Thursday, July 11, 2024

Markets slide as inflation cools in June, but gold nears its record highs

Dow went up only 32 after a nice pop in early trading, advancers over decliners about 6-1 & NAZ tumbled 364.  The MLP index was steady near 290 & the REIT index remained up 10+ to the 391s.  Junk bond funds barely budged in price & Treasuries continued to see substantial buying which reduced yields sharply.  Oil rose higher in the 82s & gold soared 41 to 2421 near its record reached in Mar (more on both below).

Dow Jones Industrials 

Mortgage rates fell slightly this week but are still hovering around 7%, remaining 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 ticked down to 6.89% this week from 6.95% last week.  The average rate on a 30-year loan was 6.96% a year ago.  The average rate on the 15-year fixed mortgage also declined, dropping to 6.17% from 6.25% last week.  1 year ago, the rate on the 15-year fixed note averaged 6.30%.

Mortgage rates tick down, still stuck near 7%

Tesla (TSLA) reported that the electric vehicle maker is delaying the unveiling of its Robotaxi by 2 months.  After previously announcing that it would introduce its robotaxi on Aug 8, TSLA has pushed the launch back to Oct to give teams working on the project more time to build prototypes.  This followed an 11-day rally that was sparked by a better-than-expected deliveries report for the 2nd qtr.  That jump wiped out the stock's loss for the year.  However, the shares are now back in negative territory for 2024, a year that has been marred by sweeping layoffs & a drop in sales due in part to an aging lineup of EVs & increased competition in China.  CEO Elon Musk has promised shareholders a robotaxi for years. In 2015, he said Tesla's cars would achieve “full autonomy” within 3 years.  In 2016, Musk said TSLA would be able to send 1 of its cars on a cross-country drive without requiring any human intervention by the end of the following year.  The empty promises continued into 2019, when Musk said on a call with institutional investors that TSLA would have 1M robotaxi-ready vehicles on the road in 2020.  However, the company has yet to deliver a robotaxi, autonomous vehicle or technology that can turn its cars into “level 3” automated vehicles.  Meanwhile the competition has leaped ahead of TSLA.  Following a dreary first-qtr earnings report in Apr, Musk reiterated his vision of TSLA as a company dedicated to developing robotaxis that will make money for their owners & a driverless transportation network.  “If somebody doesn’t believe Tesla’s going to solve autonomy, I think they should not be an investor in the company,” Musk said.  The company is scheduled to report 2nd-qtr results later this month.  At TSLA, “unveil” dates do not predict a near-future date for a commercial release of a new product.  For example, TSLA unveiled its fully electric heavy-duty truck, the Semi, in 2017, & did not begin deliveries until Dec 2022.  The stock tumbled 22.03 (8%).

Tesla shares fall 6% after report of robotaxi unveiling delay

Pfizer (PFE) said it will move forward with a once-daily version of its weight loss pill, danuglipron, after it saw “encouraging” data in an ongoing early-stage study.  The company evaluated several once-daily formulations of the drug & identified 1 with “the most favorable profile” in terms of safety & how the body reacts to the medication.  PFE plans to conduct more early-stage trials in the 2nd ½ of the year to identify the ideal dose of the drug, with results expected in the first qtr of next year.  The company said those trials will “inform the registration enabling studies,” which are used in applications for regulatory approval.  Danuglipron “has demonstrated good efficacy in a twice-daily formulation, and we believe a once-daily formulation has the potential to have a competitive profile in the oral GLP-1 space,” outgoing PFE Chief Scientific Officer Dr Mikael Dolsten said.  Notably, the company did not observe any liver safety issues in patients who received once-daily formulations of the drug.  PFE is 1 of several drugmakers racing to win a slice of the market for a highly popular class of weight loss & diabetes drugs called GLP-1 agonists.  Some analysts expect the industry to be worth roughly $100B by the end of the decade.  But PFE has so far struggled to break into the market.  Investors have been pessimistic about the company's potential in the GLP-1 space ever since it scrapped a different once-daily pill in Jun 2023 due to elevated liver enzymes in patients who received the treatment.  Those were among a string of setbacks PFE faced last year on top of the rapid decline of its Covid business, which battered its stock.  Still, PFE has other experimental obesity drugs in early stages of development.  “Obesity is a key therapeutic area for Pfizer, and the company has a robust pipeline of three clinical and several pre-clinical candidates,” Dolsten said.  PFE also believes GLP-1s are only “scratching the surface of what we will see in obesity,” CEO Albert Bourla said in Jun.  The stock was up3126¢.

Pfizer moves forward with once-daily version of weight loss pill after setbacks

Gold jumped above $2400 an ounce to close in on the record price set in May, after an unexpected drop in US consumer prices bolstered hopes that the Federal Reserve will soon start cutting interest rates.  Gold climbed as much as 2.3% after Bureau of Labor Statistics data showed a 0.1% monthly decline in consumer prices, marking the first negative reading in more than 4 years.  Another key core price gauge, which excludes food & energy, rose only 0.1%, further supporting the case for a Sep rate cut.  Gold has surprised many observers this year by surging to records despite high interest rates & sticky inflation that pushed out expectations for a Fed pivot.  Prices have been buoyed by strong buying by central banks, haven demand from investors amid geopolitical tensions & purchases by Chinese consumers.  Spot gold traded up 2% at $2418 an ounce, bringing the metal into striking distance of the all-time high $2450.  Treasury yields & the $ fell.

Gold Tops $2,400 as Easing Inflation Bolsters Rate-Cut Optimism

Oil edged higher as traders weighed the Intl Energy Agency's (IEA) estimate that demand growth is slowing against a US gov report showing signs of strengthening fuel consumption after the Fourth of July holiday.  West Texas Intermediate (WTI) bounced between gains & losses during a choppy session before settling 0.6% higher, topping $82 a barrel.  Futures have moved within a roughly $4 range for the past 3 weeks.  Volumes for the commodity have remained muted, coming in below their 100-day moving average, signaling the low liquidity typical of summer trading.  The IEA predicted that global oil demand growth will come in at less than 1M barrels a day this year, partly due to China's post-Covid rebound having run its course.  The agency's bearish tone conflicts with data showing US oil stockpiles fell by 3.44M barrels last week, with gauges of jet fuel & gasoline consumption both rising as the summer travel season continues.  Crude has rallied about 18% this year, supported by OPEC+ supply cutbacks, although relatively muted moves have caused volatility to decline to multi-year lows this month.  While some members of the cartel are continuing to pump above agreed limits, key producer Russia made noticeable reductions in Jun.  WTI for Aug climbed 0.6% to settle at $82.62 a barrel & Brent for Sep settlement rose 0.4% to $85.40 a barrel.

Oil Rises as US Summer Demand Signs Counter Downbeat IEA View

Stock gains picked up pace this week after Fed Chair Jerome Powell suggested that conditions are almost right for the Federal Reserve to start making interest-rate cuts.  Today's inflation report bolstered bets on a cut by Sep, with around 90% of traders expecting such an outcome, according to the CME FedWatch tool.  At the same time negative thinking investors are ready to take gold to new heights & there was profit taking in tech stocks which have had an excellent year, so far.

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