Markets are closed but the latest inflation report has been released

A key inflation gauge watched closely by the Federal Reserve climbed on an annual basis in Feb.  The Commerce Dept's personal consumption expenditures price index (PCE) headline figure rose 2.5% last month, in line with expectations.  On a monthly basis, prices rose 0.3%, slightly below the estimate.  Excluding food & energy, core PCE prices rose 2.8% annually in Feb & 0.3% from the prior month.  Both figures were in line with expectations & the year-over-year figure is slightly lower than Jan's reading of 2.9%.  The Jan monthly core PCE reading was revised upward from 0.4% to 0.5%.  For inflation to return to the Fed's 2% year-over-year target, monthly inflation readings over 0.2% are necessary over time to lower the headline rate.  Consumer spending spiked 0.8% last month, up from the 0.2% increase in Jan.  That figure came in higher than the 0.5% increase projected.  The report found that prices for goods rose by 0.5% from Jan while prices for services ticked up by 0.3%.  On a monthly basis, food prices increased 0.1% & energy prices rose by 2.3%.  Compared to the same month a year ago, prices for services increased 3.8% while goods decreased by 0.2%.  Food prices were up 1.3% & energy prices declined by 2.3% from last year.  Federal Reserve officials held a policy meeting last week and left the central bank's federal funds rate unchanged at 5.25% - 5.50%.  The Fed has raised the benchmark rate, which influences interest rates for mortgages, loans & credit cards, by 525 basis points since Mar 2022.  Inflation hasn't subsided as quickly as policymakers had expected, which prompted the Fed's decision to leave interest rates unchanged.  Stubborn inflation has lowered expectations that there may be as many as 6 interest rate cuts this year, although a smaller number of cuts are still projected.

Key Fed inflation gauge, consumer spending soars in February

 

The data above shows that the current inflation report shows a continuation of the numbers that have been reported in recent months.  Investors will be able to evaluate the meaning of this information before trading resumes on Mon.

Dow Jones Industrials 

Markets were little changed as stock averages remain at or near records

Dow was up 47, advancers over decliners about 2-1 & NAZ lost 20.  The MLP index went up 2+ to the 284s & the REIT index gained 2+ to the 385s.  Junk bond funds crawled higher & Treasuries had limited selling which raised yields slightly.  Oil added 1+ to 83 & gold jumped 29 to 2241 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Electric vehicle maker Tesla (TSLA) is expected to release first-qtr delivery figures next week that show a sales slowdown amid increasing competition in the EV market & a waning boost from price cuts.  The world's most valuable automaker has seen years of rapid sales growth but is bracing for a slowdown in 2024.  TSLA is projected to deliver 458K vehicles in the qtr ending Mar 31.  That's up from the 422K5 vehicles sold in the first qtr a year ago, but would represent a 5% decline from the preceding 4th qtr of 2024.  CEO Elon Musk has aggressively cut prices for its most popular models since late 2022 in an effort to boost sales amid the high interest rate environment, which has increased the cost of car payments for customers.  Musk has said the price cuts are needed to maintain demand for its vehicles & to keep its production facilities humming, & he has blamed winter & high borrowing costs for the slowdown in demand.  The company temporarily cut prices for its Model Y rear-wheel drive & long-range variants by $1000 each in Feb, though those cuts ended at the beginning of Mar.  "This is the essential quandary of manufacturing: factories need continuous production for efficiency, but consumer demand is seasonal," Musk said last month.  In Jan the company warned of "notably lower" sales growth in 2024 as it focuses its production on its next-generation EV, which is code-named "Redwood."  It also faces the loss of access to $7500 per car federal tax credits on its Model 3 compact sedans, which no longer qualify for the credit due to non-compliance with newly-implemented eligibility restrictions for battery materials sourced from China.  The stock dropped 4.06.

Tesla deliveries expected to slump on China competition, weak demand

US consumer sentiment rose unexpectedly in Mar to the highest in nearly 3 years thanks in part to growing confidence that inflation will keep softening.  The University of Michigan's benchmark Consumer Sentiment Index rose to a final reading for the month of 79.4, the highest since Jul 2021, from Feb's 76.9.  It topped consensus estimates of 76.5, which had been the same as the preliminary Mar estimate released 2 weeks ago.  Consumer assessments of both current conditions & the economic outlook both improved from the Mar mid-month & Feb final readings.  Expectations for inflation over a one-year horizon declined to 2.9% from 3.0% in Feb to match Jan's reading, which had been the lowest since Dec 2020.  Over a 5-year horizon, consumers saw inflation easing to 2.8% from 2.9% last month.

US Consumer Sentiment Tops Estimates in March to Hit Nearly 3-Yr High, UMich Says

Walgreens (WBA) reported fiscal 2nd-qtr sales that beat expectations, but lowered the high end of its full-year adjusted earnings outlook in part due to a “challenging” retail environment in the US.  The company also posted a steep net loss for the qtr as it recorded a hefty nearly $6B charge related to the decline in value of its investment in primary-care provider VillageMD.  WBA has closed 140 VillageMD clinics amid financial woes for the business, which it sees as critical to its ongoing push to transform from a major drugstore chain into a large health-care company.  But WBA does not believe the VillageMD charge “will have a significant impact on our financial position, or our ability to invest across businesses going forward,” WBA global CFO Manmohan Mahajan said.  The company said it is confident it will meet its goal of saving $1B during fiscal 2024 thru its ongoing cost-cutting program.  WBA has laid off employees, closed unprofitable stores & used artificial intelligence to make its supply chain more efficient, among other efforts.  WBA narrowed its fiscal 2024 adjusted EPS guidance to $3.20 - $3.35.  That compares with the company’s previous outlook of $3.20 - $3.50.  The forecast called fort full-year adjusted EPS of $3.24.  Its new guidance reflects the hurdles facing retailers in the US & an early wind-down of its sales-leaseback program.  It also takes into account lower earnings due to the’ forward sale of shares of drug distributor Cencora, formerly known as AmerisourceBergen.  The company reported a net loss of $6.85 per share for the qtr.  That compares with EPS of 81¢ for the same period a year ago.  The company booked sales of $37.05B in the qtr, a roughly 6% jump from the same period a year ago.  The stock rose 69¢.

Walgreens tops quarterly revenue estimates, but narrows profit outlook

Gold futures closed at the 2nd record high in as many days as buying momentum continues even as the $ & treasury yields rise.  Gold for Jun closed up $25 to settle at $2238 per ounce.  The precious metal's record rise comes on expectations lower interest rates are on the way, with the Federal Reserve seen likely to cut interest rates 3 times this year for a total 75-basis points.  Lower interest rates cut the carrying costs of owning gold, since it offers no interest.  However the outlook could change tomorrow with the release of the Feb PCE Index data, the Fed's preferred inflation measure.  The estimate expects the PCE index rose by an annualized 2.5% in Feb, up from a 2.4% rate a month earlier.  However the core index, excluding volatile items, is expected to fall 0.3% from Jan, down from a rise of 0.4% that month.  The $ also rose after the release of revised US GDP data for the 4th-qtr, pushing the growth in the economy up to 3.4% from the original 3.2% figure, showing the US economic growth continued to run hot despite interest rates at the highest in 23 years.  The ICE dollar index was last seen up 0.12 points to 104.47.  Treasury yields rose, normally bearish for gold, with the 2-year note last seen paying 4.632%, up 4.9 basis points, while the yield on the 10-year note was up 1.1 basis points to 4.205%.

Gold Rises to a Fresh Record as Buying Momentum Continues

West Texas Intermediate (WTI) crude oil closed higher following 2 losing sessions on expectations global inventories will continue to wane thru the 2nd qtr on OPEC+ production cuts & Ukrainian attacks on Russian refineries.  WTI crude oil for May closed up $1.82 to settle at $83.17 per barrel, while May Brent crude, the global benchmark, was last seen up $1.35 to $87.44.  OPEC's the Joint Monitoring Ministerial Committee will meet next week, though no change to production quotas is expected as OPEC+'s 2.2M barrels per day of voluntary production cuts are likely to be in place until at least the end of Jun & could be further extended, though a decision is not expected until a Jun ministerial meeting.

WTI Crude Oil Closes Higher as Supplies Remain Tight on OPEC+ Cuts, Cutting Into Inventories

This was an outstanding qtr for stocks & gold.  The Dow rocketed ahead over 2100 to new record & gold was up 139 to reach new records.  The challenge will be to extend the outstanding rallies, especially for the stock market.

Dow Jones Industrials 

Markets edge higher as stocks head for best first quarter since 2019

Dow inched up 1, advancers ahead of decliners about 3-1 & NAZ added 1.  The MLP index stayed range-bound in the 282s & the REIT index was up 2+ to the 288s after yesterday's advance.  Junk bond funds hardly budged & Treasuries were about even ahead of the big inflation report tomorrow (when the stock market is closed).  Oil rose 1 to the 82s & gold jumped another 20 to 2032 for another record.

AMJ (Alerian MLP Index tracking fund)

Treasury yields climbed as investors considered the path ahead for interest rates following the latest comments from Federal Reserve officials & ahead of key economic data.  The yield on the 10-year Treasury was unchanged at 4.20% & the 2-year Treasury yield was last up by 3 basis points at 4.60%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Investors weighed the outlook for monetary policy & looked ahead to key economic data as uncertainty around when & how often interest rates will be cut this year persists.  Traders were last pricing in an around 60% chance of rates being cut in Jun.  Federal Reserve Governor Christopher Waller said there was “no rush” to cut interest rates, adding that recent economic data indicated that rates may need to stay elevated for longer.  Waller added that the data told him “that it is prudent to hold this rate at its current restrictive stance perhaps for longer than previously thought to help keep inflation on a sustainable trajectory toward 2 percent.” Today, the latest weekly jobless claims came in at 210K, slightly lower than the 211K forecast.

2-year Treasury yield rises as investors mull interest rate outlook

The collapse of a major Baltimore bridge & its knock-on effects could result in the biggest-ever marine insurance payout, the chair of insurance giant Lloyd's of London said.  Analysts have forecast that insured losses from the disaster would amount to a figure in the single-digit Bs, after a huge cargo ship crashed into the Francis Scott Key Bridge on Tuesday.  6 people are presumed dead.  “We’re beginning to deploy resources in anticipation of this being a very substantial claim for the industry. And for the Lloyd’s market, it’s going to take some time for for the complexity of the situation to unravel,” Bruce Carnegie-Brown said.  “So, [it’s] very early days to call a number. I don’t at this point anticipate that it’s outside our realistic disaster scenario planning. It feels like a a very substantial loss, potentially the largest-ever marine insured loss, but not outside parameters that we plan for.”  Carnegie-Brown added that, while there would clearly be claims for the ship, cargo & the bridge, it is “second-order impacts” that would become “substantial.”  “A lot of business is going to be interrupted, supply chains are going to be interrupted by ships that are both trapped inside the port and of course, ships that were trying to gain access to the port that no longer can, and those second order effects will take some time to work through,” he added.  Baltimore is the 11th biggest port in the US & the country's busiest for the import & export of autos & light trucks.  Supply chain operators are scrambling to minimize the impact on trade.  Morningstar DBRS analysts said that insured losses could total $2-4B, depending on the length of time that the port is blocked.  Such a figure would surpass the current highest amount, which was paid out from the capsizing of the Costa Concordia cruise ship in 2012.

Baltimore disaster may be the largest-ever marine insurance payout, Lloyd’s boss says

China's economy is ending the first qtr on a “strong” note, according to a business survey published by the China Beige Book.  “The economy clearly improved in March, thanks to better industrial activity and stronger retail spending,” said Shehzad H. Qazi, COO at the China Beige Book, a US-based research firm.  China's official data on retail sales, industrial production & fixed asset investment for Jan & Feb beat expectations across the board.  Figures for the first 2 months of the year are typically reported together to account for the week-long Lunar New Year holiday, which follows the agrarian calendar.  The China Beige Book said it surveyed 1436 businesses on Mar 1-23, split roughly between state-owned & non-state-owned firms.  “China Beige Book’s March data show the economy poised for a strong end to Q1,” the report said.  “Revenue growth accelerated atop last month while pricing gains boosted margins.”  China earlier this month announced the country would target growth of around 5% for the year.  Some analysts said it was an ambitious target given the current level of announced gov stimulus.  The China Beige Book found that businesses have pulled back their borrowing due to higher interest rates, but also observed signs of a pause on the lending side.  “Market observers have largely missed the substantial policy easing we’ve tracked over the past year, and now some lenders may be hitting the brakes,” the report said.  “Hiring recorded its longest stretch of improvement since late 2020,” the report said, noting every sector except for services saw job growth pick up.  Retail spending increased in all sub-sectors, except for luxury goods, the report added.  In real estate, the report said that while the residential sector still showed a decline in sales, commercial sales & construction improved significantly.  Manufacturing saw growth in production & domestic orders from Feb, but export orders fell.  Official data showed investment into real estate fell 9% in the first 2 months of the year from a year ago.  Investment in infrastructure rose by 6.3% during that time, while manufacturing saw a 9.4% increase.

China’s economy is on track for ‘strong’ March performance, survey says

Trading is sluggish with some traders starting the long weekend early.  The inflation report tomorrow will get a lot of attention.  Dow is up a very hefty 2K so far this year!

Dow Jones Industrials 

Markets held their early advances while gold sets another record

Dow zoomed 478, advancers over decliners 4-1 & NAZ finished higher, up 83.  The MLP index continued to hold in the 281x & the REIT index remained higher, up 8+ the to 382s.  Junk bond funds rose along with the stock market & Treasuries had more buying which reduced yields.  Oil was little changed in the 81s & gold advanced 12 to 2212 for a new record (more on both below).

AMJ (Alerian MLP Index tracking fund)

Carnival (CCL) raised its annual profit forecast, anticipating a record year of bookings as the company benefits from a rise in people seeking cruise vacations for the first time.  Cruise operators are recording all-time high booking rates as more travelers switch to cheaper sea-borne experiences over expensive land-based alternatives such as booking hotels or flights, providing them more room to raise prices.  “The first quarter has been fantastic across the board,” CEO Josh Weinstein said.  “We delivered record bookings and record customer deposits again this quarter, a great start to the year.”  The company's first-qtr revenue jumped 22% to $5.4B, roughly in line with expectations.  Bookings for the rest of 2024 remain the best year on record with total customer deposits reaching $7B in the first qtr.  New-to-cruise customers surged more than 30% year-over-year, CCL added.  CCL also estimated an impact of up to $10M on full-year adjusted EBITDA & adjusted net income following Baltimore's Francis Scott Key Bridge collapse.  The cruise operator now expects full-year adjusted EPS of 98¢, compared with its prior forecast of 93¢.  The forecast expected EPS of $1.  Carnival posted an adjusted net loss per share of 14¢, compared to expectations of 18¢.  The stock went up 16¢.

Carnival rides on record cruise demand to lift annual profit forecast

Orders for long-lasting US manufactured goods increased more than expected in Feb, while business spending on equipment showed tentative signs of recovery as the economy's growth prospects in the first qtr remained upbeat.  But Nov's presidential election, a rematch between incumbent Joe Biden & Rep challenger Donald Trump, looms large.  A survey from the Conference Board showed Americans growing increasingly concerned about the political environment & less worried about a recession over the next 12 months.  The rebound in durable goods orders recouped some of Jan's sharp losses, & implied manufacturing could be regaining its footing after struggling in the aftermath of the Federal Reserve's hefty interest rate hikes.  "The data suggest that business equipment investment is beginning to recover, and with corporate bond yields likely to fall a little further over the coming months while manufacturing activity appears to be picking up again, we suspect that recovery has further to run," said Andrew Hunter, deputy chief US economist at Capital Economics.  Orders for durable goods, items ranging from toasters to aircraft meant to last 3 years or more, rose 1.4% last month, the Commerce Dept's Census Bureau said.  Data for Jan was revised lower to show orders falling 6.9% instead of the previously reported 6.2%.  The forecast for durable goods orders was expected to rise 1.1%.  Orders advanced 1.8% on a year-on-year basis in Feb.  The outlook for manufacturing, which accounts for 10.3% of the economy, is steadily improving amid expectations that the central bank will start cutting rates this year.

US durable goods orders rebound

Disney (DIS), a Dow stock, agreed to end litigation in state court involving a Florida special tourism district that the entertainment giant effectively controlled for more than 5 decades until last year after Gov Ron DeSantis moved to revoke that status.  The settlement lifts a significant barrier to the continued development of Walt Disney World in the Orlando area & provides for the potential resolution of a related federal case.  The state lawsuit was filed by the Central Florida Tourism Oversight District (CFTOD) to void agreements the old district board had signed with DIS right before it was dissolved at DeSantis' behest after DIS opposed Florida’s “Don’t Say Gay” bill backed by the governor.  DIS in turn had asked the court to rule that the agreements, which benefited the company, were valid.  As part of the settlement of that case, DIS agreed not to challenge the CFTOD's determination that the prior agreements with the old Reedy Creek Improvement District were null & void.  The settlement also includes DIS's agreement to seek permission from a federal appeals court to pause its effort to revive a dismissed retaliation lawsuit against DeSantis in Florida federal court in light of expected negotiations of “among other matters a development agreement” between the company & the district.  That clause suggests that if DIS is satisfied with the outcome of the negotiations, it might drop the federal civil complaint against the governor.  Walt Disney World President Jeff Vahle said, “We are pleased to put an end to all litigation pending in state court in Florida between Disney and the Central Florida Tourism Oversight District.”  “This agreement opens a new chapter of constructive engagement with the new leadership of the district and serves the interests of all parties by enabling significant continued investment and the creation of thousands of direct and indirect jobs and economic opportunity in the State,” Vahle added.  The stock rose 1.04.

Disney agrees to settle Florida lawsuit with special district backed by DeSantis

Gold closed at a record high again, pushing back above $2200 even as the $ strengthened, buying momentum for the metal continues, backed by expectations lower interest rates are on the horizon.  Gold for May closed up $13 to settle at $2212 per ounce, topping the previous record of $2206 set on Mar 21.  The price of the metal is being supported by a Federal Reserve forecast that interest rates could be lowered 3 times this year for a total cut of 75 basis points.  However Fri's release of the US PCE Index, the Fed's preferred inflation measure, could affect the central bank's expectations.  The estimate expects the PCE index rose by an annualized 2.5% in Feb, up from a 2.4% rate a month earlier.  However the core index, excluding volatile items, is expected to fall 0.3% from Jan, down from a rise of 0.4% that month.  The $ rose early, making gold more expensive for intl buyers.  The ICE dollar index was last seen up 0.09 points to 104.38.

Gold Pushes Back Above US$2,200, Closes at a Record High

West Texas Intermediate (WTI) fell again after the Energy Information Administration said US oil inventories unexpectedly rose last week, but less than a private report released a day earlier reported.  WTI crude oil for May closed down 27¢ to settle at 81.35 per barrel, while May Brent crude, the global benchmark, closed down 16¢ to $86.09.  In its weekly survey, the EIA said US oil inventories rose by 3.2M barrels last week, ahead of the estimate for a 1.3M barrel drop, but well under the 9.34M increase reported by the American Petroleum Institute yesterday.  OPEC+ will meet next week with the group expected to make no changes to its 2.2M barrels per day of voluntary production cuts until a ministerial meeting scheduled for Jun, even as the group overproduced its quotas by 190K barrels per day in Feb.

WTI Crude Oil Closes Lower as a Report Shows US Oil Inventories Rose Last Week, But not as Much as Feared

After a 3 day losing streak, Dow opened with a strong advance.  It held early gains until there was additional buying into the close.  The current rally is betting heavily on 3 rate cuts this year.  Meanwhile gold set another record.  These buyers are worried about the effect that high interest rates will have on the economy.

Dow Jones Industrials 

Markets rebounds while gold tops 2200 for a new record

Dow went up 234, advancers over decliners 3-1 & NAZ slid back 6.  The MLP index remained in the 281s & the REIT index gained 6+ to 381.  Junk bond funds edged higher & Treasuries saw more buying which trimmed yields (more below).  Oil traded lower in the 81s & gold jumped 15 to 2214 for another record.

AMJ (Alerian MLP Index tracking fund)

Moderna (MRNA) has more to offer beyond its Covid vaccine.  The biotech company announced positive clinical trial data on 3 experimental vaccines against other viruses.  The company is moving those shots to final stage studies.  The update brings MRNA a step closer to having multiple products on the market, which it badly needs amid plunging demand for Covid shots worldwide.  The company's Covid jab is its only commercially available product.  MRNA stock has long been tied to that vaccine, with shares falling nearly 45% last year.  MRNA will chart its post-Covid future during its 5th annual “Vaccines Day,” an investor event in Boston focused on the company's vaccine portfolio.  That business has an estimated total addressable market of $52B for infectious disease shots, which includes $27B for respiratory vaccines & more than $25B for latent shots & other jabs.  The company will present new clinical trial data on the 3 vaccines, including some against latent viruses, at the event today.  The stock rose 1.10.

Moderna moves three vaccines into final stage trials as it works to rebound from Covid slump

The usually busy spring housing market is underway, but mortgage demand isn't moving. Application volume was essentially flat last week, dropping 0.7% compared with the previous week, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index.  The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766K or less) decreased to 6.93% from 6.97%, with points decreasing to 0.60 from 0.64 (including the origination fee) for loans with a 20% down payment.  Applications to refinance a home loan fell 2% for the week & were 9% lower than the same week one year ago.  Mortgage rates today are still about a ½ a percentage point higher than they were at this time last year, so recent borrowers have no incentive to refinance.   Applications for a mortgage to purchase a home decreased 0.2% from the week before & were 16% lower year over year.  “Purchase applications were essentially unchanged, as homebuyers continue to hold out for lower mortgage rates and for more listings to hit the market,” said Joel Kan, an MBA economist.  “Lower rates should help to free up additional inventory as the lock-in effect is reduced, but we expect that will only take place gradually, as we forecast that rates will move toward 6-percent by the end of the year.”  Mortgage rates have basically moved sideways to start this week & are unlikely to change until next week, when more economic data is released.  “Rates are driven by bonds, and bonds are waiting on the most relevant economic data to offer a comment on the path of inflation and the economy in general,” wrote Matthew Graham, chief operating officer at Mortgage News Daily.  “If inflation falls a bit more or if the economy shows marked signs of weakening, it would tip the scales in favor of lower rates.”

Moderna moves three vaccines into final stage trials as it works to rebound from Covid slump

Treasury yields slipped as investors considered the economic outlook & looked to fresh data.  The yield on the 10-year Treasury fell more than 2 basis points to 4.21% & the yield on the 2-year Treasury was last at 4.57% after also declining more than 2 basis points.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Investors looked to the latest data & remarks from Federal Reserve officials as they weighed the outlook for the economy.  This comes amid uncertainty about when, & how often, the Fed will cut interest rates this year after central bank officials have repeatedly said their decision-making would depend on the state of the economy.  Some policymakers have also said that they believe there could be fewer than the forecast three rate cuts this year.  Durable goods orders rose by more than expected in Feb while the latest consumer confidence report indicated declining optimism about the economy.

Treasury yields slide as investors weigh economic outlook

Fed Governor Christopher Waller will give remarks later today.  The bulls are hoping he will bring an optimistic message for stocks.

Dow Jones Industrials 

Markets struggle to advance in choppy trading

Dow was off 31, advancers modestly ahead of decliners & NAZ dipped 68.  The MLP index stayed in the 281s & the REIT index was flattish in the 375s.  Junk bond funds remained slightly higher & Treasuries saw a little buying which took yields down a little.  Oil continued off a little in the 81s & gold added 1 to 2077 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Interest payments for US consumers are thru the roof.  Last qtr, consumers spent a record-high $1.1T on interest payments alone, reported Quartz, using data from the Bureau of Economic Analysis (BEA).  Over ½ of those interest payments were not related to mortgage debt.  Mortgages often have some of the highest interest over the life of the loans.  The "personal interest payments" line of BEA's report shows that $563B of the $1.1T was non-mortgage related interest.  "The dominance of the 15-30-year fixed-rate mortgage has played a significant role in blunting the impact of higher rates on aggregate household debt service," head of US regional economics at the credit rating agency Fitch, said.  "However, the sharp increase in credit card rates and the resumption of student loan payments will drive non-mortgage household debt service to historic highs in 2024."  Credit cards have some of the highest interest rates outside of payday loans, with the average interest rate sitting at 22.8% as of 2023.

Consumers spend more than $1 trillion on interest payments, largely due to increasing credit card debt

Apple (AAPL), a Dow stock, announced that its annual developers conference, WWDC, will take place Jun 10-14.  The conference will be livestreamed on its website, although the company is inviting some software makers to its campus on the first day to “celebrate in person,” AAPL said.  At this year's conference, AAPL could reveal its long-awaited artificial intelligence strategy & consumer features.  In Feb, Cook said AAPL was “investing significantly” in AI & teased an AI-related announcement “later this year” that many analysts believe will come at the Worldwide Developers Conference (WWDC).  AAPL typically reveals the latest versions of its iPhone, iPad, Mac & Apple TV software at WWDC via a “keynote” video on the first day, led by CEO Tim Cook & other AAPL staff, which is also streamed on YouTube.  At some past conferences, the company has also revealed new professional-oriented hardware, such as Mac laptops.  At this year's conference, AAPL also plans to reveal the first major software update to the Vision Pro, the virtual reality headset it launched earlier this year.  The stock fell 93¢.

Apple announces its big annual conference, where it could reveal its AI strategy

Consumers are feeling less confident about the future state of the US economy, according to new data.  The Conference Board's Consumer Confidence Index for Mar came in at a reading of 104.7, little changed from a revised 104.8 in Feb but short of the 107 reading expected.  The "Present Situation Index," which measures consumers' assessment of current business & labor market conditions, increased to 151 in Mar from 147.6 in Feb.   However, the "Expectations Index," which tracks consumers' short-term outlook for income, business & labor market conditions, fell to 73.8 in Mar from 76.3 last month.  Historically, a reading below 80 in that category signals a recession in the coming year.  "Consumers’ assessment of the present situation improved in March, but they also became more pessimistic about the future," said Dana Peterson, chief economist at the Conference Board.  "Confidence rose among consumers aged 55 and over but deteriorated for those under 55," Peterson said.  "Separately, consumers in the $50,000-$99,999 income group reported lower confidence in March, while confidence improved slightly in all other income groups."  "However, over the last six months, confidence has been moving sideways with no real trend to the upside or downside either by income or age group."

Americans got 'more pessimistic' about the economy in March

Gold rose back toward its most recent record set last week, extending a weeks-long rally fueled by bets on Federal Reserve rate cuts & deepening geopolitical tensions.  While the expected pivot by the Fed is positive for non-interest-bearing gold, the sharp rally over the past month has been marked by often-outsized moves that lacked a clear news trigger to justify the gains, as investors piled into the bullion market.  Persistent tensions in the Middle East & Ukraine have bolstered the precious metal's role as a haven asset, while central bank buying supported prices at historically high levels over the past year, despite rising interest rates.  A weaker $ also supported bullion, after the People's Bank of China yesterday set a stronger-than-expected reference rate for the yuan.  The next focus for investors will be the Fed's preferred measure of underlying inflation, which is due for release on Fri.  Gold for Jun closed up $1 to settle at $2177 per ounce.

Gold advances as rate cut bets firm ahead of US inflation test

West Texas Intermediate (WTI) crude oil closed lower as fresh US inventory data is awaited.  WTI crude oil for May delivery closed down 33¢ to settle at $81.62 per barrel, while May Brent crude, the global benchmark, was last seen down 58¢ to $86.17.  Prices have slipped off a 5-month high touched last week amid geopolitical worries as violence continues in the Middle East, lower US inventories & Ukrainian drone attacks on Russian oil refineries that have significantly damaged that country's processing capacity.  The damage to Russia's refineries has pushed the price of refined products higher, with gasoline futures up 17% over the past month, though heating oil is less affected as shoulder season demand sets in.  Coming surveys of US inventories may offer direction to the market, with the American Petroleum Institute releasing its weekly survey later, followed tomorrow by official data from the Energy Information Administration.

WTI Crude Oil Edges Down Ahead of Fresh Inventory Data

News that was not exciting kept buyers away from the stocks market today.  As said many times here, the market is vastly overbought & is entitled to take a rest.  Also, there was cautious selling into the close.

Dow Jones Industrials 

Markets edge higher while waiting for economic data

Dow gained 80, advancers over decliners 3-2 & NAZ went up 57.  The MLP index was off 1+ to 80 & the REIT index was even in the 376s.  Junk bond funds crawled higher & Treasuries had limited selling which raised yields slightly (more below).  Oil slid a little lower in the 81s & gold added 2 to 2178.

AMJ (Alerian MLP Index tracking fund)

Sales of new US single-family homes unexpectedly fell in Feb after mortgage rates increased during the month, but the underlying trend remained strong amid a chronic shortage of previously owned houses on the market.  The report from the Commerce Dept also showed the median new house price last month was the lowest in more than 2½ years, while supply was the highest since Nov 2022.  Builders are ramping up construction, while offering price cuts & other incentives as well as reducing floor size to make housing more affordable.  New home sales slipped 0.3% to a seasonally adjusted annual rate of 662K units last month, the Commerce Dept's Census Bureau said.  The sales pace for Jan was revised up to 664K units from the previously reported 661K units.  The forecast for new home sales, which account for 13.1% of US home sales, called for a rise to a rate of 675K units.  New home sales are counted at the signing of a contract, making them a leading indicator of the housing market.  They, however, can be volatile on a month-to-month basis.  Sales advanced 5.9% on a year-on-year basis in Feb.  The new homes market has defied 525 basis points worth of interest rate hikes from the Federal Reserve since Mar 2022, bolstered by a dearth of previously owned houses for sale.  The overall housing market has likely turned the corner, with home resales surging to a one-year high in Feb.  Nonetheless, supply remains inadequate, keeping house prices elevated & homeownership out of the reach of many.  The average rate on the popular 30-year fixed-rate mortgage jumped to 6.94% in late Feb, before retreating to just below 7.0% by mid-Mar, according to data from mortgage finance agency Freddie Mac.  The central bank is expected to start cutting rates sometime this year. 

US new home sales fall; median price lowest in more than 2-1/2 years

Cocoa hit a record as supply constraints fuel prices higher.  Futures for May delivery were up 3.9% at $10,030 per metric ton, marking the first time the commodity breaks above the $10K mark.  Cocoa has been on a tear this year, soaring nearly 138%.  Difficult weather conditions & disease have impacted production in West Africa, which produces about 70% of the world's cocoa.  The 2 largest producers, Ivory Coast & Ghana, have been hit by combination of heavy rain, dry heat & disease recently.  Late last year, heavy rain & the spread of black pod disease in the 2 countries impacted farming, according to a Nov report from the Intl Cocoa Organization (ICCO).  Poor road conditions also made it difficult to bring the available beans to port, according to the report.  “As these two leading producing countries supply about two-thirds of global cocoa beans, any change in their production tends to have a significant impact on the cocoa market,” the ICCO added.  Arrivals at ports in the Ivory Coast & Ghana have declined 28% and 35% respectively since the start of the season compared to the same period last year, according to a Feb ICCO report.  Hershey (HSY) has forecast flat earnings growth for the year due to rising cocoa prices.  The company reported 4th qtr net income of $349M, a decrease of about 12% compared to the same period in the prior year.  “As we look at those record cocoa prices, certainly it’s a dynamic market and those are a challenge but we have lived through market volatility and fluctuation in input costs before,” CEO Michele Buck said in Feb.  “We have a good hedging strategy and we have really good price visibility on those inputs into 2024,” she said.  The stock rose 2.04.

Cocoa prices hit $10,000 per metric ton for the first time ever

The 10-year Treasury yield rose slightly as investors weighed the previous day's data points & looked ahead to key inflation figures later in the week.  The benchmark rate was up 1 basis point at 4.263% & the yield on the 2-year Treasury yield was nearly 3 basis points higher at 4.61%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Today's moves come as investors continue to assess the strength of the US economy, when the Federal Reserve might start to cut interest rates — & how many times it could do so this year.  Economic data released today showed that orders for long-lasting goods in the US rose by 1.4% last month, higher than the 0.8% rise economists had anticipated.  However, the latest consumer confidence index surprised expectations to the downside, indicating that optimism in the US economy waned in Mar.  The latest reading of the Fed's favorite inflation gauge, the personal consumption expenditures price index, is due to be released Fri & will be closely watched by markets.

10-year Treasury yield ticks lower as investors weigh economic data

After a very long & impressive rise, the stock market is in a holding pattern.  If interested, this is a good time to buy chocolate candy before the next round of price hikes.

Dow Jones Industrials

Markets drift lower in lackluster trading

Dow dropped 172, decliners modestly ahead of advancers & NAZ was off 47.  The MLP index stayed near 281 & the REIT index was off 1+ to the 376s.  Junk bond funds slid a little lower & Treasuries continued to see modest selling, raising yields.  Oil went up 1+ to the 82s & gold gained 14 to 2174 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Amgen (AMGN) is taking a new approach as it tries to stand out in a crowded field of drugmakers racing to develop the next blockbuster weight loss drug.  The biotech company is testing an injectable treatment that helps people lose weight differently from the existing injections from Novo Nordisk (NOVO) & Eli Lilly (LLY), & other obesity medicines in development.  AMGN's treatment, called MariTide, also appears to help patients keep weight off after they stop taking it.  The drugmaker is also testing its drug to be taken once a month or even less frequently, which could offer more convenience than the weekly medicines on the market.  It's too early to say how competitive AMGN will be in the budding weight loss drug space, which NOVO & LLY have so far dominated.  Some analysts expect the market could be worth $100B by the end of the decade, potentially leaving room for new competitors to enter.  Goldman Sachs also projects 10-70M Americans will be taking weight loss drugs by 2028.  The available data on AMGN's injectable drug is promising, but it's from a small, early-stage clinical trial.  The company also is developing an oral medicine & other treatments for obesity, but has disclosed few details about them.  AMGN stock rose 30¢.

Amgen wants to enter the weight loss drug market with a new approach

Demand for weight loss drugs is booming in the US despite their limited insurance coverage & roughly $1000 monthly price tags before discounts.  But some patients are willing to pay more out of pocket for those treatments than others, & that desire is strongly correlated to their annual income.  That's according to a recent survey from Evercore ISI focused on GLP-1s, a new class of medications used to treat Type 2 diabetes & obesity.  Between Jan 24 - Feb 20, the firm surveyed more than 600 participants who are currently taking a GLP-1, considering the therapy or have taken it in the past but no longer do.  The findings on how much patients are willing to spend underscore concerns about equity in access to the breakthrough drugs while insurance coverage is sparse.  GLP-1s include NOV's blockbuster weight loss injection Wegovy & diabetes counterpart Ozempic, along with LLY's popular weight loss treatment Zepbound ' diabetes injection Mounjaro.  A monthly package of a GLP-1 costs $900 - $1350 before insurance & other rebates.  Both companies have savings programs that aim to reduce out-of-pocket costs for weight loss drugs, regardless of whether a patient has commercial insurance coverage.  The majority, nearly 60%, of people surveyed with annual incomes of more than $250K said the maximum price they are willing to pay out of pocket for a GLP-1 is more than $300 per month.  Only about 4% of people with annual incomes of less than $75K said the same thing.  Of that group, 64% said the maximum price they are willing to pay out of pocket for a GLP-1 is $50 per month or less.

How much people are willing to spend on weight loss drugs, according to a survey

Nissan  (NSANY) is targeting an additional 1M vehicle sales over the next 3 years & a 30% reduction in electric vehicle production costs by 2030, the Japanese carmaker announced.  In a new medium-term business plan, NSANY also said it would launch 30 new models by fiscal 2026, with 16 of these electrified.  It's aiming for EV & combustion engine costs to reach parity by 2030.  “This plan will enable us to go further and faster in driving value and competitiveness,” Pres & CEO Makoto Uchida said.  “Faced with extreme market volatility, Nissan is taking decisive actions guided by the new plan to ensure sustainable growth and profitability.”  The automaker also said it is targeting an operating profit margin of more than 6% by the end of fiscal 2026, as well as “long-term profitable growth.”  It comes as the hype around electric vehicles appears to have cooled a little recently, with major manufacturers scaling back or delaying EV plans amid cooling demand.  Even sector giant Tesla (TSLA) is bracing for what CEO Elon Musk said in Jan “may be a notably lower” rate of growth.  Traditional auto powerhouses are also facing a huge competitive challenge from China when it comes to electrification.  The country boasts the world's largest & most crowded EV market & its automakers are exerting significant downward pressure on prices.  CEO Uchida said that the development of the EV sector & particularly the price pressures, had come “much, much earlier than we thought.”  Under the 2-part plan dubbed The Arc, NSANY said it will aim to ensure volume growth through a “tailored regional strategy,” & prepare for an accelerated EV transition by balancing its portfolio between EV & combustion cars, growing volumes in major markets, & financial discipline.  This will be supported by “smart partnerships, enhanced EV competitiveness, differentiated innovations and new revenue streams.”  NSANY said this strategy could yield potential revenues of  ¥2.5T ($16B) from new business opportunities by fiscal 2030.  NSANY stock fell 11¢.

Nissan looks to address ‘extreme market volatility’ with 30 new models, EV cost cuts

Gold prices rose, driven by expectations of interest rate cuts by the Federal Reserve this year, even as traders await inflation readings this week for confirmation on the timing of these reductions.  Spot gold gained 0.5% to $2174 per ounce today & gold futures settled 0.8% higher at $2176.  The weekly initial jobless claims print is due on Thurs & will be followed by the US core personal consumption expenditure (PCE) price index data on Fri.  The $ also pared some of last week's gains, making bullion cheaper for overseas buyers.  Gold hit record peaks last week after the Fed reiterated its view of 3 rate cuts in 2024.  Traders are pricing in a 70% probability of a Jun rate cut, versus 65% before the Fed's Mar policy meet last week.  Lower interest rates tend to make zero-yield gold more appealing.  Gold also continued to draw support from strong central bank buying & safe-haven demand.

Gold gains as rate cut bets hold ground in run-up to inflation test

West Texas Intermediate (WTI) closed higher following 3 losing sessions on expectations demand will rise with interest-rate cuts on the horizon while supply remains constricted with OPEC+'s 2.2M barrels per day of voluntary cuts continuing.  WTI crude oil for May closed up $1.32 to settle at $80.88 per barrel, while May Brent crude, the global benchmark, was last seen up $1.22 to $86.65.  The rise comes as the Federal Reserve & other central banks are expected to begin a cycle of lowering interest rates with inflation slowing in most markets.  The cuts are expected to spur economies & raise demand, even as OPEC+ continues to restrict production.

WTI Crude Oil Rises as Falling Interest Rates to Stimulate Demand as Supply Remains Constrained

This week should feature quiet trading ahead of a long holiday weekend.  The most exciting news will come on Thurs, the last day of trading, & on Fri when the markets are closed..

Dow Jones Industrials 

Markets hesitate to start shortened trading week

Dow retreated 128, but advancers over decliners 5-4 & NAZ slid back 14.  The MLP index added 1 to the 283s & the REIT index was flat at 378.  Junk bond funds were pretty much flat. & Treasuries had limited selling, taking yields slightly higher.  Oil rose 1+ to the 82s (more below) & gold jumped 19 to 2179.

AMJ (Alerian MLP Index tracking fund)

Boeing (BA), a Dow stock, CEO Dave Calhoun is stepping down at the end of 2024 as the aerospace giant grapples with fallout stemming from the 737 Max crisis.  Calhoun, who was tapped to turn around the company in 2020, will "lead Boeing through the year to complete the critical work underway to stabilize and position the company for the future," the company said.  Aside from Calhoun's departure, BA announced an overhaul of its management team as it tries to turn around its reputation.  BA Commercial Airplanes (BCA) chief Stan Deal will also step down, effective immediately.  Deal is being replaced by Stephanie Pope, who has been serving as the chief operating officer.  Pope was in charge of overseeing the performance of BA's 3 business units – Boeing Commercial Airplanes, Boeing Defense, Space & Security & Boeing Global Services.  Independent Board Chair Larry Kellner also announced plans to resign.  He will be replaced by Steve Mollenkopf, who has been a director since 2020 & will be in charge of leading the process of selecting BA's next chief exec.  BA already replaced the head of its 737 Max program at the company's Renton, Washington, facility, Ed Clark,  earlier this year.  Elizabeth Lund, senior VP & general manager of Airplane Programs, was also appointed to a newly created role that will focus on quality control initiatives.  The management change-up comes as regulators continue to press BA to make "pofound improvements" after quality issues were discovered in an audit of 737 Max manufacturing processes.  The stock rose 1.81. 

Boeing takes drastic step after string of safety scares puts company in hot seat

Crude oil futures rose as Ukraine drone strikes disrupt Russian oil refining capacity.  The West Texas Intermediate contract for Apr gained 38¢ (0.5%), to $81.01 a barrel & the Brent contract for May added 37¢ (0.4%) to $85.79 a barrel.  A Ukrainian drone strike caused a fire at the Kuibyshev oil refinery in the city of Samara over the weekend.  Industry sources that 1 of the major refining units at the facility was knocked out after the attack.  Kyiv has launched campaign of strikes against Russian energy infrastructure since the start of the year with Ukrainian intelligence claiming a dozen facilities have been successfully hit.  At least 10% of Russia's refining capacity has been disrupted by the attacks, according to British intelligence.  “Depending on the extend of the damage, major repairs could take considerable time and expense,” the British Ministry of Defense said in an update over the weekend.

Oil prices rise as Ukraine strikes Russian refineries

Treasury yields rose slightly as investors awaited fresh economic data slated for this week that could provide hints about the state of the economy.  The 10-year Treasury yield was up by 2 basis points at 4.24% & the yield on the 2-year Treasury yield was last 3 basis point higher at 4.63%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Investors looked to upcoming economic data releases after the Federal Reserve last week indicated that interest rates may be cut soon, but noted that this would depend on how the economy develops.  “We believe that our policy rate is likely at its peak for this tightening cycle. If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year,” Fed Chair Jerome Powell said after the central bank's latest meeting.  “But the economic outlook is uncertain, and ongoing progress toward our 2% inflation objective is not assured,” he added. 

Treasury yields inch higher as investors look to key data in week ahead

After the good start for stocks this year, analysts are raising forecasts for the year.  But there are a lot of problems out there starting with wars, high interest rates & company problems.  Already the EU is launching probes of high profile tech companies.  All is not well even though popular stock averages are at new records.  The stock market will close for the holiday on Fri.

Dow Jones Industrials 

Markets fall but Dow stayed near its record and Nasdaq moved higher

Dow fell 306 (with a high over 40K), decliners over advancers 2-1 & NAZ was up 26.  The MLP index lost 2+ to the 282s & the REIT index dropped 4+ to the 378s.  Junk bond funds fluctuated & Treasuries saw strong buying which lowered yields.  Oil was slid back fractionally to go under 81 & gold dropped 21 to 2163 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Nike (NKE), a Dow stock, China sales continued to slow during its holiday qtr, but the retailer beat estimates on the top & bottom line, helped by better than expected growth in North America & price changes.  For the 3-months ended Feb 29 was 77¢ compared with 79¢ a year earlier.  Excluding 21¢ per share related to restructuring charges, EPS would have been 98¢.  Sales rose to $12.43B, up slightly from $12.39B a year earlier.  In North America, where demand has been unsteady, sales rose about 3% to $5.07B, compared with estimates of $4.75B.  Meanwhile, sales in the rest of its regions came in below estimates.  In China, sales reached $2.08B, just below the $2.09B expected.  Revenues in the region climbed 5%, but growth there has decelerated as demand normalizes after Covid-19 lockdowns.  In Europe, the Middle East & Africa, revenue fell 3% to $3.14B, worse than the $3.17B that had expected.  Excluding restructuring charges, the company reiterated its sales outlook for fiscal 2024 & said it expects revenue to grow 1%, in line with expectations of up 1.1%.  For the current qtr, it expects revenue to be up slightly, compared to estimates of up 2%.  For fiscal 2025, NKE expects revenue & earnings to grow versus the prior year, but it didn't say by how much.  Analysts had expected revenue guidance of up 5.6%.  The stock dropped 6.21.

Nike shares slide on lackluster outlook, slowing China sales

Stubbornly high inflation could push the Federal Reserve into a more cautious stance this year regarding interest rate cuts, the central bank's former vice chair said.  Richard Clarida, who served as Fed governor until Jan 2022 & is now a global economic advisor at asset management giant Pimco, said his former colleagues need to be on guard against sticky prices that could thwart plans to ease monetary policy this year.  At its meeting this week, the rate-setting Federal Open Market Committee indicated it would likely decrease rates 3 times this year, assuming qtr percentage point intervals.  Chair Jerome Powell said receding inflation & a strong economy give policymakers room to cut.  “This may be more of a hope than a forecast,” Clarida said.  “I do hope that the Fed really moves into data-dependent mode, because there can be a very good case if inflation is sticky and stubborn that they shouldn’t deliver three cuts this year.”  Markets also are expecting 3 cuts this year, though that pricing has been scaled back after data to start the year showed inflation higher than expected.  Fed officials are banking that elevated shelter inflation is on its way down, paving the way to lower their key borrowing rate from its highest level in more than 23 years.  Clarida, however, said the extent to which the Fed can cut is unclear.  “Under a pretty broad range of scenarios, they’re going to get at least one cut in this year,” he said.  However, the calculus gets different as inflation data provides mixed signals.  “If the Fed were targeting CPI right now, we wouldn’t even be discussing rate cuts,” Clarida added.  He also noted that even though Powell on Wed said financial conditions are tight, they in fact are “a lot easier than they were in November.”  A Chicago Fed measure of financial conditions is at their loosest since Jan 2022.  “What I think is going on here is a delicate balance that [Powell is] trying to navigate,” Clarida continued.  “Financial conditions will very naturally start to ease when they get the sense the Fed is done and [will start] cutting. Then of course that improves the economic outlook and potentially makes it harder to get inflation down to 2%.”

Former Fed vice chair Clarida sees possibility of fewer rate cuts this year

Treasury Secretary Janet Yellen has admitted that Pres Biden "doesn’t have a plan" – only "principles" – when it comes to preventing Social Security from going insolvent around a decade from now.   Yellen made the remark during a Senate Finance Committee Hearing on Biden's fiscal year 2025 budget.  Gov projections last year estimated that the Social Security retirement fund could run out of money as soon as 2033, & Biden has floated raising taxes on top earners to make up for the shortfall.  "I'll note that there's already been $4.9 trillion in new taxes proposed for those making over $400,000 a year. It seems to be the go-to place, fill in the blank, we're going to tax those over 400,000 a year for whatever," Sen. Bill Cassidy told Yellen.  "Of that $4.9 trillion, none of that has been dedicated to Social Security."  Cassidy then asked Yellen what the tax rate would have to be on those earners to address "the unfunded accrued liability for Social Security," because the "president theoretically has a plan."  Yellen first said "I don't have that computation to offer you" before saying that "The president doesn't have a plan. He has principles.  "He wants to work with Congress to find a way to protect Social Security and extended its solvency beyond 2034," she added.  Yellen, when asked by Cassidy how Biden could "justify not having a plan" for Social Security "when he's been in office for three years already," said the pres "believes it's important to work with Congress."  However, Cassidy argued that he & other members on the Senate Finance Committee have not heard "one peep" from Biden on that matter.  "Secretary Yellen made clear in her testimony that President Biden has put forward an approach that would strengthen Social Security by protecting seniors from benefit cuts and extend solvency by asking the highest-income Americans to pay their fair share," Treasury Principal Deputy Secretary for Public Affairs Michael Gwin said following the hearing.

Biden 'doesn't have a plan' on Social Security solvency, Treasury secretary says

Gold prices fell off from a record high as the $ rose to a month high.  Gold for Jun closed down $24 to settle at $2181 per ounce, a day after closing above the $2000 mark for the first time.  The price of the metal is being buoyed by expectations lower interest rates are on the way after the Federal Reserve this week forecast rate cuts of 75 basis points this year, even as it left its benchmark rate at a 23-year high.  The expectation of central banks starting to cut policy rates later this year will continue to underpin gold.  The ICE dollar index was last seen up 1.01 points to 104.45, the highest since Feb14, making gold more expensive for intl buyers.

Gold Falls Off a Record as the Dollar Rises to a Month High

West Texas Intermediate (WTI) crude oil closed lower, falling for a 3rd day as the $ rose to the highest in more than a month.  WTI crude for May closed down 44¢ to settle at $80.63 per barrel, while May Brent crude, the global benchmark, closed down 35¢ to $85.43.  A rising $ is checking prices as the ICE dollar index pushes to a month high following the Federal Reserve's decision this week to keep interest rates at a 23-year high while forecasting 75 basis points of cuts this year.  The index was last seen up 1.01 points to 104.44, the highest since Feb 14.  Crude oil prices are under some pressure due to the strong $, but Brent Crude remains above $85 a barrel as rate outlook & supply tightness concerns continued to underpin prices.  Still, supply remains tight on 2.2M barrels per day of voluntary production cuts from OPEC+ members that are scheduled to expire at the end of Jun, though they could be extended thru year end.

May WTI Crude Oil Closes Lower as the Dollar Surges, Offsetting Supply Concerns

The strong stock market has risen on the prospect of a reversal from interest rate hikes buoying investors' spirits.  The popular stock averages continue in record territory with Dow up a staggering 8K since Nov.  That is a staggering rally without any significant pullback.  This week Dow rose 761.

Dow Jones Industrials 

Markets advance to new records while gold also reaches a new record

Dow rose 269 (close to today's high), advancers over decliners better than 2-1 & NAZ was up a more modest 32.  The MLP index stayed in the 283s & the REIT index went up 1+ to the 382s.  Junk bond funds crawled higher & Treasuries were little changed near elevated levels.  Oil slid lower, taking it below 81, & gold surged 24 to 2185 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Target (TGT), a Dividend Aristocrat, will double its bonus payments to salaried employees this year, as profits recover from a bumpy nearly 2-year stretch.  Salaried employees receive an annual bonus, based on company performance& the eligible amount set as part of their compensation.  The retailer will pay 100% of employees' eligible annual bonus amounts for the most recent fiscal year, an increase from 50% in the prior year.  The annual bonus payout is based on how the retailer performs against sales & profit goals set at the beginning of the fiscal year.  “Based on Target’s performance in 2023, including the $2 billion in additional profit growth our team delivered that exceeded the goals we set at the beginning of the year, we’re rewarding our team accordingly,” the company said.  TGT will pay out the annual cash bonuses in late Mar.  The amount paid out won't be as high as it could be, however.  It tops out at 175% of each employee's eligible bonus amount.  The vast majority of approximately 415K employees, such as those at its stores & warehouses, are paid hourly & do not qualify for the bonuses.  Yet it does offer bonuses to store & supply-chain leaders, along with many corp employees.  Top execs have a different bonus structure.  The stock fell 30¢.

Target doubles bonuses for salaried employees as profits recover

Microsoft (MSFT), a Dow stock, is releasing its first Surface PCs featuring a dedicated Copilot button on the keyboard for quickly accessing the chatbot, following through on a promise that it made in Jan.  The addition of the button, to the left of the arrow keys, represents the biggest change to the computer keyboard in decades.  While MSF is not the largest PC seller, that distinction belongs to Lenovo, it does run the most popular operating system with Windows.  Lenovo has announced its own PCs featuring Copilot keys, as have Dell (Dell) & HP (HPQ).  But the Surface has in the past been a showcase of what a Windows machine can be, & MSFT is trying to articulate the convenience of having generative artificial intelligence one keystroke away with the 2 new PCs: its new convertible Surface Pro 10 for Business & Surface Laptop 6 for Business.  When people type a few words in to the Copilot, which draws on AI models from MSFT-backed OpenAI, servers in faraway data centers perform the necessary computing work to craft a response.  MSFT calls these new machines AI PCs.  The new key, which allows users to open the Copilot panel any time on the right side of the screen, helps matters, along with the silicon inside.  Each computer comes packed with an Intel (INTC), a Dow stock, Core Ultra processor containing a special neural processing engine, or NPU.  Surface computers have featured NPUs since 2019.  MSFT stock rose 4.14.

Microsoft debuts first Surface PCs with dedicated Copilot AI button

The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, suggesting that job growth remained strong in Mar.  The Federal Reserve yesterday left interest rates unchanged.  Fed Chair Jerome Powell said he did not see "cracks" in the labor market, which he described as "in good shape," noting that "the extreme imbalances that we saw in the early parts of the pandemic recovery have mostly been resolved."  Initial claims for state unemployment benefits dropped 2K to a seasonally adjusted 210K last week, the Labor Dept said.  The forecast called for 215K claims.  Unadjusted claims decreased 12K to 190K last week.  Applications in California plunged by 5369, while filings in Oregon fell 2580.  They more than offset notable increases in Michigan & Missouri.  Fed officials indicated that they still expected to trim the central bank's policy rate by 3-qtrs of a percentage point by the end of the year.  The central bank has raised its benchmark interest rate by 525 basis points to the current 5.25%-5.50% range since Mar 2022.  Labor market resilience is helping to underpin the economy, which continues to outshine its global peers.  Despite a flurry of high-profile layoffs at the start of the year, employers have largely been hoarding labor after struggling to find workers during & after the COVID-19 pandemic.  The claims data covered the period during which the gov surveyed business establishments for the nonfarm payrolls portion of Mar's employment report.  Claims rose marginally between the Feb & Mar survey weeks.  The economy added 275K jobs in Feb.

US Weekly Jobless Claims Unexpectedly Fall

Gold surged to a new record, rising above the $2200 mark for the first time as the Federal Reserve's policy committee ended their 2-day meeting yesterday leaving interest rates steady while maintaining expectations for cuts of 75 basis points this year.  Gold for Jun closed up $24 to settle at $2206 per ounce, topping the prior record of $2188 set on Mar 11, but down from the session high of $2246.  The rise follows on the end of the Federal Open Market Committee's meeting, which closed with interest rates remaining at a 23-year high while forecasting up to 3 25 basis point cuts before the end of the year, a bullish note for gold since it pays no interest.  The Fed followed thru on what was widely expected & left interest rates unchanged (the benchmark is still at its highest since 2001).  The Fed maintained their outlook for 3 qtr point cuts this year, but fewer in 2025 than previously & stronger economic growth is expected.  The rate narrative for gold is just a bit more positive.  The $ traded higher, with the ICE dollar index last seen up 0.61 points to 104.04, making gold more expensive for intl buyers.  Treasury yields were higher, with the 2-year note last seen paying 4.638%, up 2.7 basis points, while the yield on the 10-year note was up 0.2 basis points to 4.278%.

Gold Climbs to a Record on Expectations Lower Interest Rates are on the Way

Oil prices settled slightly lower, pressured by weaker US gasoline demand data and reports of a UN draft resolution calling for a ceasefire in Gaza.  Brent crude futures for May settled down 17¢ to $85.78 a barrel, while US West Texas Intermediate futures for May settled own 20¢ to $81.07 a barrel after a fall of about 1.8% in the previous session.  Crude inventories in the US, the world's biggest oil consumer, unexpectedly declined last week, the Energy Information Administration (EIA) reported yesterday.  Though gasoline inventories fell for a 7th week, down 3.3M barrels to 230.8M, gasoline product supplied, a proxy for product demand, slipped below 9M barrels.  The fall suggested that gasoline markets, which had underpinned a recent market rally, may have been overbought.  Oil prices also were pressured by confirmation that the US drafted a UN resolution calling for a ceasefire that would allow the release of 40 Israeli hostages in return for hundreds of Palestinians detained in Israeli jails.

Oil Settles Lower on Weaker US Gasoline Demand, Gaza Ceasefire Hopes

Stocks were bid higher in the first hour of trading & remained at those elevated levels for the rest of the session.  This week is shaping up as a highly unusual week.  Stocks & gold are at record levels even though they represent opposite views about the financial future for the economy, positive versus negative.  With interest rates at high levels, even after 3 rate cuts the bulls will still be challenged.

Dow Jones Industrials