Dow dropped 145 (near early session lows), decliners over advancers 3-2 & NAZ declined 130. The MLP index gained 3+ to the 268s & the REIT index fell 3+ to the 377s. Junk bond funds continued lower & Treasuries had selling which raised yields. Oil closed up 1+ to the 79s & gold added 9 to 2024 (more on both below).
AMJ (Alerian MLP Index tracking fund)
New US home construction dropped in Jan to the lowest level in 5 months, underscoring the ongoing challenges facing the housing market. Housing starts tumbled 14.8% last month to an annual rate of 1.33M units, according to Dept of Commerce data. That is well below the forecast for a pace of 1.46M units. It marked the lowest level for housing starts since Aug 2023 & the biggest one-month drop in construction since the early days of the COVID-19 pandemic. Applications to build, which measure future construction, also slid in Jan, falling 1.5% over the course of the month to an annualized rate of 1.47M units. Compared with the same time last year, building permits are up about 8.6%. "A home building revival is coming, but it didn’t arrive in January," said Robert Frick, corp economist at Navy Federal Credit Union. "High mortgage rates, with maybe a dash of cold weather, caused starts and permits to fall from December. We know that builders are ready to ramp up when rates fall, which could be as soon as spring." The housing market is grappling with an astronomic rise in mortgage rates over the past 2 years, but bad weather in many parts of the country may have weighed on growth last month. The data comes one day after the National Association of Home Builders/Wells Fargo Housing Market Index, which measures the pulse of the single-family housing market, rose for the 3rd straight month to 48. Any reading below 50 is considered negative. Sentiment among builders began steadily falling at the end of the summer after mortgage rates shot above 7%, throttling demand among would-be homebuyers. But borrowing costs have retreated over the past 2 months as the Federal Reserve has signaled that it is finished raising interest rates & will pivot to cutting them sometime this year.
Winter weather, high mortgage rates send housing starts plummeting
Nike (NKE), a Dow stock, is cutting 2% of its current workforce (more than 1500 jobs) as
part of a broader restructuring, the company said. The sneaker giant said it wants to better use its
capital to invest in its growth areas, such as running, women's & the
Jordan brand. “This is how we will reignite our growth,” CEO John Donahoe said. “This
is a painful reality and not one that I take lightly,” he added. “We
are not currently performing at our best, and I ultimately hold myself
and my leadership team accountable.” The layoffs will
take place in 2 phases. The company will start the first round this
week & finish the 2nd by the end of its fiscal 4th qtr,
which typically concludes at the end of May. It’s not clear which departments will experience layoffs,
but they will not affect retail employees at its stores or warehouse
workers. The cuts come as consumers become more cautious in their spending & the retail industry braces for a demand slowdown for discretionary items such as clothes & shoes, which is its bread & butter. In Dec, NKE unveiled a broad restructuring plan
to cut costs by about $2B over the next 3 years. It lowered
its sales outlook as it prepared for lower demand & wholesale orders,
soft sales online & a marketplace that relies more on promotions. As
part of its plan to cut costs, it will be looking to simplify its
product assortment, increase automation and its use of technology,
streamline the organization by reducing management layers & leverage
its scale “to drive greater efficiency.” The stock fell 2.54.
Nike to lay off 2% of employees, cutting more than 1,500 jobs during broad restructuring
The United Auto Workers (UAW) is threatening a labor strike at Ford's (F) largest US plant if local union demands aren't resolved by next week. The Detroit union said nearly 9000 UAW autoworkers at Ford's Kentucky Truck Plant could strike at on Feb. 23 if local contract issues remain. The plant, its largest in terms of employment & revenue, produces Ford Super Duty pickups as well as Ford Expeditions & Lincoln Navigator SUVs. Local contracts differ from the national agreements that the union ratified in late 2023 with Ford. They deal with plant-specific issues & can many times go unresolved for months, if not years, after the national deals are ratified. The union said “core issues in Kentucky Truck Plant's local negotiations are health & safety in the plant, including minimum in-plant nurse staffing levels & ergonomic issues, as well as Ford’s continued attempts to erode the skilled trades at Kentucky Truck Plant.” It was not immediately clear why the union set the strike deadline at the Ford plant & not others. There are 19 other open local agreements across Ford. The stock was off 21¢.
UAW threatens to strike Ford truck plant in Kentucky if local issues aren’t resolved
Gold closed higher, rising off early weakness as the $ gave up the gains it posted after another report showed US inflation running hotter than expected, lowering hopes for a quick cut to US interest rates from the Federal Reserve. Gold for Apr closed up $9 to settle at $2024 per ounce. The Bureau of Labor Statistics reported the Jan producer price index (PPI) rose by 0.3% from Dec, above expectations for 0.1% rise & up from a 0.1% drop in the previous month. Core PPI rose 2% annualized, ahead of expectations for a 1.6% rise & up from 1.8% in Dec. The higher than expected rise follows on prior reports showing the US economy continues to run hot & clouds the outlook for US interest rates. Gold is likely to remain stuck until there is a better understanding about the delivery of future US rate cuts. The ICE dollar index was last seen down 0.08 points to 104.21, after earlier touching 104.67. Treasury yields pushed higher, raising the carrying cost of owning gold. The 2-year note was last seen paying 4.665%, up 8.7 basis points, while the yield on the 10-year note was up 7.0 basis points to 4.297%.
Gold Closes Higher as the Dollar Surrenders Gains That Came After a Report SHows US Inflation Ran Hotter Last month
West Texas Intermediate (WTI) crude oil rose to the highest in 3
months as geopolitical worries amid Mideast violence & the
death in prison of Russian opposition Alexei Navalny offset a well-supplied market & flagging demand. WTI
crude for Mar closed up $1.16 to settle at $79.19 per
barrel, the highest since Nov 6. while Apr Brent crude was last seen
up 58¢ to $83.44. Geopolitical
risks continue as a trading focus with Israel continuing to push into
the crowded city of Rafah in Gaza, while attacks on Red Sea shipping by
Yemen's Houthis force traffic around the Cape of Good Hope instead of
thru the Suez Canal, boosting shipping costs & Navalny's death is
sparking intl condemnation of Russian pres Vladimir Putin. The
rise comes a day after the Intl Energy Agency said the oil
market was well supplied amid rising production outside of the OPEC+
cartel & moderate demand. "Global
oil demand growth is losing momentum, with annual gains easing from 2.8
mb/d in 3Q23 to 1.8 mb/d in 4Q23. A sharp drop in China underpinned an
830 kb/d decline in global oil demand to 102.1 mb/d in the last quarter
of 2023. The pace of expansion is set to decelerate further to 1.2 mb/d
in 2024, compared with 2.3 mb/d last year. China, India and Brazil will
continue to dominate gains," the agency said.
WTI Crude Oil Closes Higher as Focus Stays on Geopolitical Turmoil
After a midday rally, the sellers returned to drag the averages back into the red. Investors are adjusting to the concept of slower rate cuts. Stocks had a tough with mixed to negative economic data. The Dow ended a choppy week down 170.
Dow Jones Industrials
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