Markets slide after Powell's testimony was viewed as lacking clarity

Dow went up 75 (off early highs), advancers over decliners better than 2-1 & NAZ gained 91.  The MLP index advanced 3+ to 281 & the REIT index added 2+ to the 386s.  Junk bond funds edged higher & Treasuries were purchased, lowering yields modestly.  Oil was fractionally higher to 79 (but below early highs) & gold was up 6 to 2148 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Shares of Foot Locker (FL) plummeted after the sneaker retailer reported a holiday-qtr loss, issued weak guidance for the current year & said it's behind on meeting its financial goals.  Given how poorly its past fiscal year went, the company is now expecting the profitability goal it laid out during its March 2023 investor day to be delayed by 2 years, finance chief Mike Baughn said.  It now anticipates to reach an EBIT margin of 8.5-9% by 2028, said Baughn added.  The company swung to a loss in the 3-month period that ended Feb 3.  It lost $4.13 per share, compared with income of 20¢ per share, a year earlier.  Excluding one-time items, EPS was 38¢.  Sales rose slightly to $2.38B, up from $2.34B a year earlier.  In the current fiscal year, FL is expecting profit to be worse than expected.  It anticipates adjusted EPS will be $1.50 - $1.70, compared with analysts estimates of $1.40 - $2.30.  It's expecting sales to be down 1% to up 1%, compared with estimates of down ½ a %.  CEO Mary Dillon said that FL managed to drive full-price sales “in addition to compelling promotions” during its holiday qtr.  But as the retailer wound down its fiscal year, FL marked down more items to clear out excess inventory, primarily in its apparel category.  As a result, “higher markdowns” drove FL's gross margin down by 3.5 percentage points.  “As we continue evolving into a modern, omnichannel retailer for ‘all things sneakers,’ we are making important progress strengthening our brand partnerships, increasing customer engagement, transforming our real estate footprint, and driving growth in digital,” said Dillon.  The stock sank 10.08 (29%).

Foot Locker shares plunge 30% as retailer posts holiday loss, delays key financial target

Abercrombie & Fitch (ANF) said that its holiday-qtr sales jumped 21% & its profit grew thanks to higher prices & lower raw material costs.  The apparel retailer expects its growth story will continue as it issued better-than-expected sales guidance.  EPS for the 3-month period that ended Feb 3 was $158.4 $2.97, compared with 75¢, a year earlier.  Sales rose to $1.45B, up about 21% from $1.2B a year earlier.  For the current qtr, ANF expects sales to rise by a low double-digit percentage, compared with estimates of up 7.2%.  For the full year, its anticipates sales will grow 4-6%, compared with estimates of 4%.  During the qtr, comparable sales grew 16% & gross margin came in at 62.9%, 7.2 percentage points higher than the year ago period.  Higher average selling prices plus lower freight & raw material costs boosted profit.  Analysts had expected gross margin to be 60.1%.  “Our strong fourth quarter was fueled by sales growth across regions and brands. Abercrombie brands grew net sales 35%, continuing an impressive multi-quarter growth trend, while Hollister brands grew 9%, delivering a third consecutive quarter of sales growth,” CEO Fran Horowitz said.  “By staying close to our customers, tightly controlling inventories and continuing to operate with financial discipline, our team delivered year-over-year fourth quarter operating margin expansion of 800 basis points, reaching 15.3%,” she continued.  In the year ahead, Horowitz said the company is focused on expanding its global customer base & getting closer to reaching its long-term goal of $5B in global annual sales.  During fiscal 2023, ANF came close to that target, posting full-year revenue of $4.28B.  The stock fell 5.02 (4%).

Abercrombie & Fitch beats estimates as sales soar, helped by higher prices

Struggling New York Community Bancorp (NYCB) announced a $1B capital raise & a leadership shakeup today, headlined by former Treasury Secretary Steve Mnuchin.  A report earlier today said that the bank was looking to outside investors for cash to shore up its balance sheet.  The stock was halted for news pending when shares were down 42%.  A cash infusion would be the latest development in a turbulent start to the year for NYCB.  The bank disclosed in late Jan that it was dramatically raising the allowance for potential loan losses on its balance sheet, with its exposure to commercial real estate being a potential issue.  That was followed shortly by Moody's Investors Service downgrading the bank's credit rating to junk status & NYCB naming former Flagstar bank CEO Alessandro DiNello as exec chairman.  Then last week, NYCB disclosed that it had “identified material weaknesses in the company’s internal controls related to internal loan review” & announced that DiNello was taking over as CEO.  The struggles for NYCB may have caught regulators off guard as well as investors.  The regional lender acquired much of Signature Bank out of receivership from the Federal Deposit Insurance Corp last Mar.  Its stock was up 26¢  to 3.48 in hectic trading.

NYCB announces $1 billion capital raise from firms including Steve Mnuchin’s Liberty Strategic Capital

Gold closed at record high for a 4th-straight session as congressional testimony from Federal Reserve chair Jerome Powell, did not shed light on when the central bank will begin lowering interest rates.  Gold for Apr was closed up US16 to $2158 per ounce.  The price of the precious metal rose to new heights over the past 3 sessions on expectations lower interest rates are on the way, cutting the carrying costs of owning gold, while momentum investors have also added buying pressure.  However the first of Powell's 2 days of congressional testimony offered little clarity on when lower rates will come.  The $ weakened following Powell's appearance, with the ICE dollar index last seen down 0.48 points to 103.32.  Treasury yields also dipped, with the 2-year note last seen paying 4.556%, down 0.6 basis points, while the yield on the 10-year note was down 4.9 basis points to 4.106%.

Gold Posts Another Record Sessions as Fed Chair's Testimony Offers Little Detail on Rate Cut Timing

West Texas Intermediate (WTI) crude oil closed higher after a report showed a smaller than expected rise in US oil inventories last week & lower US production, offsetting concerns over the health of China's economy.  WTI crude oil closed up 98¢ to settle at $79.13 per barrel, while May Brent crude, the global benchmark, was last seen up 93¢ to $82.97.  The rise comes after the Energy Information Agency said US oil inventories rose by 1.4M barrels last week, under the consensus estimate for a 2.1M barrel rise.  Also, gasoline & distillate inventories fell while US production drop to 13.2M barrels per day, down from a record 13.3M bpd a week earlier.  The lighter than expected rise came as traders mull a weakening Chinese economy, after the #1 importer again steered clear of stimulus measures amid a debt crisis in its real-estate sector as it set a 5% growth goal for its GDP this year.

WTI Crude Oil Closes Higher After a Report Shows a Smaller than Expected Rise In US Inventories Last Week

There was not much for Powell to say about the future of rate cuts & traders became nervous.   While the economy is viewed as strong, the Atlanta Fed does not indicate a strong economy.  Latest estimate: 2.5% -- March 06, 2024.

Dow Jones Industrials 

Markets rise after Powell said rate cuts likely at 'some point' this year

Dow rebounded 216, advancers over decliners 3-1 & NAZ went up 124.  The MLP index gained 3+ to the 381s as MLPs are back in favor by investors & the REIT index added 1+ to the 387s.  Junk bond funds crawled higher & Treasuries saw limited buying which lowered yields.  Oil jumped 2+ to go over 80 after Saudi Arabia raised prices to Asia & gold advanced another 10 to 2152.

AMJ (Alerian MLP Index tracking fund)

Federal Reserve Chair Jerome Powell said that policymakers expect to cut interest rates sometime in 2024, but are not ready to do so until they are confident inflation is tamed.  In remarks prepared for testimony before the House Financial Services Commitee, Powell said Fed officials are trying to balance the risks between cutting interest rates too soon, which risks setting off inflation again, or waiting too long to cut rates, which could weigh on the economy and possibly trigger a recession.  "We believe that our policy rate is likely at its peak for this tightening cycle," he added.  "If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year. But the economic outlook is uncertain, and ongoing progress toward our 2% inflation objective is not assured."  He is on Capitol Hill for the first of 2 days of his semi-annual monetary policy testimony & is slated to appear before the Senate Banking Committee tomorrow.  Most investors expect the Fed to begin rate cuts in Jun & are betting the central bank will reduce borrowing costs 3 or 4 times over the course of the year.  While inflation has cooled considerably in recent months, it remains up 3.1% compared to the same time a year ago, according to the most recent Labor Dept data.  Hiking interest rates tends to create higher rates on consumer & business loans, which then slows the economy by forcing employers to cut back on spending.  Higher rates have helped push the average rate on 30-year mortgages above 8% for the first time in decades.  Borrowing costs for everything from home equity lines of credit, auto loans & credit cards have also spiked.  Yet the rapid rise in rates has not stopped consumers from spending or businesses from hiring.  Fed officials have said that higher interest rates are still working their way thru the economy & will eventually weigh on growth.  Until that happens, policymakers have indicated they will keep interest rates elevated.

Powell says Fed won't rush to cut interest rates until inflation is conquered

Private sector job growth improved during Feb though growth was slightly less than expected, payrolls processing firm ADP reported.  Companies added 140K positions for the month, an increase from the upwardly revised 111K in Jan but a bit below the estimate for 150K.  Job gains came across multiple areas, led by leisure & hospitality with 41K & construction, which added 28K positions.  Other industries showing solid gains included trade, transportation & utilities (24K), finance (17K) & the other services category (14K).  Of the total, 110K came from the services sector while goods producers added 30K.  Growth was concentrated among larger companies, as establishments with fewer than 50 employees contributed just 13K to the total.  Along with the job growth, annual pay increased 5.1% for those staying in their jobs, which ADP said was the smallest rise since Aug 2021, a potential indication that inflation pressures are receding.  The report comes with the labor market getting added attention for signals of whether US economic growth will stall this year after GDP posted a solid 2.5% annualized gain in 2023.  “Job gains remain solid. Pay gains are trending lower but are still above inflation,” said ADP's chief economist, Nela Richardson.  “In short, the labor market is dynamic, but doesn’t tip the scales in terms of a Fed rate decision this year.”

Private payrolls rose by 140,000 in February, less than expected, ADP reports

Nordstrom (JWN) holiday-qtr sales topped expectations, but the retailer gave a muted outlook for the year ahead.  It plans to open new Nordstrom Rack stores & drive higher online & in-store sales in the coming year.  Yet full-year revenue, including retail sales & credit cards, will range from a 2% decline to a 1% gain compared with the previous year.  That forecast includes a more than 1% hit from having one less week in the fiscal year.  It expects EPS of $1.65- $2.05 for the full year.  That would be higher than its most recent fiscal year, which saw EPS of $1.51.  JWN has felt the squeeze from consumers becoming choosier & more price-conscious while dealing with inflation & higher interest rates.  It has also struggled with company-specific problems, such as lagging sales at its off-price retailer, Nordstrom Rack, & too much of the wrong inventory, which led to higher levels of markdowns.  In the last fiscal qtr that, JWN's quarterly revenue rose about 2% from $4.3B in the year-ago period.  It attributed approximately $190M of those sales to having an extra week in the fiscal year.  EPS was 82¢ versus 74¢ a year earlier.  Excluding a charge associated with relocating the company's fulfillment center, as well as other adjustments, EPS was 96¢.  Net sales for the company’s namesake banner declined 3% in the 4th qtr compared with the year-ago period.  That includes a 4.1% lift from the extra week of the fiscal year.  The retailer plans to open 22 new Nordstrom Rack stores in 2024.  Erik Nordstrom said the chain is “a growth engine for our company” & JWN's “largest source of new customer acquisition.”  He said roughly a qtr of retained Rack customers migrate to the JWN banner within 4 years.  The stock fell 2.88 (14%).

Nordstrom shares fall 10% as retailer warns of potential sales declines in 2024

Powell's comments were well received.  Of course if there are 4 rate cuts this year that means rates will still be high (only 1% below current levels).  And Fed officials will be looking for GDP growth to slow.  In the meantime stock averages are essentially at records levels while gold is at new records from heavy demand.  Tomorrow Powell will have more to say.

Dow Jones Industrials 

Markets tumbled led by selling tech-driven stocks on Nasdaq

Dow sank 404 with buying into the close, decliners over advancers 3-2 & NAZ dropped 267.  The MLP index added 2+ to the 277s & the REIT index was off 4+ to the 386s.  Junk bond funds slid lower & Treasuries were in heavy demand which reduced yields.  Oil remained lower in the 78s & gold gained 12 to 2139 setting another record (more on both below).

AMJ (Alerian MLP Index tracking fund)

Microsoft (MSFT), a Dow stock, is accusing The New York Times (NYT) of “unsubstantiated” claims in the publisher's lawsuit filed in Dec against OpenAI, a case that could have major implications for the future of generative artificial intelligence.  In a motion to dismiss part of the suit, MSF said the Times presented a false narrative of “doomsday futurology” in which OpenAI’s ChatGPT chatbot will decimate the news business.  In the opening line of its argument to the court, MSFT compares the lawsuit to Hollywood’s resistance to the VCR, which was created in the last 1970s & allowed users to record television programs.  “In this case, The New York Times uses its might and its megaphone to challenge the latest profound technological advance: the Large Language Model,” attorneys for Microsoft wrote.  MSFT is OpenAI’s largest investor, having pumped about $13B into the startup.  The filing marks the latest salvo in the battle between OpenAI & the media industry, which is increasingly concerned that AI models are being trained on valuable content that’s been produced over many decades.  In its lawsuit, the Times accused OpenAI & MSFT of copyright infringement & abusing the newspaper's intellectual property in training LLMs.  OpenAI previously asked a judge to dismiss parts of The NYT lawsuit against it, alleging that the publisher “paid someone to hack OpenAI’s products,” such as ChatGPT, to generate 100 examples of copyright infringement for its case.  OpenAI claimed it took the Times “tens of thousands of attempts to generate the highly anomalous results,” & that the company did so using “deceptive prompts that blatantly violate OpenAI’s terms of use.”  In the latest filing, MSFT lawyers argue that, “content used to train LLMs does not supplant the market for the works, it teaches the models language.”  MSFT stock fell 12.27 to 402+.

Microsoft compares New York Times’ claims against OpenAI to Hollywood’s early fight against VCR

The Middle East franchisee of Starbucks (SBUX) said it has begun firing around 2000 workers at its coffee shops across the region after the brand found itself targeted by activists during the ongoing Israel-Hamas war in the Gaza Strip.  The Kuwait-based Alshaya Group, a private family firm holding franchise rights for a variety of Western companies including The Cheesecake Factory, H&M & Shake Shack, issued a statement acknowledging the firings at its Middle Eastern & North African locations.  “As a result of the continually challenging trading conditions over the last six months, we have taken the sad and very difficult decision to reduce the number of colleagues in our Starbucks MENA stores,” the statement read.  Alshaya later confirmed it was firing about 2000 employees.  Many of its employees in the Gulf Arab states are foreign workers hailing from Asian nations.  Alshaya runs about 1900 Starbucks branches in Bahrain, Egypt, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Saudi Arabia, Turkey & United Arab Emirates.  It had employed more than 19K staff.  The layoffs represent just over 10% of its staff.  Since the beginning of the war on Oct 7, SBUX has found itself alongside other Western brands targeted by pro-Palestinian activists over the war.  The company prominently has been trying to counter what it describes as “ongoing false and misleading information being shared about Starbucks” being spread online.  “We have no political agenda,” SBUX said.  “We do not use our profits to fund any government or military operations anywhere — and never have.”  SBUX stock dropped 1.24.

Mideast Starbucks franchisee firing 2,000 workers after being targeted in Israel-Hamas war boycott

Shares of Amer Sports (AS), the maker of Wilson tennis rackets & Lousiville Slugger baseball bats, fell after the company reported strong sales in China but a slowdown in wholesale orders.  In the 3 months ended Dec 31, the company reported a net loss of 25¢ per share, compared with $148.3M (39¢ per share a year earlier).  Sales rose to $1.32B, up about 10% from $1.2B a year earlier.  The company started trading on the NYSE last month.  Founded in Helsinki in 1950, Amer was a Finnish public company until it was taken private in 2019 by a consortium of investors led by China's Anta Sports, FountainVest Partners, Anamered Investments & Tencent.  Since the acquisition, sales grew about 45% from $2.45B in 2020 to $3.55B in 2022.  Revenue jumped again in 2023 to $4.37B.  Still, AS failed to turn a profit between 2020 & 2023.  In 2023, the company lost $209M, but its losses narrowed from $231M in 2022.   CEO, James Zheng, said the company is still in the “early stages” of its “profitable growth journey.”   “We are winning in the premium segment of the sports and outdoor market, which remains healthy and growing. Driven by our technical performance products, we believe Amer Sports’ brands resonate strongly with consumers everywhere, but are still relatively small players on the global stage,” said Zheng.  “Looking forward, our confidence is enhanced by the fact that our highest margin brand, region, channel, and category are growing fastest.”  Much of its expansion has come in China.  Between 2020 & 2022, AS grew sales in the region from 8.3% of total revenue to 14.8%.  In the 9 months ended Sep 30, nearly 20% of sales came from the region.  That growth story continued during its fiscal 4th qtr.  Sales in greater China jumped by 45% & all 3 of the company's segments saw “solid growth.”  For its first qtr, AS expects reported revenue to grow 6-8% & it projects its adjusted gross margin to be around 53.5%.  It anticipates earnings to range between a loss per share of 1¢ to EPS of 2¢.  The company expects technical apparel revenue to grow about 30%, sales for its outdoor performance categories to be flat year over year & its ball & racquet segment sales to be down a double-digit percentage.  For the full year, AS expects sales to grow by a mid-teens percentage, & it anticipates an adjusted gross margin of 53.5-54%.  It is forecasting EPS of 30-40¢.  The stock fell 89¢ to 16.45.

Shares of Wilson tennis racket maker Amer Sports drop nearly 10% after first earnings report

Gold rose to a new record for the 3rd-straight session as buying momentum for the precious metals continues.  Gold for Apr closed up $15 to settle at $2141 per ounce, surpassing the record close set a day earlier.  The price of the metal is being supported by expectations interest rates in developed countries will soon be lowered as inflation eases.  Jerome Powell will begin 2 days of congressional testimony tomorrow amid hopes he will offer firmer detail on when rate cuts will begin.  The record also comes amid a steady $ & strong treasury yields, though yields eased early today.  Gold reached a a fresh record closing high despite a run higher in yields, suggesting continued demand from momentum buyers & low short-selling appetite at a time of heightened geopolitical tensions along with market's continued optimism around the rate cut trajectory.  Still, treasury yields weakened, bullish for gold since it offers no interest, with the 2-year note last seen paying 4.56%, down 5.0 basis points, while the yield on the 10-year note was down 7.2 basis points to 4.144%.  The $ also moved, with the ICE dollar index last seen down 0.03 points to 103.8.

Gold Closes at a Fresh Record as Treasury Yields Ease; Buying Momentum Continues

West Texas Intermediate (WTI) crude oil closed lower for a 2nd session, retreating back to the range it has traded for over the past 4 months despite OPEC+'s weekend extension of 2.2M barrels of voluntary production cuts thru Jun.  WTI crude oil for Apr closed down 59¢ to settle at $78.15 per barrel, while May Brent crude, the global benchmark, was last seen down 70¢ to $82.10.  The drop is the 2nd-straight session of weaker prices following the OPEC+ announcement on Sun as prices remain firmly rangebound with the cartel's cuts offset by rising output from the US & other western hemisphere countries & weak demand from China as a real-estate debt crisis weighs on its economy.  Traders are also awaiting further word on when the Federal Reserve will begin lowering interest rates, a move expected to boost demand as the weight of high rates is taken off the economy.  Fed chair Jerome Powell will begin 2 days of congressional testimony tomorrow, which may offer more insight into the timing of rate cuts.

WTI Crude Oil Falls Again as the Extension of OPEC+ Cuts is Offset by Demand Concerns

The overbought stock market, led by tech stocks, met its challenge today.  That brought out more nervous investors who bought safe haven investments such as gold & Treasuries.  Mar could be a tough month for stocks.

Dow Jones Industrials 

Markets fall ahead of Powell's testimony tomorrow and Thursday

Dow dropped 244, but advancers over decliners 5-4 & NAZ sank 284.  The MLP index added 1+ to the 277s & the REIT index was steady at 390.  Junk bond funds fluctuated & Treasuries were purchased which reduced yields.  Oil slid lower in the 78s & gold gained 13 to 2139 for a new record.

AMJ (Alerian MLP Index tracking fund)

Voters are headed to the polls on the biggest primary election day of the 2024 cycle with 1 issue in particular at the top of their minds: the state of the US economy.  About 1/3 of Americans think that economic problems are the most important issue facing the country today, according to a monthly poll published by Gallup.  That includes 12% of voters who are worried about the economy in general & 11% who identified the high cost of living & ongoing inflation crisis as the top problem in the country.  Another 3% expressed concern about the steep federal budget deficit, while 2% said taxes.  By comparison, 28% of Americans said that immigration is the #1 problem, while 20% said the top issue is the gov & poor leadership.  Another 6% identified poverty & homelessness as the biggest problems.  The findings come ahead of Super Tuesday, the day in the presidential primary cycle when many states vote.  More than 1/3 of Rep delegates are up for grabs in the 15 states that are voting.  About a 3rd of Dem delegates will also be decided, with nominating contests in 14 states plus American Samoa.  While inflation has fallen considerably from a peak of 9.1% notched during Jun 2022, it remains well above the Federal Reserve's 2% goal.   When compared with Jan 2021, shortly before the inflation crisis began, prices are up a stunning 17.6%.  Many families have yet to see material relief.  Food prices are up 33.7% from the start of 2021, while shelter costs are up 18.7%.  Energy prices, meanwhile, are up 33%.  Chronically high prices are forcing Americans to spend about $1019 more per month than they did 3 years ago, before the inflation crisis began, according to a recent estimate from Moody's Analytics.

Economic woes dominate Americans' worries on Super Tuesday

Sales of Apple's (AAPL), a Dow & NAZ stock, iPhone plunged in China in the first 6 weeks of 2024, according to a Counterpoint Research report.  The analyst firm said that iPhone sales dropped 24% in the period, as AAPL faced stiff competition from local smartphone firms like Huawei, Oppo, Vivo & Xiaomi.  AAPL came under particular pressure from Chinese tech giant Huawei, whose consumer business is experiencing a resurgence in China after the launch of its Mate 60 smartphone.  Several rival Chinese smartphone companies also logged drops in their unit sales in the 6-week period, but the declines were less pronounced than that of AAPL.  The best-performing smartphone brands for the first 6 weeks were Huawei & its spinoff Honor, which branched out of the tech giant in 2020 as a result of US sanctions.  AAPL is facing a tough environment in its key market, China. Several notable trends are adding pressure, not least of which is intense competition from local Chinese smartphone makers.  AAPL stock fell 4.76 (3%).

Apple iPhone sales plunge 24% in China as Huawei smartphone business resurges, report says

Target (TGT), a Dividend Aristocrat, reported higher holiday-qtr earnings on a smaller-than-expected sales decline & predicted that annual comparable sales would come in largely above expectations.  The mass merchandiser is banking on same-day services, product launches & a new membership program to boost spending at its stores.  Adjusted EPS were $2.98 in the 4th qtr, compared to $1.89 per share in the same period a year earlier.  The forecast called for $2.42.  Total comparable sales in the Nov- Jan period fell 4.4% compared with the 4.6% decline that was expected, in part due to a recovery in sales on Target.com.  Online sales fell 0.7% during the 4th quarter, an improvement from the 6% decline in the previous qtr.  Robust Black Friday & Cyber Monday spending helped drive holiday-qtr sale & shoppers gravitated to newly launched collections such as Kendra Scott jewelry & its private-label Figmint line of kitchenware.  Shoppers also responded to same-day pickup services, such as Drive-up, which made up more than 10% of total sales in the quarter.  Looking ahead, TGT will focus on rolling out new products & services, including a new Target Circle membership program, to reignite sales, traffic & market share gains in 2024, CEO Brian Cornell said.  TGT introduced its earnings outlook for 2024, saying it expects adjusted EPS of $8.60-9.60.  The midpoint of that range was largely in line with expectations of $9.14.  Annual comparable sales are expected to be in a range of flat to up 2% this year, compared to expectations of a 0.86% rise.  The stock jumped 17.76 (12%).

Target's earnings surge despite holiday sales dip, sees sales recovery in 2024

Stocks pulled back further from record highs as uncertainty over interest rate cuts & the continued strength of tech stocks brought a note of doubts to the market.  It's interesting to see the stock averages with sharp declines while a majority of stocks are higher.  Meanwhile gold (negatives bets on high priced stocks) reached another record high.

Dow Jones Industrials 

Markets struggle while gold soars to $2126 a barrel for a new record

Dow was off 97 with selling into the close, decliners ahead of of advancers about 5-4 & NAZ fell 67.  The MLP index stayed in the 275s & the REIT index went up 3+ to the 389s.  Junk bond funds were mixed & Treasuries saw more selling which raised yields.  Oil fell 1+ to the 78s & gold surged 30 to 2126 for a new record (more on both below).

AMJ (Alerian MLP Index tracking fund)

Ford (F) US sales jumped 10.5% last month compared with Feb 2023, led by increases in its hybrid & all-electric vehicles sales.  Sales were 174K cars & trucks for Feb.  The results included an 81% jump in EV sales & roughly 32% uptick in hybrid models.  Sales of traditional internal combustion engines also increased, up 7.5% from the same month a year earlier.  The spike in hybrid sales is part of Ford's plan to double down on the technology.  Hybrid sales totaled 12K, including 6K units of its small Maverick Hybrid pickup.  Sales of EVs for Ford have fluctuated month to month based on demand & pricing.  Sales of Ford's all-electric vehicles last month were up across the board, including a 64% increase in its Mustang Mach-E crossover & a nearly doubling in sales of the all-electric F-150 Lightning pickup.  Despite the increases in hybrids & EVs, 89% of Ford’s sales last month were traditional cars & trucks.  Sales of the highly profitable F-Series pickups fell by 5.8% last month to 51K units.  Shipments of new 2024 models of the pickup were delayed due to an undisclosed quality issue, Automotive News reported last month.  Amid quality & warranty issues, CEO Jim Farley has instituted more stringent testing & quality checks during new vehicle launches.  Total YTD sales were 311K units, a 6.6% increase compared with the same time period a year earlier.  The stock rose 27¢.

Ford sales jump 10.5% in February, led by gains in hybrids and EVs

American Airlines (AAL) said that 80% of its revenue this year will come from loyalty program members & passengers who buy more expensive tickets, up from a 70% share in 2017.  AAL & other carriers have poured Bs of $s into new cabins, lounges & onboard upgrades to cater to high-spending travelers.  AAL said that it was ordering 260 new Boeing (BA), Airbus & Embraer planes to revamp its fleet & that it would retrofit older Airbus planes to increase the size of their first-class cabins.  AALs revenue forecast considers “premium content” tickets that cost more than the cheapest offering.  The airline expects to grow pretax margins in the coming years & chip away at its debt load.  Analysts are projecting 2024 EPS of $2.56 & revenue of $55B.  The stock fell 85¢.

American says loyalty program, more expensive tickets will drive 2024 revenue

Americans are having a harder time getting approved for loans & other financial products nearly 2 years after the Federal Reserve began aggressively hiking interest rates.  A new survey published by Bankrate found that 50% of loans or financial product applicants have been denied since the Fed started raising rates in Mar 2022.  Credit card applications have been rejected the most frequently, with 14% of Americans reporting that banks denied them a new credit card while another 6% were refused a balance transfer card.  Others were denied a credit limit increase on their existing credit card (11%), a personal loan (10%), car loan or car lease (9%), insurance (8%) & a mortgage loan (5%).  Banks are tightening their lending standards in response to higher interest rates.  Fed policymakers have raised interest rates sharply over the past 2 years, approving 11 rate increases in the hopes of crushing inflation & cooling the economy.   In the span of just 16 months, interest rates surged from near zero to above 5%, the fastest pace of tightening since the 1980s.  Hiking interest rates tends to create higher rates on consumer & business loans, which then slows the economy by forcing employers to cut back on spending.  Higher rates have helped push the average rate on 30-year mortgages above 8% for the first time in decades.  Borrowing costs for everything from home equity lines of credit, auto loans & credit cards have also spiked.  The share of Americans who have been denied a loan or financial product is "substantially" higher for those with lower credit scores.  For instance, about 73% of individuals with a "poor" credit score, ranging from 300-579, have been denied a loan or financial product, compared to 63% with "fair" credit, ranging from 580-669, & 55% with "good" credit, ranging from 670-739.

Americans are struggling to get a loan since the Fed started raising rates

Gold prices closed at a new record high early today even as treasury yields rose.  Gold for Apr closed up $30 at $2126 per ounce, the highest ever after topping the prior peak set on Fri.  The price of the metal is being supported by expectations lower interest rates are on the way as inflation cools in the US & elsewhere.  Gold closed at a record high on Fri after a softer $ & Treasury yields triggered a strong technical buying reaction, thereby strengthening the yellow metal's buy-on-dip credentials following a month that should have seen it trade lower amid lower rate cut expectations, dollar & yield strength.  The $ was mostly steady early, with the ICE dollar index last seen down 0.04 points to 103.82.  Treasury yields rose, bearish for gold since it offers no interest.  The 2-year note was last seen up 7.4 basis points to 4.616%, while the 10-year note was paying 4.225%, up 4.0 basis points.

Gold Climbs to a New Record High Even as Treasury Yields are on the Rise

Crude futures settle lower after a choppy start as some view the extension of OPEC+ output cuts as a sign the group could be rethinking its above-consensus demand views.  The extension, including additional output & export curbs by Russia, likely highlights some bearishness in global demand expectations by the group. Chinese demand, in particular, may have led to a desire to avoid a situation in which the market is oversupplied.  The challenge for OPEC+ has been balancing non-OPEC+ supply growth alongside stagnating global demand.  WTI for Apr settles down 1.5% at $78.74 a barrel & May Brent falls 0.9% to $82.80 a barrel.

Oil Futures Fall As OPEC Extension Raises Demand Concerns

Stock averages are essentially at record levels while gold soared to record highs even though interest rates were on the rise.  Powell's comments this week along with new economic data will be drivers for the overbought stock market.  The gold bugs are happy!

Dow Jones Industrials 

Markets retreat ahead of Powell's testimony as gold sets new record

Dow dropped 98, decliners slightly ahead of advancers & NAZ was off 27.  The MLP index wavered in the 276s & the REIT index was steady at 386.  Junk bond funds were essentially flat & Treasuries had selling which raised yields.  Oil slid lower in the 79s & gold shot up 15 to 2111, a new record!

AMJ (Alerian MLP Index tracking fund)

European regulators hit Apple (AAPL), a Dow stock, with a nearly $2B antitrust fine for "abusive" App Store rules related to music streaming providers.  The European Commission said it found that its banned music streaming app developers from fully informing iOS users about alternate & cheaper music subscription services.  "For a decade, Apple abused its dominant position in the market for the distribution of music streaming apps through the App Store," EU antitrust chief Margrethe Vestager said.  The regulators said AAPL's conduct may have led to iOS users paying "significantly higher" prices for music streaming subscriptions.  The EU competition enforcer said AAPL's restrictions constituted unfair trading conditions, a relatively novel argument in an antitrust case & also used by the Dutch antitrust agency in a decision against AAPL in 2021 in a case brought by dating app providers.  The EU regulator said it added an additional lump sum of €1.8B to the basic amount as a deterrent to AAPL & because a significant part of the harm caused by its conduct was non-monetary, but did not say what the basic amount was.  The stock retreated 4.82 (3%).

Apple hit with nearly $2B EU antitrust fine

Treasury yields were higher as investors considered the state of the economy & looked ahead to key economic data slated for this week.  The yield on the 10-year Treasury was almost 4 basis points higher at 4.229% & the 2-year Treasury  yield was last up by more than 5 basis points at 4.585%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Investors weighed the path ahead for the economy, including inflation, after recent data painted a somewhat mixed picture, & awaited fresh insights from the economy expected this week.  Last week, inflation expectations from consumers grew, according to the University of Michigan.  Investors have been looking to economic data for hints about not only the state of the economy, but also the outlook for Federal Reserve interest rates.  Many are hoping for rate cuts & are seeing data that suggests a cooling economy as an encouraging sign, while signals of persistent inflation are viewed as a signal that rate cuts may still be a way off.  Fresh insights will come this week in the form of labor market data, including JOLTs job openings figures, private payrolls data from ADP & the Feb jobs report.  Fed Chair Jerome Powell is also expected to provide testimony about monetary policy to the House of Representatives on Wed & to the Senate on Thurs.

Treasury yields rise as investors look ahead to Powell testimony and jobs data

Tesla (TSLA) raised prices on certain Model Y vehicles sold in the US market by $1,000.  The electric vehicle maker raised the price of its Model Y rear-wheel drive & long-range vehicles to $43,990 & $48,990, respectively.  Prices of the Model Y Performance variant & other models of the car remained unchanged as of Fri.  In Feb, TSLA temporarily cut prices of some of its Model Y cars in the US until Feb 29, nearly a month after it cut prices in Europe & China.  "This is the essential quandary of manufacturing: factories need continuous production for efficiency, but consumer demand is seasonal," CEO Elon Musk said last month when responding to a post from TSLA on X that indicated prices would go up in Mar.  Car buyers in the US have opted for hybrids over EVs in the past few months due to higher ownership costs & some EV models losing their eligibility for federal tax credits over battery sourcing requirements included in the Inflation Reduction Act.  In Jan, TSLA warned of "notably lower" sales growth this year as it focuses on the production of its next-generation electric vehicle, which is code-named "Redwood."  The latest price hike may help the company's margins, which were strained over the last year as the company & other EV-makers engaged in a price war that impacted its profitability in a bid to preserve market share.  The stock sank 11.90 (12%).

Tesla raises prices of some Model Y vehicles in US

Dow opened lower & continued in the red.  Major news this week should come from Federal Reserve Chair Jerome Powell's testimony before Congress along with the monthly jobs report.  Nervous investors took gold to a new record, above $2100.

Dow Jones Industrials 

Markets rise while safe haven gold reaches a new record

Dow went up 90, advancers over decliners about 3-2 & NAZ jumped 180.  The MLP index added 3+ to the 275s & the REIT index gained 3+ higher to the 385s.  Junk bond funds continued to be in demand & Treasuries were purchased all day.  Oil gained 1+ to 80 & gold soared 40 to 2095 (more on both below & gold is flirting with its record).

AMJ (Alerian MLP Index tracking fund)

US crude oil futures topped $80 a barrel for the first time in nearly 4 months, as signs point to a tightening market ahead of an OPEC+ decision on production cuts.  The West Texas Intermediate  contract for Apr gained almost 3% ($2.31) to $80.57 a barrel, while May Brent futures added 2.5% $2.03 to $83.94 a barrel.  US crude & the global benchmark booked a 2nd consecutive monthly gain in Feb as near-month contracts traded at a premium to later months, typically a sign of a tightening oil market.  OPEC+ is considering rolling over its production cuts through the 2nd qtr & possibly the end of the year.  The cartel & its allies are expected to make a decision on the reductions next week.  OPEC's next formal Joint Ministerial Monitoring Committee meeting is scheduled for Apr 3.  On the geopolitical front, cease-fire negotiations in the Israel-Hamas war are in jeopardy after scores of Palestinians were killed in Gaza City while waiting for humanitarian aid.  “I am rejecting the international pressure to end the war before we achieve all of its goals,” Israel Prime Minister Benjamin Netanyahu said.

U.S. crude tops $80 for first time since November before OPEC+ decision

New York Community Bancorp (NYCB) shares tumbled after replacing its CEO & disclosing lapsed internal controls.  "As part of management’s assessment of the Company’s internal controls, management identified material weaknesses in the Company’s internal controls related to internal loan review, resulting from ineffective oversight, risk assessment and monitoring activities," the bank detailed in a filing with the SEC.  As a result, recent financial reporting is being reviewed.  The bank, whose parent is Flagstar Bank (FBC), one of the largest regional banks in the US has over $116B in assets.  Alessandro DiNello, the bank's exec chair, will succeed Thomas Cangemi as CEO, effective immediately & Cangemi will remain on the board.  Several firms, including Piper Sandler, Wedbush & Deutsche Bank cut price targets on NYCB shares to $3.50 - $5.00.  The stock sunk 1.25 (26%).

NYCB stock plummets as bank replaces CEO, cites 'material weakness'

Ford (F) CEO Jim Farley wrote that the charging partnership, which involves use of fast-charging adapters, should “improve the EV ownership experience,” for Ford EV drivers, noting that “I’ve tested it myself and its works great.”  Tesla (TSLA) has forged a similar agreement with General Motors (GM), which was announced in Jun, giving GM customers access to more than 12K TSLA fast chargers in the US & Canada.  GM CEO Mary Barra said at the time that her company expected to save up to $400M of a planned investment in building out EV charging stations.  The partnerships mark a strategy shift for TSLA CEO Elon Musk, who for years touted the exclusivity of TSLA's charging network & his company's ability to build reliable charging locations that would keep consumers from sitting in long lines.  Becoming the charging standard has required TSLA to invest heavily in technical & business development.  But TSLA has plenty to gain from working with others.  Sam Fiorani, VP for global forecasting at AutoForecast Solutions, said these efforts should eventually yield huge financial benefits for TSLA, including from environmental credits & fees for charging sessions.  Currently, TSLA operates about 1 in 3 charging stations in the US.  Even if adoption of battery electric vehicles slows domestically, & the fleet of electric vehicles is smaller than what the gov & many automakers planned 6 months ago, “Tesla could still see $6 billion to $12 billion a year,” by 2030 from its expanded charging business, Fiorani said.  TSLA stock rose 76¢.

Tesla stands to earn billions by opening U.S. charging stations to drivers of Ford and other EVs

Gold rose to the highest in 9 weeks as disappointing US factory data & a drop in consumer sentiment reinforced bets on the possibility of interest-rate cuts later this year.  Signs of a softening economy solidified expectations that the Federal Reserve will need to lower borrowing costs to help shore up the economy.  Higher rates are typically negative for non-yielding bullion.  The precious metal has largely held above the key $2000 level since mid-Dec on bets of the Fed's pivot to monetary easing.  That view hasn't changed even though expectations of the timing & size of the central bank's rate reduction varied against mixed US economic data recently.  Data today showed a measure of US factory activity shrank at a faster pace in Feb as orders, production & employment contracted, suggesting manufacturing is struggling for momentum.  Separate data showed US consumer sentiment fell in Feb for the first time in 3 months as current & expected views of the economy deteriorated.  Treasury yields tumbled, helping sending bullion higher by as much as 2.1%, the biggest intraday increase since Dec 13.  Remarks from a slew of Fed officials also weighed on bond yields, which in turn boosted bullion.  Federal Reserve Governor Christopher Waller said he would like the central bank to boost its share of short-term Treasuries.  Fed Bank of Chicago Pres Austan Goolsbee said he believes the Fed funds rate is quite restrictive.  Separately, his Richmond counterpart Thomas Barkin said markets are pricing in fewer rate reductions in response to economic data.  Dallas Fed chief counterpart Lorie Logan reiterated it'll likely be appropriate to start slowing the pace at which it shrinks its balance sheet.  Spot gold climbed 2% to $2088 an ounce, on track for its 2nd consecutive weekly gain.

Gold Rises to Nine-Week High as US Data Reinforces Rate Cut Bets

West Texas Intermediate (WTI) crude oil rose to the highest in 4 months ahead of next week's expected roll over of OPEC+'s voluntary production cuts into the 2nd qtr, while weak economic data pushed investors to add risk on expectations lower interest rates may be near.  WTI crude oil for Apr closed up $1.71 to settle at $79.97 per barrel, the highest since Nov 6, while May Brent crude, the global benchmark, was last seen up $1.74 to $83.65.  The rise comes ahead of OPEC+ expected move to continue cuts to support oil prices that have been limited by demand concerns & rising non-OPEC supply, keeping the commodity trading in a tight range.  Prices were also supported by weak economic data as the US ISM manufacturing index fell to 47.8 in Feb from 49.1 a month earlier, while the consensus forecast expected a reading of 49.5.  Construction spending & consumer sentiment also fell.  The weak data comes a day after the US reported its PCE Index, the Federal Reserve's preferred inflation measure, fell in Jan from Dec, while several European countries also reported slowing inflation, boosting hopes for lower interest rates.

WTI Crude Oil Closes at a Four-Month High on OPEC+, Weak Economic Data

Gold for Apr climbed $41 (2%) to settle at a record $2095 an ounce, topping the previous record high at $2093.  Stocks regained momentum in the PM, building on a record-setting rally in Feb.  The bulls are betting that the Fed may get more aggressive in cutting rates.  Meanwhile demand was very strong for gold & Treasuries, classic safe haven investments.  The bears are predicting that unimpressive data along with higher oil prices could drag the economy into a recession.  Also NYCB's problems are very troublesome.  Dow fell 44 this week & all popular averages are at or near their records.  Take your pick!

Dow Jones Industrials 

Markets continued record-setting rally with optimism on inflation

Dow gained 59, advancers over decliners 3-2 & NAZ was up 90.  The MLP index added 3+ to the 275s & the REIT index edged up 1+ to the 383s.  Junk bond funds rose along with stocks & Treasuries were purchased which reduced yields.  Oil rose 2 to go over 80 & gold jumped 24 to 2078.

AMJ (Alerian MLP Index tracking fund)

Treasury yields declined as investors digested fresh economic data.  The yield on the 10-year Treasury dropped by more than 5 basis points at 4.199% & the 2-year Treasury yield was last down by 10 basis points at 4.544%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  The final reading on Feb consumer sentiment missed expectations as inflation expectations ticked higher.  The University of Michigan's sentiment index came in at 76.9, below the estimate of 79.6 & was also lower than the Jan reading of 79.  This came on the back of the personal consumption expenditures index (PCE) report.  The PCE report, which is the Fed's preferred inflation gauge, was in line with expectations.  Headline PCE increased by 0.3% on a monthly & 2.4% on an annual basis in Jan, while core PCE, which strips out food & energy prices, rose by 0.4% for the month & 2.8% from a year earlier.  The annual figures were slightly lower than Dec's readings, but still remained above the Fed's 2% target range.  The PCE data comes soon after both the consumer & producer price index reports for Jan, which also track inflation, came in hotter than expected.  Fed officials have in recent weeks expressed caution about cutting rates too soon & made clear that data would continue to inform their decision-making.  Several speakers have indicated rate cuts were expected to come this year, but there have been few clues about a potential timeline.

Treasury yields are flat as investors weigh economic outlook

Microsoft (MSFT), a Dow stock, announced a new partnership with French start-up Mistral AI, Europe's answer to ChatGPT maker OpenAI, as the US tech giant seeks to expand its footprint in the fast-evolving artificial intelligence industry.  MSFT said that it was investing in the €2B ($2.1B), 10-month-old business to help it unlock “new commercial opportunities” & expand to global markets & confirmed that it was investing €15M, which would convert into equity in Mistral's next funding round.  Under the deal, Mistral’s large language models (LLM), the technology behind generative AI products, will be available on MSFT's Azure cloud computing platform, becoming only the 2nd company to host its LLM on the platform after OpenAI.  It will also see MSFT bolster the start-up's access to new customers as it rolls out its ChatGPT-style multilingual conversational assistant “Le Chat,” or “the cat.”  Pres Brad Smith said that the deal was an “important” signal of the company's backing of European technology.  The stock fell 89¢.

Microsoft invests in Europe’s Mistral AI to expand beyond OpenAI

Inflation in the 20-nation euro zone eased to 2.6% in Feb, flash figures showed, but both the headline & core figures were higher than expected.  The forecast called for a headline reading of 2.5%.  Core inflation, stripping out volatile components of energy, food, alcohol & tobacco, was 3.1%, above the 2.9% expected.  The European Union statistics agency said food, alcohol & tobacco had the highest inflation rate in Feb at 4%, followed by services at 3.9%.  Energy prices, which had swollen last year as a result of Russia's invasion of Ukraine, continued to reduce, with the rate of deflation moving from -6.1% to -3.7%.  The headline print previously came in at 2.8% in Jan, with further easing expected after price rises cooled in Germany, France & Spain.  Investors are hunting for clues on when the ECB will start to bring down interest rates, with market pricing pointing to a Jun cut.   Yet many ECB officials still stress that they need spring wage negotiations to conclude before they have a clearer picture of domestic inflationary pressures.  The Feb figures will be a mixed bag for policymakers, as core inflation is holding above 3% even as the headline rate moves toward the ECB's 2% target.  Price rises have nonethless cooled significantly from their peak of 10.6% in Oct 2022.

Inflation remains sticky in Europe, with core prices cooling less than expected

Dow slid lower at the open, then buyers took it into the black.  After the long multi month rally, nervous investors are buying a lot gold & Treasuries.  Gold is close to its record highs!

Dow Jones Industrials