Markets extend 3 week selloff while Treasury yields soar

Dow dropped 173, decliners over advancers 5-2 & NAZ fell 85.  The MLP index was off 2+ to the 215s & the REIT index gained 4 to the 412s.  Junk bond funds drifted lower & Treasuries saw very heavy selling, raising yields.  Oil was around even in the 86s & gold slid back 11 to 1711 (more on both below).

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The CHIPS for America program aims to create "good-paying jobs" across the country & counter China's growing influence by:

• Establishing & expanding domestic production of leading edge semiconductors in the US, of which the US currently makes 0% of the world’s supply,
• Building a sufficient & stable supply of mature node semiconductors,
• Investing in research & development to ensure the next generation semiconductor technology is developed & produced in the US &
  
• Creating tens of thousands of good-paying manufacturing jobs & more than hundred thousand construction jobs.

Job creation will ensure a pipeline to expand opportunities to include people who have historically not had a chance to participate in this industry.  "Rebuilding America’s leadership in the semiconductor industry is a down payment on our future as a global leader," Commerce Sec Gina Raimondo said.

Biden admin reveals $50B plan to boost struggling US industry

Verizon )VZ), a Dow stock, green-lighted the 16th straight year of div increases.  The quarterly div of 65.25¢ per share is an increase of 1.25¢ per share from the previous qyr.  "Our consistently disciplined approach to the market to maximize growth and profitability has again put the Verizon Board in a position to raise the dividend,"  CEO Hans Vestberg said.  "We will continue to execute our network-as-a-service strategy to deliver long-term shareholder value."  The company currently has an annual div yield of 6.2%.  In Jul, VZ lowered its fiscal year 2022 adjusted EPS guidance to $5.10-5.25, compared to its previous forecast of $5.40-5.55.  The company expects wireless service revenue growth of 8.5-9.5%, down from previous growth guidance of 9-10%, & service & other revenue growth of minus 1% to flat, down from guidance of approximately flat.  The stock fell 20¢.
If you would like to learn more about VZ, click on this link:
club.ino.com/trend/analysis/stock/VZ?a_aid=CD3289&a_bid=6ae5b6f7

Verizon hikes dividend for 16th straight year

Britain's new prime minister, Liz Truss, made her first speech today, promising to tackle rising energy bills & the cost-of-living crisis in the next couple of days.  “I will deal with the energy crisis caused by Putin’s war,” Truss said.  “I will take action this week to deal with energy bills and to secure our future energy supply,” she said.  Truss also said she had a “bold plan” to grow the economy thru tax cuts and reform that would “boost business-led growth and investment.”  Improving health services was the 3rd priority listed by the former foreign secretary.  “I’m confident that together we can ride out the storm, we can re-build the economy and we can become the modern brilliant Britain that I know we can be,” Truss concluded.  Truss was officially appointed as prime minister of the UK today following a meeting with Queen Elizabeth II. There have been rumors of a £100B ($113B) energy stimulus package to help British people to deal with the worsening cost-of-living crisis.  But there are questions as to how such a package will be funded.  “No new taxes” was a sentiment repeated time & time again by Truss during the Conservative leadership campaign.

Liz Truss promises action on soaring energy bills in first speech as UK PM

Prices of gold ended lower on the back of a stronger $.  Gold for Dec declined by $9 (0.6%) to settle at $1712 per ounce after ending Fri with a 0.8% climb.  Regular metals trading was closed yesterday for the Labor Day holiday.  Gold may be reaching a critical equilibrium as global recession fears spurred by the latest COVID lockdowns in China appear to be counterbalancing higher Treasury yields & a stronger $.  While gold has outperformed stocks & bonds so far this year, the precious metal hasn't performed as strongly as had expected, given its longtime reputation as a hedge against inflation.  Today the ICE US Dollar a gauge of the $'s strength against a basket of currencies, was up 0.7%, while the 10-year Treasury yield climbed 14 basis points to 3.3378%.  Gold traded mostly lower following US data today.  A barometer of business conditions at companies such as restaurants & hotels rose to 56.9% in Aug from 56.7% in the prior month, the Institute for Supply Management said.  It is the highest level since Apr.

Gold prices end lower, while silver extends its recent gain

US benchmark oil prices ended little changed today, as traders in the US, following a holiday yesterday, got a chance to react to a decision by OPEC+ to cut production by 100K barrels per day in Oct.  Oct WTI crude added a penny to settle at $86.88 a barrel.

Global oil benchmark settles lower, gives back Monday’s OPEC-inspired bounce

With a lack of drama, trading was dreary in the financial markets.  The bulls stayed home.  The big story was Treasury yields soared.

Dow Jones Industrials

Markets meander as investors weigh economic data and surging yields

Dow was off 4, decliners over advancers 3-2 & NAZ fell 38.  The MLP index pulled back 1 to the 217s & the REIT index rose 3+ to the 412s.  Junk bond funds were little changed & Treasuries were heavily sold, bringing higher yields (more below).  Oil slid lower in the 86s & gold declined 7 to 1715.

AMJ (Alerian MLP index tracking fund)

 

 

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Treasury yields surged higher as investors responded to strong US economic data.  The yield on the benchmark 10-year Treasury note traded higher by more than 14 basis points at 3.328%, while the yield on the 30-year Treasury bond gained nearly 13 basis points to 3.472%.  The yield on the 2-year Treasury note jumped 9 basis points to trade at 3.493%.  The short-term note climbed to 3.55% last week, notching its highest level since 2007.  Yields move inversely to prices & a basis point is equal to 0.01%. On the data front, the Institute for Supply Management’s non-manufacturing PMI figure for Aug came in better-than-expected at 56.9, rising month over month.  The forecast was expecting a reading of 55.5.  Yields extended their gains for the session after the report was released.  The data points come amid persistent worries about an economic slowdown, with investors monitoring whether the Federal Reserve is likely to continue hiking interest rates at an aggressive pace in a bid to tame soaring inflation.

U.S. Treasury yields rise sharply following strong economic data

German energy giant Uniper owarned the worst is still to come as concerns over Russian gas supplies to Europe thru fall & winter continue to push up prices.  “I have said this a number of times now over this year and I’m educating also policymakers. Look, the worst is still to come,” Uniper CEO Klaus-Dieter Maubach said in Milan.  “What we see on the wholesale market is 20 times the price that we have seen two years ago — 20 times. That is why I think we need to have really an open discussion with everyone taking responsibility on how to fix that,” he added.  Russia's state-owned energy giant, Gazprom, on Fri indefinitely halted gas flows to Europe via a major pipeline, stoking fears that parts of Europe could be forced to ration energy thru winter.  Uniper, as Germany's biggest importer of gas, has been hit hard by vastly reduced flows via pipelines from Russia, which have sent prices soaring.  The German gov agreed in Jul to bail out Uniper with a €15B ($14.9B) rescue deal to provide the embattled company with some financial relief.  Maubach said today that some of the details still needed to be ironed out with this stabilization package.  Russia's halt to supplies via Nord Stream 1 & the subsequent spike in European gas prices are likely to exacerbate the situation for the company.

German gas giant Uniper says the worst is still to come after Russia halts flows to Europe

OPEC+ plans to cut global oil supplies by 100K barrels per day next month, which an industry expert claims is more of a "political statement."  The Oct cut essentially reversed the group's Sep increase by the same amount.  Yesterday's move also comes after comments from Saudi Arabia's energy minister that the group could reduce output at any time.  "With OPEC+ production already running nearly 3 million barrels per day less than their agreed to quota, the announcement is more of a political statement," Lipow Oil Associates Pres Andy Lipow said.  "Saudi Arabia wants to talk up prices and the burden of any production cut will rest predominantly with them and to a lesser extent with the United Arab Emirates and Kuwait."  Although oil prices were rising yesterday, Lipow said it is mainly due to Russian energy giant Gazprom's shutdown of Nordstream 1 natural gas supplies.  "OPEC+ announcement had little effect on oil prices as the market had been expecting no change in production and OPEC+ actions for October basically mean no discernable change," he added.  Prices are still significantly down from Jun peaks of over $120 per barrel, which is good news for motorists given the fact that oil accounts for over 50% of what consumers pay at the pump, according to the US Energy Information Administration.  Since Jun, pump prices have eased after hitting a record of over $5.  As of yesterday, the average for a gallon of regular gasoline< is sitting at $3.78.

OPEC+ accused of making ‘political statement’ after global oil cuts

Yields & energy are of the greatest interest for investors.  Soaring interest rates will crimp the economic recovery & energy futures continue too be in high demand.  Meanwhile the inverted yields curve keeps flashing its recession warning signal.

Dow Jones Industrials

 

Markets give up gains ahead of long holiday weekend

Dow dropped 337 (about 800 below early highs), decliners ahead of advancers about 4-3 & NAZ declined 154.  The MLP index went up 2 to the 217s & the REIT index dropped 5+ to the 408s.  Junk bond funds fluctuated & Treasuries traded higher, lowing yields.  Oil was higher in the 86s & gold recovered 14 to 1724 (more on both below).

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Home sellers are getting nervous, as the once-hot housing market cools fast.  One in 5 sellers in Aug dropped their asking price, according to Realtor.com.  A year ago that share was just 11%.  The average home sold for less than its list price for the first time in over 17 months during the 4-week period ended Aug 28, according to a report by Redfin.  Homes are simply not selling at the breakneck pace they were 6 months ago, when strong demand butted up against tight supply, bidding wars were the norm & a seller could often get a signed contract in under a weekend.  Homes in Aug sat on the market an average 5 days longer than they did a year ago — the first annual increase in time on the market in more than 2 years.  The supply of homes for sale is also rising fast, up nearly 27% from a year ago, even as fewer sellers decide to list.  Pending sales in Jul, which represent signed contracts on existing homes & which are the most recent sales data available, were nearly 20% lower than Jul 2021, according to the National Association of Realtors.  “For many of today’s buyers, the uptick in for-sale home options is taking away the sense of urgency that they felt during the past two years, when inventory was scarce,” said Danielle Hale, chief economist at Realtor.com.  “As a result of this shift, coupled with higher mortgage rates, competition continued to cool in August, with listing price trends indicating that home shoppers are tightening their purse strings.”  The median listing price in Aug dropped to $435K from $449K in Jul, according to Realtor.com.

1 in 5 home sellers is now dropping their asking price as the housing market cools

Centers for Disease Control & Prevention (CDC) Director Rochelle Walensky gave the final sign off for updated COVID-19 vaccines targeting the omicron strain.  BA.5, a subvariant of omicron, is responsible for about 89% of new coronavirus infections, according to CDC data.  The new shots, made by Pfizer (PFE) & Moderna (MRNA), are tweaked versions that offer ½ the original concoction & ½ to target BA.5 & BA.4.  "They can help restore protection that has waned since previous vaccination and were designed to provide broader protection against newer variants," Walensky added.  COVID-19 cases have steadily declined since mid-Jul, with the 7-day moving average falling from 130K new cases on Jul 16 to 85K on Aug 31.  Still, many Americans have resisted booster shots since they were first approved late last year.  Just 51.5% of adults who received the 2 primary doses have received their first booster shot, according to the CDC.  Only about 1/3 of people ages 50 & older who are eligible for a 2nd booster shot have received that dose.

ANOTHER JAB:CDC approves updated COVID-19 vaccines targeting omicron variant

Russia's Gazprom announced a halt of gas supplies to Europe thru the Nord Stream pipeline, citing the need for additional repairs.  Earlier in the week, the Russian gas giant stopped energy supplies to Europe via the pipeline in a planned “maintenance outage” expected to last until tomorrow.  Gazprom said in an update on the Telegram messaging app that inspectors found an oil leak in the pipeline.  “Gas transportation to the Nord Stream gas pipeline has been completely stopped until the issues on the operation of the equipment are eliminated,” the energy company added.  Ukraine's state energy company said a power unit at the Zaporizhzhia nuclear plant was reconnected to the power grid.  “Today, September 2, 2022, power unit No. 5 of the Zaporizhzhia nuclear plant, which was disconnected as a result of another mortar shelling by the Russian occupying forces at the Zaporizhzhia site, was connected to the power grid at 1:10 p.m,” according to an update from Energoatom.  “Currently, two power units are operating at the station, which produce electricity for the needs of Ukraine,” the company added.

Gazprom halts gas supplies to Europe; UN team at Ukraine nuclear plant ‘not going anywhere’

Gold prices ended higher but posted a loss for the week.  Dec gold futures rose $13 (0.8%) to settle at $1722 after losing 1% yesterday.  Prices based on the most-active contract end with a more than 1% loss for the week.  Gold finished higher in the wake of today's release of the monthly US employment data.  The US labor market is strong according to the data, which showed that the US added 315K new jobs in Aug, basically matching estimates.  The labor participation number has also improved, a highly encouraging sign.  The ICE US Dollar index was down 0.1% at 109.568 in today's dealings, while 10-year Treasury yields fell to 3.2016% from 3.264% yesterday.  Strength for the week, however, contributed to a decline in $-denominated prices of gold.

Gold prices end higher, but post a loss for the week

Oil futures saw a modest gain, but posted a hefty weekly loss as investors awaited a meeting of OPEC+ early next week.  West Texas Intermediate (WTI) crude for Oct rose 26¢ to settle at $86.87 a barrel after trading as high as $89.66 during the session.  The US benchmark, based on the front-month contract, logged a 4.6% weekly loss.  Nov Brent crude, the global benchmark, added 66¢ (0.7%) to $93.02 a barrel, for a 6.1% weekly decline.  WTI & Brent ended at roughly 2-week lows yesterday.  Crude prices fell this week as traders reacted to another COVID lockdown in China, with authorities putting restrictions on Chengdu, a city of 21M.  Worries about the global economic outlook as the Federal Reserve & other major central banks tighten monetary policy aggressively in an effort to wring out inflation has also been a weight on futures prices.  Attention is focused on the Mon meeting of OPEC+ when US markets will be closed for the Labor Day holiday.  The expanded cartel has unwound production cuts that were introduced after the onset of the COVID-19 pandemic in early 2020 & last month agreed to a modest output increase of 100K barrels a day for Sep, though surveys indicate that production remains below target.  Saudi Arabia's energy minister last month floated the prospect of a production cut amid what he described as a disconnect between the physical & futures markets, though analysts largely expect OPEC+ to hold off on Mon.

Oil futures end higher for the session, down for the week

Trading began the day higher after the jobs report.  But investors are nervous & sellers were active going into a long weekend.  This week, Dow dropped 900.  Check below, 70% of the recent advance from mid Jun has been lost.  Try to have a good weekend.   😀

Dow Jones Industrials