Markets rally taking the Dow to a new record

Dow shot up 247 to a record high but profit taking into the close trimmed its highs above 40K, advancers over decliners better than 3-1 & NAZ jumped 115.  The MLP index crawled higher in the 281s & the REIT index gained another 4+ to the 395s after yesterday's rally.  Junk bond funds remained in demand & Treasuries stayed near even so yields barely changed.  Oil slid back chump change in the 82s & gold was off 3 to 2418 (more on both below).

Dow Jones Industrials 

Citigroup (C) posted 2nd-qtr results that topped expectations for profit & revenue on a rebound in investment activities.  EPS jumped 10% from a year earlier to $1.52 & revenue rose 4% to $20.14B.  Equities trading revenue rose 37% to $1.5B, driven by strength in derivatives & a rise in hedge fund balances, roughly $300M more than the estimate.  “Our results show the progress we are making in executing our strategy and the benefit of our diversified business model,” CEO Jane Fraser said.  “Markets had a strong finish to the quarter leading to better performance than we had anticipated.” Citi was just this week rebuked  for failing to fix its regulatory shortfalls, so analysts will be keen to ask Fraser about her long-running efforts to address the issue.  Last year, Fraser announced plans to simplify the management structure & reduce costs at the 3rd-biggest US bank by assets.  But earnings will take a backseat if Citi cannot appease regulators concerns about its data & risk management.  The stock fell 1.18.

Citigroup tops expectations for profit and revenue on strong Wall Street results

Wells Fargo (WFC) reported a 9% decline in net interest income, even though its 2nd-qtr earnings & revenue exceeded expectations.  WFC recorded $11.9B in net interest income, a key measure of what a bank makes on lending, marking a 9% year-over-year decline.  That was below the $12.1B expected.  The bank said the drop was due to the impact of higher interest rates on funding costs.  “We continued to see growth in our fee-based revenue offsetting an expected decline in net interest income,” CEO Charlie Scharf said.  “The investments we have been making allowed us to take advantage of the market activity in the quarter with strong performance in investment advisory, trading, and investment banking fees.”  Net income dipped to $4.91B ($1.33 per share) in the 2nd qtr, from $4.94B ($1.25 per share) during the same qtr a year ago.  The bank set aside $1.24B as provision for credit losses, which included a modest decrease in the allowance for those losses.  Revenue rose to $20.7B in the qtr.  The bank repurchased more than $12B of common stock during the first ½ of 2024 & it expects to increase the 3rd-qtr div by 14%.  The stock fell 3.59.

Wells Fargo shares tumble after net interest income falls short of estimates

Hackers stole 6 months’ worth of call & text message records of nearly every AT&T (T) cellular network customer, the company said, a breach that has the potential to reveal sensitive information about Ms of Americans.  The company said in an SEC filing that it learned from an internal investigation that in Apr, hackers “unlawfully accessed and copied AT&T call logs” that were saved on a 3rd-party cloud platform.  The data contains records of calls & texts between approximately May 1 & Oct 31, 2022, & on Jan 2, 2023.  The content of the calls and messages was not compromised & customers' personal information was not accessed, but the records did include phone numbers.  Such information is often called metadata, which is information about communications, & considered highly sensitive especially when collected & analyzed at large scales to reveal patterns & connections between people.  AT&T wireless network has 127M devices connected to it.  “While the data does not include customer names, there are often ways, using publicly available online tools, to find the name associated with a specific telephone number,” the company said.  The Justice Dept & the FBI each said it is working with AT&T to investigate the hack.  The FCC also said it had launched an investigation into the breach.  AT&T said it has “taken additional cybersecurity measures in response to this incident including closing off the point of unlawful access.” Customers affected by the hack will be contacted.  The stock slid back 4¢.

AT&T says hackers stole records of nearly all cellular customers’ calls and texts

Gold is holding above $2400 an ounce as investor expectations mount that the Federal Reserve is moving closer to cutting interest rates.  A flurry of US economic data including the core consumer price index has signaled that US inflation is cooling, which could give Fed Chair Jerome Powell & his colleagues the confidence they’ll need to cut rates.  Activity in the federal funds futures market suggests that bond traders are ramping up bets that the Fed will cut rates by ½ a percentage point in Sep instead of the standard qtr-point increment.  Lower rates tend to favor non-interest bearing gold.  Spot gold edged toward the record high of $2450 an ounce reached in May, reversing earlier declines after the Bureau of Labor Statistics published data on US producer prices.  The precious metal traded at $2417 & the Bloomberg Dollar Spot Index dropped 0.4%.  Bullion has rallied 17% this year despite headwinds including high interest rates & sticky inflation, thanks in part to strong central bank buying, investor demand & the metal's appeal as a haven asset during heightened political risks.

Gold Holds Near Record as Fed' Rate-Cut Optimism Mounts

West Texas Intermediate (WTI) crude oil closed lower after the US reported its Producer Price Index (PPI) rose more than expected last month, countering some of the day-prior optimism spurred by slowing consumer-price inflation.  WTI crude oil for Aug closed down 41¢ to settle at $82.21 per barrel, while Sep Brent crude, the global benchmark, was last seen down 14¢ to $85.26.  The Bureau of Labor Statistics said producer prices rose 0.2% in Jun, unchanged from May & above expectations for a 0.1% monthly rise.  Excluding volatile items, core PPI rose 0.4% from May after being unchanged that month, while expectations called for a 0.2% monthly rise.  The $ rose off overnight lows following the data but failed to regain ground lost yesterday after the Consumer Price Index rose less than expected last month, raising expectations for interest-rate cuts from the Federal Reserve.  The ICE dollar index was last seen down 0.3 points to 104.13.  Still fundamentals appear to be sound for oil, with high summer demand cutting US oil inventories & OPEC+ continuing 2.2M barrels per day of voluntary production cuts.  However weaker demand from China, the #1 importer, is clouding the outlook after the country reported an outsized drop in imports last month.

WTI Oil Closes Lower After a Report Showed U.S. Producer Prices Rose More than Expected in June

Investors are encouraged by improved inflation data & are eager to bid stock prices higher.  As pointed out previously, even with rate reductions they remain high high for months & probably years.  Nervous investors keep buying gold, taking it to new highs.  Last week Dow rose 625 to reach a new record at 40K.