Markets fall led by selling in tech stocks

Dow dropped 533, decliners over advancers 4-1 & NAZ declined 125.  The MLP index added 1+ to the 297s & the REIT index pulled back 3+ to 401.  Junk bond funds fluctuated & Treasuries had selling which raised yields.  Oil was pennies lower in the 82s & gold slid back 6 to 2453 (more on both below).

Dow Jones Industrials 

United Airlines (UAL) 2nd-qtr profit rose more than 20% from last year as strong demand for intl travel boosted the carrier's results, but its 3rd-qtr forecast came in shy of estimates as an oversupply of flights weighs on fares.  UAL expects EPS of $2.75 - $3.25 on an adjusted basis in the current qtr, lower than the $3.44 estimated.  EPS was $3.96 in the 3 months ended Jun versus $3.24 a year earlier.  Adjusting for 1-time items, it reported EPS of $4.14 compared with $3.93 that was expected.  Revenue of $14.99B jumped 5.7% from the year-earlier period, though it was just shy of estimates.  UAL reiterated its full-year forecast for adjusted EPS of $9 to $11.  “Looking back at the quarter now, it is increasingly clear that demand was in fact strong, it just could not keep up with the incremental industry domestic capacity added in 2024. Excess capacity, in turn, pressured yields,”  Chief Commercial Officer Andrew Nocella said.  Premium revenue grew more than 8% from last year, while sales from the most restrictive basic economy tickets rose 38%, as it works to cater to both ends of the market.  The company expanded domestic flying by more than 5% in the 2nd qtr over last year & unit revenues fell more than 1% over last year.  Yields on flights to & from Europe, which is a smaller slice of its sales, rose more than 5%, compared with the 2nd qtr of 2023.  CEO Scott Kirby said airlines have been trimming their schedules & that there will be an inflection point to moderate the supply in mid-Aug.  “I’ve been through these cycles with capacity many times in my career, this is the fastest respond and it’s also the biggest gap between the leading airlines and the other airlines, which I think is part of the reason the response is so fast,” Kirby said.  The stock fell 30¢.

United Airlines profit jumps 23%, but third-quarter forecast disappoints

Mortgage rates fell again this week but remain uncomfortably high for many would-be buyers.  Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate on the benchmark 30-year fixed mortgage declined to 6.77% this week from 6.89% last week. The average rate on a 30-year loan was 6.78% a year ago.  The average rate on the 15-year fixed mortgage also dropped to 6.05% from 6.17% last week.  One year ago, the rate on the 15-year fixed note averaged 6.06%.

Mortgage rates fall to 6.77%

DR Horton (DHI) tightened its annual forecast for home sales & beat estimates for quarterly profit, as historically low US supplies prop up demand despite elevated mortgage rates, sending its shares to a record high. The largest US homebuilder by sales volume now expects to deliver 90.0-90.5K homes in fiscal 2024, the mid-point of which is higher than its prior forecast of 89-91K.  "Homebuyer demand during the spring selling season was good despite continued affordability challenges," CEO Paul Romanowski said.  Supply of existing homes, which account for a large portion of US housing sales, have dried up as homeowners with fixed rates below 5% have avoided reselling in the face of the popular 30-year, fixed-mortgage rate hovering around 7%.  The company expects to generate increased cash flow in fiscal 2025 as its rental investments stabilize, which, it has said, will be used to increase shareholder returns.  To address affordability in its homebuilding business, DHI has reduced prices & the size of its homes.  Still, home sales gross margins came in at 24% in the 3rd qtr, above the company's expectations of 23-23.5%, as incentive costs, including discounts on mortgage rates, eased.  "We did maintain incentives but didn't lean in too hard," said CEO Romanowski.  The company tightened its full-year revenue forecast to $36.8-$37.2B.  The homebuilder's EPS of $4.10 came in above the estimate of $3.75.  The stock jumped 15.77 (10%).

D.R. Horton beats estimates for quarterly profit

Gold prices edged higher, as expectations of a Sep interest rate cut from the Federal Reserve continue to gather momentum.  Spot gold was down 0.2% at $2453 per ounce.  It hit an all-time high of $2483.  US gold futures fell 0.1% to $2457.  Analysts foresee long-term gains for the precious metal, driven by the Federal Reserve's preparations to cut rates, believing inflation is under control.  Geopolitical instability & central bank demand are also creating a positive medium to long-term outlook for gold.  Markets are pricing in a 100% chance of a US cut rate in Sep, according to the CME FedWatch Tool.  Non-yielding bullion's appeal tends to shine in a low-interest-rate environment.  The number of Americans filing new applications for unemployment benefits rose more than expected last week, but there has been no material shift in the labor market, according to data released by the Labor Dept.

Fed Rate-Cut Hopes Keep Gold Near Record Levels

West Texas Intermediate (WTI) crude oil closed with a small loss, giving up some day-prior gains spurred by falling US oil inventories & a weaker $ after China's ruling Communist Party ended its Third Plenum with little detail on measures to stimulate the #1 oil importer's sagging economy.  WTI crude for Aug closed down 3¢ to settle at $82.82 per barrel, while Sep Brent crude, the global benchmark, was last seen up 3¢ to $85.11.  Chinese officials ended the plenum, staged every 5 years, warning of economic risks but offering little detail on any measures to stimulate an economy burdened by a debt crisis in its key real-estate sector, high youth unemployment & weak consumer spending, amid other issues.  The end of the plenum followed yesterday's weekly survey from the Energy Information Administration that showed US oil inventories fell by 4.9M barrels last week, while the estimate expected a minor drop in stocks.

WTI Crude Oil Edges Down as a Key China Meeting Ends Without Offering Stimulus Measures and the Dollar Rises

Buyers took the Dow higher in the first hour of trading, then it was downhill for the rest of the day.  Dow was having a spectacular Jul, up almost 2K.  But good things don't last forever.  Stocks were hit with increasing turbulence this week.  Selling in tech stocks took NAZ down about 780 since Jul 10.  Some of that money went into Dow kind of stocks this week.  But not today.  The stock market continues to be overbought & more unsettled markets lie ahead.