Markets tumble on economic worries after weak economic data

Dow plummeted 515, decliners over advancers about 5-2 & NAZ gave back 243.  The MLP index was off 2+ to the 286s & the REIT index added 2+ to 408 on lowering yields.  Junk bond funds hardly budged & Treasuries had heavy buying which sharply reduced yields (more below).  Oil was fractionally lower in the 77s after being in the black in early trading & gold went up 17 to 1490 for a new record after rising tensions in the MedEast.

Dow Jones Industrials 

Treasury yields fell as investors digested comments from Federal Reserve Chair Jerome Powell, who suggested a Sep rate cut was on the table, along with a jump in US jobless claims.  The benchmark 10-year Treasury yield traded at 3.997%, reaching its lowest level since Feb 2.  Meanwhile, the 2-year Treasury yield the slipped to 4.23%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Yields fell on yesterday after Fed Chair Powell hinted at a Sep rate cut after the central bank's Jul meeting concluded.  “The broad sense of the committee is that the economy is moving closer to the point at which it would be appropriate to reduce our policy rate,” he said.  Powell added the Fed would weigh economic data, expectations & risks alongside inflation & labor market signals, & respond accordingly.  Depending on these factors, “a reduction in our policy rate could be on the table as soon as the next meeting in September,” he continued.  Data released today hinted at a souring of the economic picture.  Initial jobless claims surged to 249K last week, well above a forecast of 235K & continuing claims also rose to their highest level since Nov 2021.  On top of that, the ISM manufacturing index came in at 46.8.  That's well below an estimate of 48.9.  A reading below 50 indicates a contraction in economic activity for the sector.

10-year Treasury yield falls below 4% for the first time since February

US crude oil futures broke above $78 per barrel on fears that Israel & Iran are heading to a direct conflict after the assassination of a Hamas leader in Tehran.  Iran Supreme Ayatollah Ali Khamenei has ordered a direct strike on Israel in response to the assassination of Hamas political leader Ismail Haniyeh.  West Texas Intermediate has surged nearly 5% since the killing of Haniyeh yesterday.  Khamenei ordered the direct strike at an emergency meeting of Iran's national security council yesterday after Haniyeh was killed, officials said.  West Texas Intermediate (WTI) the Sep contract was $78.33 per barrel, up 42¢ (0.6%) & YTD, & US crude oil has gained 9.3%.  The Brent Sept contract was $81.39 per barrel, up 55¢ (0.7%), & YTD the global benchmark has gained 5.7%.  Top Iranian officials are scheduled to meet today with representatives of Yemen's Houthis, Lebanon's Hezbollah & militant groups in Iraq.  Iran & Israel traded direct strikes in Apr, pushing oil prices to the highest point of the year, but they enemies ultimately pulled back from a full-scale war.  The rising tensions come as an OPEC+ committee is meeting today to review members' production quotas.

U.S. crude oil breaks $78 per barrel as fears of war between Iran and Israel grow

Moderna (MRNA) reported 2nd-qtr revenue that beat expectations but slashed its full-year sales guidance, citing lower expected sales in Europe, a “competitive environment” for respiratory vaccines in the US & the potential for deferred intl revenue into 2025.  The biotech company now expects 2024 product revenue to come in at $3.0-3.5B, down from previous guidance of $4B.  The company has started shipping doses of its vaccine for respiratory syncytial virus, called mRESVIA, in the US following its approval in May for older adults.  It's MRNA's 2nd-ever commercially available product after its Covid vaccine, which has seen demand plunge as the world emerges from the pandemic & relies less on protective shots & treatments.  CEO Stephane Bancel said there has been “more intensity of competition” for both RSV & Covid vaccines.  He noted that mRESVIA is the third RSV shot to enter the market following jabs.  He added that “we’ve been having quite intense discussions with governments across Europe” to get Covid vaccine supply from MRNA.  But “some countries, as recently as of last week, have told us that because of a very tight budget … they just don’t have the capacity to buy more vaccine than they need because they already have” another contract, Bancel added.  He is referring to the European Union's massive renegotiated Covid vaccine supply contract with Pfizer (PFE) & its German partner BioNTech (BNTX).  Still, MRNA expects to return to sales growth in 2025 & to break even by 2026, with the launch of new products.  The company booked 2nd-qtr revenue of $241M, with product sales from its Covid shot dropping 37% from the same period a year ago.  MRNA reported $344M in revenue in the prior-year period.  The company said the revenue decline came in part from an expected transition to a seasonal Covid vaccine market, where patients typically take their shots in the fall & winter.  MRNA posted a net loss of $3.33 per share for the 2nd qtr.  That compares with a net loss of $3.62 per share reported for the year-ago period.  Bancel said the company lost less than expected in part due to its progress in cutting costs.  The stock sank $23 (19%).

Moderna stock falls more than 15% as it slashes guidance on low EU sales, tough U.S. vaccine market

The economic readings above reflect a cooling in the US economy that revived concerns about the risk that interest rates at historic highs are driving toward a recession.  Rising tensions in the Mideast are adding to traders' worries.  And demand is strong for gold.