Thursday, September 12, 2024

Markets climb while demand for gold takes it to new heights

Dow went up 235, advancers over decliners 3-1 & NAZ gained 174.  The MLP index added 2+ to the 284s & the REIT index was up 1+ to the 438s.  Junk bond funds were essentially even & Treasuries had selling which raised yields.  Oil rose 1+ to 69 & gold jumped 40 to 2583 (more on both below).

Dow Jones Industrials 

Mortgage rates fell this week to the lowest levels in over 1½ years, but elevated rates & high home prices are still keeping would-be buyers & sellers out of the housing market.  Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate on the benchmark 30-year fixed mortgage dropped to 6.20%, down from the 6.35% reading of the past 2 weeks & the average rate on a 30-year loan was 7.18% a year ago.  "Mortgage rates have fallen more than half a percent over the last 6 weeks & are at their lowest level since February 2023," said Sam Khater, Freddie Mac's chief economist.  "Rates continue to soften due to incoming economic data that is more sedate," Khater continued.  "But despite the improving mortgage rate environment, prospective buyers remain on the sidelines, as they negotiate a combination of high house prices and persistent supply shortages."  Many would-be buyers & sellers are holding out to see if rates fall further.  Currently, about 80% of mortgage holders have a rate below 5%, according to a Zillow survey.  The average rate on the 15-year fixed mortgage declined to 5.27% from 5.47% last week & 1 year ago, the rate on the 15-year fixed note averaged 6.51%.

Mortgage rates fall to lowest level in over 18 months but home prices remain high

Gilead (GILD) twice-yearly shot reduced HIV infections by 96% in a 2nd large study, the company said.  The positive phase-3 trial data on lenacapavir sets the stage for likely approval by the Food & Drug Administration for HIV prevention.  “Now that we have a comprehensive dataset across multiple study populations, Gilead will work urgently with regulatory, government, public health and community partners to ensure that, if approved, we can deliver twice-yearly lenacapavir for PrEP worldwide, for all those who want or need PrEP,” said CEO Daniel O'Day.  PrEP or, pre-exposure prophylaxis, is medication taken to prevent getting HIV, according to the Centers for Disease Control & Prevention.  The company said 99.9% of participants who received lenacapavir did not acquire HIV, with 2 cases among 2180 people.  The trial included cisgender men, transgender men, transgender women & gender non-binary people who have sex with partners assigned male at birth.  There were 9 cases of HIV in a group of more than 1000 people assigned to receive Truvada, its older daily pill used for prevention & treatment.  The company said lenacapavir was 89% more effective than Truvada in the study.  The trial results should lead to an FDA approval & launch in the market by 2025.  The stock rose 2.22.

Gilead says its twice-yearly shot cut HIV infections by 96% in trial

Stellantis' (STLA) US dealer network has joined the United Auto Workers union in criticizing CEO Carlos Tavares for the company's recent sales declines, factory production cuts & other decisions they deem detrimental to the automaker's business.  In an open letter to Tavares this week, the head of its US dealer council, Kevin Farrish, condemned the chief exec for prioritizing the company's profits at the cost of sales, market share & the reputations of its Chrysler, Dodge, Jeep and Ram brands.  The council represents the company's 2600 US dealers.  “The market share of your brands has been slashed nearly in half, Stellantis stock price is tumbling, plants are closing, layoffs are rampant, and key executives fleeing the company. Investor lawsuits, supplier lawsuits, strikes–the fallout is mounting. Your own distribution network, your dealer body, has been left in an anemic and diminished state,” Farrish wrote.  Farrish, a dealer in Virginia, said the dealer council has raised concerns about the company's operations for 2 years, & accused Tavares of “reckless short-term decision making” that boosted profits & padded his compensation but have led to the “rapid degradation” of its brands.  STLA said it takes “absolute exception to the letter,” citing a 21% increase in Aug sales over Jul & an “action plan developed with the dealer body.”  “At Stellantis, we don’t believe that public personal attacks, such as the one in the open letter from the NDC president against our CEO, are the most effective way to solve problems,” the company said.  “We have started a path that will prove successful. We will continue to work with our dealers to avoid any public disputes that will delay our ability to deliver results.”  STLA reported a record profit in 2023, but so far this year, the automaker reported a first-half net profit of €5.6B ($6.1B), down 48% from the same period of 2023.  The stock fell 20¢.

UAW, U.S. dealers increase criticism of Stellantis CEO over cuts, sales declines

Gold prices rose more than 1% to hit a record high, helped by expectations of an interest rate cut by the Federal Reserve next week after US data signaled a slowing of the economy.  Spot gold was up 1.7% at $2554 per ounce & US gold futures settled 1.5% higher at $2580.  The Labor Dept said initial claims for state unemployment benefits rose 2000 to a seasonally adjusted 230K.  US producer prices increased slightly more than expected in Aug amid higher costs for services, but the trend remained consistent with subsiding inflation.  Markets are currently pricing in an 73% chance of a 25-basis-point US rate cut at the Fed's Sep 17-18 meeting & a 27% chance of a 50-bps cut, the CME FedWatch tool showed.  The labor market is continuing to falter & if the labor market deteriorates, the journey that the Fed will embark on in cutting rates is going to go for an extended period of time.

Gold Hits All-Time High as Fed-Cut Hopes Bolster Appeal

West Texas Intermediate (WTI) crude oil for a 2nd day, boosted by the supply cuts caused by Hurricane Francine's path thru the Gulf of Mexico, while the Intl Energy Agency warned demand growth continues to wane as China's economy slows.  WTI crude oil for Oct closed up $1.66 to settle at $68.97 per barrel, while Nov Brent crude, the global benchmark, was last seen up $1.49 to $72.10.  Prices fell to the lowest in more than 3 years earlier in the week, with the market dominated by concerns over the prospects for economic slowdowns in China & the US.  However, now more than a 3rd of gulf oil production is shut in because of the storm, which made landfall in Louisiana today, returning the focus to tight supply.  The Bureau of Safety & Environmental Enforcement, the US offshore regulator reported 169 producing platforms remain evacuated, shutting in 730K barrels per day of oil production, 42% of Gulf output.

WTI Crude Oil Rises Again as Hurricane Francine Cuts Supply While the IEA Cuts Its 2024 Demand Forecast

Stocks were in demand as investors digested fresh inflation & labor data testing high-running expectations for a qtr-point interest-rate cut next week.  The last major pieces of data this week reinforced bets on a smaller, 25 point rate reduction from the Federal Reserve next week instead of a larger, 0.5% cut.  These expectations are bringing buyers to gold who like to see low interest rates.

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