Dow dropped 48, decliners slightly ahead of advancers & NAZ slipped back 49. The MLP index added 1+ to the 272s & the REIT index went up 1+ to the 378s. Junk bond funds continued to be in demand & Treasuries were sold, raising yields. Oil rose almost 1 to the high 77s & gold slid back 3 to 2036 (more on both below).
AMJ (Alerian MLP Index tracking fund)
Federal Reserve officials indicated at their last meeting that they were in no hurry to cut interest rates & expressed both optimism & caution on inflation, according to minutes from the session. The discussion came as policymakers not only decided to leave their key overnight borrowing rate unchanged but also altered the post-meeting statement to indicate that no cuts would be coming until the rate-setting Federal Open Market Committee held “greater confidence” that inflation was receding. The meeting summary indicated a general sense of optimism that the Fed's policy moves had succeeded in lowering the rate of inflation, which in mid-2022 hit its highest level in more than 40 years. However, officials noted that they wanted to see more before starting to ease policy, while saying that rate hikes are likely over. “In discussing the policy outlook, participants judged that the policy rate was likely at its peak for this tightening cycle,” the minutes stated. But, “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.” Prior to the meeting, a string of reports showed that inflation, while still elevated, was moving back towards the Fed's 2% target. While the minutes assessed the “solid progress” being made, the committee viewed some of that progress as “idiosyncratic” & possibly due to factors that won't last. Consequently, members said they will “carefully assess” incoming data to judge where inflation is heading over the longer term. Officials noted both upside & downside risks & worried about lowering rates too quickly. “Participants highlighted the uncertainty associated with how long a restrictive monetary policy stance would need to be maintained,” the summary said. “Most participants noted the risks of moving too quickly to ease the stance of policy and emphasized the importance of carefully assessing incoming data in judging whether inflation is moving down sustainably to 2 percent.” Officials “remained concerned that elevated inflation continued to harm households, especially those with limited means to absorb higher prices,” the minute added. “While the inflation data had indicated significant disinflation in the second half of last year, participants observed that they would be carefully assessing incoming data in judging whether inflation was moving down sustainably toward 2 percent.” The minutes reflected an internal debate over how quickly the Fed will want to move considering the uncertainty about the outlook.
Fed officials expressed caution about lowering rates too quickly at last meeting, minutes show
Boeing (BA), a Dow stock, is replacing the head of its 737 Max program less than 2 months after a panel blew out on one of the jet models during an Alaska Airlines (ALK) flight, prompting a brief federal grounding of the aircraft type & heightened scrutiny of the plane maker's operations. The
company’s 737 program head, Ed Clark, is leaving the company, Stan
Deal, CEO of the commercial airplane unit, said in memo to
employees. Katie Ringgold will become pres & general manager of
the program & the company's Renton, Washington, site, Deal said. “I
am announcing several leadership changes as we continue driving BCA’s
enhanced focus on ensuring that every airplane we deliver meets or
exceeds all quality and safety requirements. Our customers demand, and
deserve, nothing less,” Deal added. BA named Elizabeth Lund to a
newly created position of senior VP of quality for the
commercial airplane unit & Lund will continue to
report to him, it added. The leadership changes are effective
immediately. “Ed departs with my, and our, deepest gratitude for
his many significant contributions over nearly 18 years of dedicated
service to Boeing,” Deal said. The Jan 5 accident aboard the ALK flight is the latest crisis for BA that has been trying to find its footing after fatal crashes of its Boeing 737 Max 8 in 2018 & 2019 that killed all 346 people on board the flights. It
is also the latest & most serious of a string of quality flaws on
BA planes that have delayed deliveries to customers. A month after
the ALK flight, BA said misdrilled holes on some Max
planes would delay handovers of the aircraft to airlines. The stock fell 1.65.
Boeing replaces head of troubled 737 Max program
Electric vehicle maker Tesla (TSLA) failed to secure a vote among locals in favor of authorizing a major
factory expansion for the company's battery & car assembly plant in
Brandenburg, Germany. German state-owned broadcaster DW first reported
on the vote & that TSLA needed to cut down approximately “250 acres
of forest in the rural community of fewer than 8,000 residents near a
nature conservation area” for the expansion. Plans
for the expansion in Grünheide, which is in the Brandenburg
district about an hour drive from Berlin, had included designs for a
rail freight depot & storage facilities that could help TSLA avoid
reliance on other logistics providers including existing freight rail & help them avoid production pauses due to parts shortages. The vote is nonbinding & local officials would try to find another solution. The German factory temporarily halted production
for approximately 2 weeks earlier this year with execs citing a
local component shortage, caused or exacerbated by Houthi militant
attacks on ships in the Red Sea. In the 4th qtr of 2023, TSLA reported that this facility, which it refers to as its Berlin-Brandenburg site, has an annual capacity
to produce 375K of the company's Model Y vehicles. The company also
said in its most recent quarterly filing that its intl
manufacturing facilities, including in Germany, allow TSLA “to increase
the affordability” of its vehicles for customers in local markets by
“reducing transportation and manufacturing costs and eliminating the
impact of unfavorable tariffs.” While TSLA has remained a
top-selling brand in Europe, it faces competition from more battery
electric models than ever in & beyond the region. TSLA stock was up 53¢.
Tesla faces hurdle in Germany as locals vote to oppose factory expansion
Gold climbed for a 5th session before the of Federal Reserve released minutes that provided fresh clues on when the central bank will pivot to monetary easing. Swaps traders currently see little chance of the Fed lowering borrowing costs before Jun, after recent data showed inflation in the world's biggest economy remains stubbornly sticky. Higher rates are typically negative for bullion, which doesn't yield interest. Along with the release of the minutes from its Jan meeting, a number of policymaking officials are scheduled to speak later this week. Spot gold rose 0.3% to $2029 an ounce after climbing 1.6% over the previous 4 sessions. The Bloomberg Dollar Spot Index was flat.
Gold Extends Advance for Fifth Day Ahead of Fed Minutes Release
Oil prices extended losses from the previous session, as growing expectations that cuts to US interest rates will take longer than thought outweighed ongoing concerns over attacks on shipping in the Red Sea. Brent crude futures fell by 47¢ (0.6%) to $81.87 a barrel while US West Texas Intermediate crude futures (WTI) were lower by 48¢ (0.6%) at $76.56. The Brent & WTI contracts fell from near 3-week highs yesterday, dropping by 1.5% & 1.4%, respectively. The premium of front-month Apr Brent futures over Sep contracts - known as backwardation, & a sign of a tightly-supplied market - hit its highest since Oct 31 on Mon at $3.64 a barrel, though has since cooled off to around $3.37. Concerns that rate cuts by the Federal Reserve could take longer than thought have weighed on the outlook for oil demand. US inflation data last week pushed back expectations for an imminent start to the Fed's easing cycle, with economists now forecasting a cut in Jun.
Oil Dips as Investors Weigh up US Rate Cut Outlook
Dow dropped more than 100 following the release of minutes from the last meeting. While not a great surprise, it said the first rate cut might have to wait until Jun. That did not warm the hearts of traders although a late day modest rally trimmed the decline. Meanwhile economic data indicates that housing & auto manufacturing (2 important industries) are not booming. High interest rates, among other things, are a significant drag.
Dow Jones Industrials
No comments:
Post a Comment