Markets slip lower ahead of Nvidia's earnings later today

Dow slid back 26, advancers barely ahead of decliners & NAZ sank 259.  The MLP index fell 1+ to the 279s & the REIT index was even in the 426s.  Junk bond funds hardly budged & Treasuries saw a little more buying which lowered yields slightly (more below).  Oil was off pennies in the 75s & gold fell 12 to 2540.

Dow Jones Industrials

Abercrombie & Fitch (ANF) revenue grew 21% during its fiscal 2nd qtr as the apparel company builds on its torrid growth.  The sales gain, which follows 16% growth in the year-ago period, led the company to issue bullish guidance for the current qtr.  Still, its full-year outlook was largely in line with estimates as it prepares for 1 fewer week this year than last.  CEO Fran Horowitz, who often says good companies win in any economic environment, may be bracing for a turbulent 2nd ½ of the year because for the first time in 4 qtrs, she referenced the uncertain state of the economy in the company's earnings release.  “We delivered a strong first half of the year, and we are increasing our full-year outlook. Although we continue to operate in an increasingly uncertain environment, we remain steadfast in executing our global playbook and maintaining discipline over inventory and expenses,” said Horowitz.  “We are on track and confident in our goal to deliver sustainable, profitable growth this year, while making strategic long-term investments across marketing, digital and technology and stores to enable future growth.”  EPS for the 3-month period that ended Aug 3 was $2.50, compared with  $1.10 a year earlier.  Sales rose to $1.13B, up about 21% from $935M a year earlier.  During the qtr, same-store sales jumped 18%, driven by better-than-expected summer & back-to-school selling.  For the current qtr, ANF expects sales to rise by a low double-digit percentage, better than the 8.9% growth that was expected.  ANF raised its full-year sales guidance from 10% growth to a 12-13% increase, which is roughly in line with the 12% rise analysts had expected.   The stock plunged 28.35 (17%).

Shares of Abercrombie & Fitch plunge 15% after CEO warns of ‘increasingly uncertain environment’

Mortgage rates fell last week for the 4th straight week, but neither current homeowners nor homebuyers seemed particularly impressed.  Total mortgage application volume rose just 0.5% last week compared to 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 6.44% from 6.50%, with points decreasing to 0.54 from 0.60, including the origination fee, for loans with a 20% down payment.  That was the lowest rate since Apr 2023.  Rates have come down more than 80 basis points from a year ago.  Despite the drop, demand to refinance decreased 0.1% from the previous week.  It was, however, 85% higher than the same week 1 year ago.  The trouble is that the vast majority of borrowers have mortgages with rates well below 6%.  Doing a refinance is really only worth the expense if you can shave at least 75 basis points off your current rate.  Applications for a mortgage to purchase a home rose 1% for the week but were 9% lower than the same week 1 year ago.  “As observed in recent weeks, despite lower rates, purchase applications have not moved much. Prospective homebuyers are staying patient now that rates are moving lower and for-sale inventory has started to increase,” said Joel Kan, MBA's VP & deputy chief economist.  Mortgage rates have been flat to start this week, with no significant economic data to influence them. The next big move could come with the monthly employment report at the end of next week.

Weekly mortgage demand stalls, even though rates drop to lowest since April 2023

The US 10-year Treasury  was flat as investors awaited a key US inflation report due later in the week.  The yield on the 10-year Treasury was unchanged at 3.833% & the yield on the 2-year Treasury was also flat at 3.861%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Market participants are looking ahead to the release of personal consumption expenditures (PCE) data on Fri to get a better picture on the health of the world's largest economy.  Federal Reserve officials use the PCE measure as their main baseline to gauge inflation.  It comes after Fed Chair Jerome Powell said late last week that “the time has come for policy to adjust,” bolstering expectations for a rate cut at the central bank's next meeting.  Powell declined to provide exact indications on the timing or extent of the cut, however. “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks,” Powell said in his keynote address at the Fed's annual retreat in Jackson Hole.  Market participants are firmly pricing in a rate cut at the Fed's Sep 18 meeting.  Traders are currently pricing in a roughly 63.5% chance of a 25-basis-point rate cut next month, with 36.5% pricing in a 50-basis-point rate cut, according to the CME Group’s FedWatch Tool.

Treasury yields are flat as investors look ahead to U.S. inflation data

US stocks were mixed ahead of chipmaker Nvidia's (NVDA) earnings report later today, seen as crucial to keeping confidence in the broader market aloft.  Traders are expecting a swing of almost 10% in the chipmaker's shares in either direction, depending on whether hopes for another blowout qtr are met.  Forecasts are for earnings to grow by 109% & revenue by 99%, year-on-year.  Updates on any potential delays for its new Blackwell chip will be in particular focus.  Meanwhile Dow & gold are essentially at record highs (quite a combination)!!!