates. Combined, the 2 have helped to push the typical portion of average wages nationwide required for major homeownership expenses up to 33%.  There are several reasons to blame for the affordability crisis.  The Federal Reserve's aggressive interest-rate hike campaign sent mortgage rates soaring above 8% for the first time in nearly 2 decades last year.  Rates have been slow to retreat, hovering near 7% as hotter-than-expected inflation data dashed investors' hopes for immediate rate cuts.  The average rate for a 30-year fixed loan rose to 6.9% this week, Freddie Mac reported, well above the pandemic-era lows of 3%.  Even though mortgage rates are nearly double what they were 3 years ago, home prices have hardly budged.  That is largely due to a lack of available homes for sale.  Sellers who locked in a low mortgage rate before the pandemic began have been reluctant to sell, leaving few options for eager would-be buyers.

Home foreclosures see a 'notable' increase amid ongoing cost-of-living crisis

Fed officials pretty much agree that while inflation is down in the last couple of years, the path for rate cuts is unclear.  Worries continue about reaching the goal of 2% in the near future.  Nervous investors keep buying gold which remains only about 50 below its record high.

Dow Jones Industrials

Markets surge led by Dow and Nasdaq at new records

Dow shot up 456, advancers over decliners 3-2 & NAZ zoomed 460.  The MLP index gained 2+ to the 274s & the REIT index was up 1 to 380.  Junk bond funds edged higher & Treasuries were about even, keeping yields essentially flat.  Oil rose fractionally to the mid 78s & gold slid 1 to 2033 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Mortgage rates continued their upward trend this week, nearing 7% & piling on the unaffordability crisis that threatens to dampen the typical spring buying frenzy.  Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate on the benchmark 30-year fixed mortgage climbed to 6.90% this week, up from 6.77% last week & the average rate on a 30-year loan was 6.50% a year ago.  The rate on the 15-year fixed mortgage also increased, averaging 6.29% after coming in last week at 6.12%.  One year ago, the rate on the 15-year fixed note averaged 5.76%.  "Historically, the combination of a vibrant economy and modestly higher rates did not meaningfully impact the housing market," Freddie Mac chief economist Sam Khater said.  "The current cycle is different than historical norms, as housing affordability is so low that good economic news equates to bad news for homebuyers, who are sensitive to even minor shifts in affordability."  Buying activity tends to pick up in the spring following slower winter months, but elevated rates & sky-high home prices have stalled the housing market as more would-be buyers & sellers are priced out or opting not to move.  "Recent surges in new listing activities suggested that we might have a busy spring ahead," said Realtor.com economist Jaiyi Xu.  "However, the recent increase in mortgage rates has the potential to slow the market by disrupting the plans of many buyers, especially in a market where a significant number of consumers are anticipating lower mortgage rates, not higher."  Robert Frick, a corp economist at Navy Federal Credit Union, says rates are climbing because the futures markets have temporarily lost faith in the Federal Reserve cutting the federal funds rate soon, & in a "higher for longer" scenario that means higher mortgage rates, too.  "But market expectations can turn on a dime, and are always just one Fed meeting or data drop away from shifting," Frick added.  "We saw that mortgage rates around 7% in January actually boosted existing home sales, and if rates fall below 6% this year, as many forecast, home sales volume should accelerate."

Mortgage rates rise again, threatening to slow spring housing market

Moderna (MRNA) posted a surprise quarterly profit, boosted by deferred revenue & cost cuts, even as it saw slumping sales from its Covid vaccine, its only marketable product.  The results cap a rocky year for the biotech company & other Covid vaccine makers, which all saw revenue plunge as the world continued to emerge from the pandemic & relied less on protective shots & treatments.  MRNA posted EPS of 55¢ for the 4th qtr which compares with EPS of $3.61, reported for the year-ago period.  The biotech company booked 4th-qtr sales of $2.8B, with revenue from its Covid shot dropping 43% from the same period a year ago.  That decline was primarily driven by lower vaccine volume, but was partially offset by a higher average selling price of the jab.  The company recorded $600M in deferred revenue during the qtr related to its work with Gavi, a nongovernmental global vaccine organization that coordinated a global shot distribution program.  But CFO Jamey Mock said that the deferred revenue is “kind of a nonevent” & isn't “really the best way to beat earnings.”  He noted that MRNA is more excited about its lower-than-expected cost of sales, which he called one of the main reasons why company earnings came in above what some was expected.  Deferred revenue boosted full-year Covid vaccine sales to $6.7B, an amount the company first unveiled in Jan.  It booked $18B in revenue in 2022 & expects sales from the shot to drop even further in 2024.  The company noted that the vaccine won 48% of the US Covid vaccine market share last year, up from the 37% it captured in 2022.  MRNA reiterated its full-year 2024 sales guidance of roughly $4B.  That forecast includes revenue from its vaccine against respiratory syncytial virus, or RSV, which could win Food & Drug Administration approval on May 12.  The stock rose 11.85 (14%).

Moderna stock pops 15% after company posts surprise profit even as Covid vaccine sales fall

The number of Americans applying for jobless benefits fell to its lowest level in 5 weeks, even as more high-profile companies announce layoffs.  Applications for unemployment benefits fell by 12K to 201K last week, the Labor Dept reported.  The 4-week average of claims, a less volatile measure, fell by 3K to 215K, down from 218K the previous week.  Weekly unemployment claims are broadly viewed as representative of the number of US layoffs in a given week.  They have remained at historically low levels in recent years, despite efforts by the Federal Reserve to cool the economy.  The Federal Reserve raised its benchmark borrowing rate 11 times beginning in Mar of 2022 in an effort to bring down the 4-decade high inflation that took hold after the economy roared back from the COVID-19 recession of 2020.  Many economists expected the rapid rate hikes to weaken the labor market & potentially tip the country into recession, but it hasn't happened.  Jobs have remained plentiful & the economy has held up better than forecast thanks to strong consumer spending.  Though layoffs remain at low levels, there has been an uptick in job cuts recently across technology & media.  In total, 1.86M Americans were collecting jobless benefits during the latest week, a decrease of 27K from the previous week.

Applications for US jobless benefits fall again as labor market powers on

Gold prices fell from a near 2-week high after jobless claims data indicated a strong economy, while investors awaited further economic data for guidance on the Federal Reserve's interest rate stance.  Spot gold lost 2 to $2022 after hitting its highest since Feb 9 of $2034 earlier in the session.  Gold futures settled $4 lower to $2030.  Data showed the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, suggesting that job growth likely remained solid in Feb. 

Gold slips after US data signals resilient economy

West Texas Intermediate (WTI) crude oil closed higher after US oil inventories less than expected.  WTI crude for Apr closed up 70¢ to settle at $78.61 per barrel, while Apr Brent crude, the global benchmark, was last seen up 57¢ to $83.60.  Prices fell early after the the American Petroleum Institute reported US oil inventories rose by 7.2M barrels last week, above the 4.3M barrel estimate.  However official data from the Energy Information Administration showed a rise of only 3.5M barrel, while gasoline & distillate inventories dropped.  Prices are also being supported by geopolitical risk, after Yemen's Houthi militants promised to increase attacks on Red Sea shipping & said they also now have submarine weapons.

WTI Crude Oil Closes Higher as US Inventories Rise Less than Expected

The bulls are happy with popular stock averages at record levels.  But the # of advancers are not strongly ahead of the decliners which is expected when stocks surge.  A nagging problem is that interest rates remain high & could be around these levels for several months, if not longer.  For the time being stockholders are feeling good,

Dow Jones Industrials 

Markets climbed to new records led by tech stocks

Dow jumped 250, advancers over decliners 4-3 & NAZ soared 366.  The MLP index crawled higher in the 272s & the REIT index slid back to the 378s.  Junk bond funds were mixed & Treasuries saw a little buying, taking yields lower (more below).  Oil inched up to the 78s & gold was off 1 to 2033.

AMJ (Alerian MLP Index tracking fund)

Sales of previously owned homes rose 3.1% in Jan to 4M units on a seasonally adjusted annualized basis, according to the National Association of Realtors (NAR).  Sales were down 1.7% year over year.  The count is based on closings, so the contracts were likely signed in Nov & Dec, when mortgage interest rates backed off their Oct high of 8%.  By mid-Dec, the rates had hit a recent low of around 6.6%.  Today they are back over 7%, according to Mortgage News Daily.  “While home sales remain sizably lower than a couple of years ago, January’s monthly gain is the start of more supply and demand,” said Lawrence Yun, chief economist for the NAR.  “Listings were modestly higher, and home buyers are taking advantage of lower mortgage rates compared to late last year.”  Inventory of homes for sale in Jan increased to 1.01M units, up 3.1% from Jan 2023, but still at a low 3-month supply.  A 6 months supply is considered a balanced market between buyer & seller.  That dynamic is why the market is still seeing pressure on home prices.  The median existing home price for all housing types in Jan was $379K, up 5.1% from a year earlier & an all-time high for the month of Jan.  All 4 regions saw price increases & 16% of homes were sold above list price.  “Multiple offers are common on mid-priced homes, and many homes were still sold within a month. The elevated share of cash deals – 32% – indicated a market full of multiple offers and propelled by record-high housing wealth,” Yun said.

Existing home sales rose last month, but higher mortgage rates now are hurting

The European Central Bank (ECB) reported its first annual loss since 2004, following hefty payouts due to higher interest rates.  It reported losses of €1.3B ($1.4B), which would have been steeper, had the bank not released €6.6 — its entire provision for financial risks, built up over a number of years.  The ECB said that it expected further losses for the following few years that would not impact “its ability to conduct effective monetary policy,” before returning to sustained profits.  The central bank hauled interest rates from negative territory to a record 4% between Jul 2022 & Sep 2023, in response to rising inflation in the wake of the Covid-19 pandemic & partially losing access to Russia's energy following its invasion of Ukraine.  The institution suffered increased interest expenses on key liabilities, while interest income on assets did not keep pace, because many are on fixed rates or have long maturities, it said.  It logged a net interest loss of €7.19B euros in 2023, following €900M income in 2022.  “The financial strength of the ECB is further underlined by its capital and its substantial revaluation accounts, which together amounted to €46 billion at the end of 2023,” the central bank added.  The central bank said it will carry forward the loss on its balance sheet to offset against future profits & will not make profit distributions to euro zone national central banks for 2023.  For 8 years, the ECB followed a policy of fiscal stimulus that swelled its balance sheet, but was seen as controversial in some qtrs.  The central bank began quantitative tightening in Mar 2023.

European Central Bank posts first annual loss in two decades

Treasury yields were mixed as investors considered the path ahead for interest rates after minutes from the Federal Reserve's latest meeting indicated caution about cutting rates too soon.  The yield on the 10-year Treasury was hovering around flat at 4.323% & the 2-year Treasury yield was last up by 5 basis points at 4.703%.  Yields & prices have an inverted relationship & 1 basis point equals 0.01%.  Minutes from the Federal Reserve's Jan meeting suggested policymakers would be careful & not rush to cut rates.  Fed officials were concerned about the “risks of moving too quickly” & were still looking to be more confident in inflation easing before cutting rates.  “Participants generally noted that they did not expect it would be appropriate to reduce the target range for the federal funds rate until they had gained greater confidence that inflation was moving sustainably toward 2 percent,” the minutes stated.  However, the minutes also suggested that policymakers were not expecting rates to be hiked any further.  The latest inflation insights suggested to many market participants that pressures from higher prices could be stickier than hoped, with the Jan consumer price index & producer price index coming in higher than expected.  Investors were initially hoping for rate cuts as soon as Mar but are now expecting the first one to take place in Jun.

2-year Treasury yield rises as investors fret over interest rate outlook

This rally which is taking the averages to new records levels is largely due to a few elite tech stocks.  Many of the mundane stocks have been left behind with the number of advancing stocks not showing strength.  At the same time, there are indications that rate cuts by the Fed will delayed & come more slowly than expected.  Already the auto & housing markets are struggling & getting by with only so-so years.  Safe haven gold remains not far from its recent record highs.

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