Markets waver after yesterday's sharp decline

Dow inched up 38, decliners slightly ahead of advancers & NAZ was off 52.  The MLP index rebounded 1+ to the 283s & the REIT index went up 1 to the 428s.  Junk bond funds remained mixed & Treasuries continued in demand causing yields to fall.  Oil dropped 1+ to 69 as selling continues & gold added 2 to 2525 (more on both below).

Dow Jones Industrials 

The US produced more oil in 2023 than has ever been produced in any year by any country, according to the US Energy Information Administration.  Big Oil has become more productive as horizontal drilling & hydraulic fracturing, which is also known as fracking, have seen technological breakthroughs.  US oil production hit a low of 5M barrels per day in 2008 before the industry adopted horizontal drilling & fracking techniques.  In Aug 2024, US oil production hit a record 13.4M barrels per day.  This comes as the Biden administration has led an expansion into subsidies for renewable energy projects thru the Inflation Reduction Act of 2022, which included $369B to combat climate change.  The majority of that funding is delivered thru tax incentives.  “U.S. energy policy has been largely oriented towards the tax code. That’s how a lot of the renewable energy deployment that’s happened to date has come about,” Daniel Bresette, pres of the Environmental & Energy Study Institute, said.  The fossil fuel industry benefits from tax incentives, such as the intangible drilling costs tax credit, that are built into the tax code.  The intangible drilling costs incentive “is the most active subsidy they get and it’s a tax credit,” Amy Myers Jaffe, director of New York University's Energy, Climate Justice & Sustainability Lab, said.  The intangible drilling costs tax break is expected to benefit oil & gas companies by $1.7B in 2025 & $9.7B thru 2034, according to the White House Budget for Fiscal Year 2025.

How fracking helped the U.S. break the all-time oil production record

Intel's (INTC), a Dow stock, contract manufacturing business has suffered a setback after tests with chipmaker Broadcom (AVGO) failed, dealing a blow to the company's turnaround efforts.  The tests conducted by AVGO involved sending silicon wafers, the foot-wide discs on which chips are printed, thru INTC's most advanced manufacturing process known as 18A.  AVGO received the wafers back last month.  After its engineers & execs studied the results, the company concluded the manufacturing process is not yet viable to move to high-volume production.  "Intel 18A is powered on, healthy and yielding well, and we remain fully on track to begin high volume manufacturing next year," an INTC spokesperson said.  "There is a great deal of interest in Intel 18A across the industry but, as a matter of policy, we do not comment on specific customer conversations."  An AVGO spokesperson said the company is "evaluating the product and service offerings of Intel Foundry and have not concluded that evaluation."  Intel's contract manufacturing business was launched in 2021 as a key part of CEO Pat Gelsinger's turnaround strategy.  AVGO is not a household name but makes crucial networking gear & radio chips that helped generate $28B in overall chip sales in its last fiscal year.  It has benefited from the boom in spending on artificial intelligence hardware.  Some of its chip sales are from agreements with companies such as Alphabet's (GOOG) & Meta (META) Platforms to help produce in-house AI processors, which can include arrangements with a manufacturer, such as INTC or Taiwan Semiconductor Manufacturing Co.  As part of a disastrous 2nd-qtr earnings report that shaved more than a qtr from the company's market value & it announced a 15% job cut & a reduction in capital spending related to its factory construction.  Gelsinger & other execs will present a plan to the board of directors in mid-Sep on possible cuts to business units & teams to reduce costs.  INTC reported a $7B operating loss for the foundry business, wider than the $5.2B in losses the year earlier.  Execs expect the contract chip business to achieve breakeven in 2027.  INTC stock fell 67¢.

Intel Stock Drops Further as Silicon Wafers Reportedly Fail Broadcom Tests

Less than a year after McDonald's (MCD), a Dow stock & Dividend Aristocrat, McFlurry desserts lost their iconic spindles, the fast-food giant announced that the item is "getting a makeover" as it tries to reverse a current sales decline.  Starting to, MCD will be selling the new "Mini McFlurry," in addition to the standard size, & both will come in a new "more environmentally friendly four-flap cup" as they are "phasing out plastic McFlurry cup lids."  "Packaging updates like this matter," Michael Gonda, SVP, chief impact officer of North America for MCD, said.  "Not only is this a fun new way for our U.S. fans to enjoy the McFlurry; we're also moving one step closer to fulfilling our packaging and waste commitments."  The new look helps advance their "commitment to sustainability," which includes aiming to source "100% of primary guest packaging from renewable, recycled or certified materials by the end of 2025."  The new look is not entirely new to the company, as the 4-flap cups are already being used in certain intl markets.  Back in Jul, MCD reported a drop in sales for the first time in years as it struggled to draw in cash-strapped customers amid higher menu prices.  Global sales fell 1% in the 2nd qtr, its first decline in 13 qtrs, compared with an estimate of a 0.5% rise.  To reverse the decline, fast-food chains have launched several promotions in an attempt to boost customer traffic during persistent inflation.   MCD stock rose 2.37.

McDonald's give classic menu item a 'makeover' amid push to reverse sales decline

Gold prices reversed course to gain, helped by a softer $ & lower yields after falling US job openings signaled a possibility of an over-sized rate cut from the Federal Reserve at its policy meeting this month.  Spot gold gained 0.1% to $2494 per ounce, bouncing back from a 2-week low of $2471 hit earlier in the session & US gold futures settled 0.1% higher to $2526.  Data showed US job openings in Jul fell to the lowest level in 3½ years.  Traders added to bets that the Fed will deliver a 50-basis-point reduction at its Sep 17-18 meeting, raising them to about 49% from 41% immediately before the data.  ADP employment & jobless claims reports tomorrow & the non-farm payrolls report on Fri will also be closely scanned for cues on the Fed's rate-cut path.  Markets expect 100 basis points of cuts by year-end, implying a 50-basis-point cut in 1 of the next 3 FOMC meetings, although it's unlikely to be the first 1.  Bullion, which offers no interest of its own, tends to thrive in a low-interest-rate environment.

Gold Rebounds From Lows After Weak US Jobs Openings Data

Oil prices added to the previous day's heavy losses as the market shrugs off delegate comments that OPEC+ is considering a delay in plans to start unwinding output cuts.  The prospect of the producer group returning barrels to the market as demand eases has sent futures to multi-month lows.  Current market prices are suggesting that investors are not expecting demand to pick up any time soon.  It's all about OPEC, will they cut more, will they extend their output cuts?  They don't seem to mind oil prices around current levels that much, but if they see another drop in the next couple of months they may start getting worried again.  WTI settled down 1.6% at $69.20 a barrel & Brent fell 1.4% to $72.70.

Crude Extends Losses on Prospects of Higher Supply

Today traders wanted to take stocks higher, but effort failed.  The Dow remained close to even for the entire session.  Analysts suggest stocks may not be in the clear yet after the weak start in Sep.