Markets wobble on continued hopes for rate cuts

Dow rose 60, decliners ahead of advancers about 5-4 & NAZ slid 13.  The MLP index stayed in the 274s & the REIT index was flattish in the 375s.  Junk bond funds drifted a little lower & Treasuries saw limited buying taking yields a tad lower.  Oil was up 1+ to the 75s & gold gained 15 to 2390 (more on both below).

Dow Jones Industrials 

Mortgage rates dipped just under 7% this week after crossing above that threshold in the prior reading as rates remain stubbornly high, stifling the housing market.  Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate on the benchmark 30-year fixed mortgage ticked down to 6.99% this week from 7.03% last week. The average rate on a 30-year loan was 6.71% a year ago.  The average rate on the 15-year fixed mortgage also decreased to 6.29% from 6.36% last week.  One year ago, the rate on the 15-year fixed note averaged 6.07%.

Mortgage rates tick down, back below 7%

The race to the $25K EV in the US car market has been won, but not in the way the auto industry wanted.  Since Jan, Hertz Global Holdings (HTZ) has been in Tesla (TSLA) sales mode, with 20K electric vehicles from its global fleet, representing nearly a 3rd of the rental-car company’s existing EV inventory, on the dealer lot.  The move, viewed as a stumble in Hertz’s (HTZ) EV strategy, in 2021, it heralded plans to order hundreds of thousands of TSLAs, Polestars & battery-electric GM models, also reflects a sobering up of the electrification hype within the US auto industry, which has run into a consumer in 2024 spurning at least the expected pace of the transition away from gas-powered cars.  While EV sales in the US more than quadrupled from 2020 to 2023, & now account for more than 9% of total light-duty vehicle sales, the pace of growth has slowed & automakers are focusing more on selling hybrids.  Yet the eventual transition to EVs remains inevitable, as sticker prices become more in line with those of internal combustion engine (ICE) vehicles, something the sales slump is making happen even faster as auto companies attempt to move EVs, battery technology improves driving range & the charging infrastructure expands.  And there is the overarching imperative to reduce the tons of climate-changing carbon emissions that cars & trucks produce.  Considering all that, now might be a good time to buy 1 of HTZ's used TSLAs thru its long-established Hertz Car Sales division, in business since 1977 & operating about 70 locations across the country.  Although as with buying any used car — from manufacturers & independent dealers, online marketplaces or private owners — there are pros & cons.  On the plus side, HTZ has plenty of EVs that it’s motivated to sell at what it calls no-haggle prices.  “Our EVs can be found nationwide in most major metros and averaging around $25,000,” said a Hertz spokesperson.  All of the HTZ-certified vehicles are given a 115-point inspection & include a 12-month/12K-mile (whichever comes first) limited powertrain warranty.  HTZ also offers vehicle protection plans that last beyond the warranty, as well as a 7-day or 250-mile buy-back guarantee.  HTZ, like most used car retailers, offers trade-ins & financing.  Also, some used EVs are eligible for up to $4K in federal tax credits, & several states offer tax credits or rebates.  On the minus side, although the HTZ late-model EV fleet is only a couple of years old, the cars have been frequently rented, so the mileage can be relatively higher compared to other used vehicles.  That could mean more wear & tear, since there’s no telling how aggressively they've been driven.  TSLA stock rose 3.01 & HTZ stock fell 17¢.

EV sales slump and Hertz dump take used Teslas to ‘no haggle’ $25,000 price

The number of Americans who applied for unemployment benefits last week rose to a 4-week high of 229K, likely in part due to the end of the school year, but there was little sign of rising layoffs.  The forecast called for new claims to total 219K in the latest week, based on seasonally adjusted figures.  Initial jobless claims have hovered between 194K - 232K this year, a remarkably low level last achieved consistently in the 1960s.  Big picture: Businesses are not hiring as many workers, but they are not cutting as many jobs.  Sales are still pretty strong & good help is hard to find, giving most firms little incentive to shrink staff.  As long as most adults are working, they are likely to keep spending at levels sufficient to keep the economy growing.

Jobless claims climb to 4-week high of 229,000, but layoffs still little sign of accelerating

Gold prices climbed to a 2-week high as weaker-than-expected US jobs data fanned hopes of a Federal Reserve interest rate cut later this year with focus shifting to non-farm payrolls data due tomorrow.  Spot gold was up 0.8% at $2373 per ounce & US gold futures rose 0.7% to $2393.  Data yesterday showed US private payrolls increased less than expected in May while data for the prior month was revised lower.  Lower interest rates reduce the opportunity cost of holding non-yielding bullion.  The Fed will likely cut its key interest rate in Sep & once more this year.  Gold prices are expected to hit another record high this year, despite a dip in physical demand.  Meanwhile, global stocks hit an all-time high & the € rose after the European Central Bank cut interest rates for the first time in nearly 5 years, but also signaled that further moves could take a while.

Gold hits two-week high, payrolls data in focus

West Texas Intermediate (WTI) crude oil closed higher for a 2nd day with risk appetite is on the rise following interest-rate cuts by Canada & Europe.  WTI crude for Jul closed up $1.48 to settle at $75.55 per barrel, while Aug Brent crude, the global benchmark, was last seen up $1.46 to $79.87.  The 2 day rally follows 5 straight days of losses that came on signs of weak demand & an OPEC+ decision to begin returning 2.2M barrels per day of supply cuts back to market beginning in Oct.  The Energy Information Administration yesterday said US oil inventories rose by 1.2M barrels per day last week, while most analysts expected stocks to fall.  Gasoline & distillate inventories also climbed, a sign of weak demand despite the start of the US driving season on the Memorial Day weekend.  Still, with US equities at record highs & central banks beginning to lower interest rates, traders are showing a willingness to bid up risky commodities.

WTI Oil Rises Again Despite Signs of Weak Demand as Risk Appetite Rises Following Start of G7 Interest-Rate Easing

Dow has been edging higher in Jun without significant conviction.  Traders want to see the new jobs data tomorrow & next week results from the FOMC meeting (along with fresh inflation data).  Nervous investors are buying more gold.

Markets are reacting to the ECB's interest rate decisions

Dow was up 49 but off early highs, decliners ahead of advancers 5-4 & NAZ slid back 28.  The MLP index hardly budged in the 287s & the REIT index was flat at 375.  Junk bond funds were steady & Treasuries had limited selling, allowing rates to inch higher (much more below).  Oil rose in the 74s & gold gained 11 to 2387.

Dow Jones Industrials 

Treasury yields ticked up as investors considered the latest economic data & weighed the outlook for interest rate cuts.  The yield on the 10-year Treasury was up by less than 3 basis points at 4.302% & the 2-year Treasury yield was last 2.5 basis points higher on the day at 4.75%.  Yields & prices move in opposite directions & 1 basis point is equivalent to 0.01%.  The European Central Bank announced its first interest rate cut since 2019, even as inflationary pressures in the euro zone have lingered.  The move will likely increase the pressure on the Federal Reserve to follow suit & walk back monetary policy that investors view as too restrictive.  The Federal Reserve is due to meet next week, but rate cuts in the US are not expected to begin until later in the year.  Canada became the first country in the Group of Seven to cut interest rates in the current cycle yesterday, following cuts from central banks in Sweden & Switzerland earlier in the year.  Investors also weighed data that provided fresh clues about the state of the economy.  ISM's purchasing managers index for the services sector, released yesterday, rose to 53.8 in May, above the previously expected 50.7.  Readings above 50 indicate an expansion of the sector.

Treasury yields rise slightly as investors weigh economic data, rate outlook

Euro zone government bond yields extended gains today, shortly after the European Central Bank (ECB) announced its first interest rate cut in 5 years.  Germany's 10-year bond yield, seen as the euro area benchmark, was up 6 basis points to 2.557% & the country's 2-year bond yield was higher by 4 basis points to 3.025%.  Italy's 10-year bond yield was up 7 basis points to 3.88%, while the yield of the Spanish bond of the same maturity added 6 basis points to 3.29%.  While the ECB delivered a first rate since 2019, market watchers were quick to speak of uncertainty over what happens next.  “The Governing Council emphasized a data-dependent, meeting-by-meeting approach, reducing the likelihood of a back-to-back rate cut in July due to insufficient European data before the next meeting. This decision can be termed a ‘hawkish cut’,” Gaël Fichan, head of fixed income at Bank Syz, said.  US Treasuries were higher as investors monitored a rise in weekly jobless claims, potentially supportive of Federal Reserve rate cuts, with the benchmark 10-year edging slightly higher to 4.299%.  Interest rate divergence is likely to drive action in stocks, currencies & bonds in the coming months, according to analysts.

Euro zone bond yields rise after European Central Bank delivers ‘hawkish’ cut

Crude oil futures rose for a 2nd day as the ECB cut interest rates for the first time in 5 years & as traders bet the Federal Reserve will follow suit in Sep.  Oil prices closed more than 1% higher on yesterday, snapping a losing streak triggered this week by the OPEC+ decision to increase supply later this year.  The move higher yesterday came after private payrolls came in much weaker than expected, boosting hopes that the Fed will slash rates.  Fed futures trading now suggests about a 70% chance that the central bank will cut rates in Sep.  Lower interest rates bring the hope of more robust economic growth & stronger oil demand.  “The May private payroll data yesterday also suggested a slowing labour market much to the delight of the Federal Reserve,” Tamas Varga, an analyst at oil broker PVM, wrote.  “US equities climbed to fresh historic highs and the temptation was irresistible for oil, it faithfully followed.”  Oil prices are still down about 3% this week after 8 OPEC+ members led by Saudi Arabia & Russia agreed to phase out 2.2M barrels per day in production cuts from Oct thru Sep 2025.  Saudi Arabia & Russia may be willing to maintain their cuts thru the end of the year if demand isn't strong enough to absorb the additional barrels.  Moreover, rising oil inventories are expected to shift to draws in the 3rd qtr with the OPEC+ cuts remaining in place at least until Oct.

Oil prices gain for second day as ECB cuts rates, traders hope for Fed to ease in September

Dow had a good advance at the opening, then selling took much of that gain away.  Meanwhile NAZ has been little changed.  Traders are weighing how these changes (above) might affect policy makers at the Fed meeting next week.

Markets rise as investors look for rate cuts

Dow went up 96, advancers over decliners about 2-1 & NAZ jumped 330 to another record.  The MLP index added 1+ to the 276s & the REIT index fell 1 to the 374s.  Junk bond funds crawled higher & Treasuries were purchased which lowered yields.  Oil bounced back about 1 to the low 74s & gold rose 28 to 2375 (more on both below).

Dow Jones Industrials 

Boeing (BA), a Dow stock, launched its first Starliner flight with astronauts, beginning a crucial final flight test of the long-delayed spacecraft.  The launch took off at from Cape Canaveral, Florida, with 2 NASA astronauts aboard.  Starliner is carried by a United Launch Alliance Atlas V rocket & is bound for the Intl Space Station.  About 15 minutes after launch, the rocket released the Starliner capsule in orbit as planned, with the flight going as expected, according to mission control.  NASA's broadcast of the launch also noted that although Starliner has cameras onboard to show inside & outside the cabin, BA won't be able to relay video back down to the ground until the spacecraft reaches the ISS.  Starliner will fly in space for about 25 hours before a planned docking with the ISS tomorrow.  The astronauts will then spend about a week on the ISS, focused on testing Starliner, before returning to Earth.  BA's crew flight test aims to certify the Starliner system as capable of carrying NASA astronauts to & from the ISS.  The liftoff comes after a series of attempts to launch the mission.  To date, BA has eaten $1.5B in costs due to Starliner setbacks & nearly $5B of NASA development funds.  The stock rose 1.15.

Boeing Starliner launches for the first time carrying NASA astronauts to the ISS

Dollar Tree (DLTR) is considering a sale of its more grocery-focused Family Dollar brand.  The company had recently shared plans to close almost 1000 Family Dollar stores in an attempt to revamp the struggling business.  The discounter closed more than 500 locations during its fiscal first qtr, it said.  “We are already beginning to see progress in this targeted strategy in the streamlined Family Dollar banner,” the company said.  “The unique needs of each banner at this time – transformation at Family Dollar and growth acceleration at Dollar Tree – lead us to the decision to conduct a thorough review of strategic alternatives for the Family Dollar business.”  DLTR bought Family Dollar in 2015 for almost $9B & the business has been struggling ever since to compete against its major rivals.  The update came alongside DLTR's fiscal first-qtr earnings report, in which Family Dollar lagged.  Same-store sales for the DLTR brand rose 1.7% while Family Dollar sales climbed only 0.1%.  Enterprise sales rose 1%.  Revenue rose to $7.6B, up about 4% from $7.32B a year earlier.  The company expects sales for the 2nd qtr will be $7.3-7.6B, with sales growth for the DLTR banner of 2-4% & sales for the Family Dollar segment approximately flat.  EPS for the 3-month period that ended May 4 was $1.38 compared with $1.35 per share a year earlier.  Adjusting for one-time items, including the cost of store closures, the company reported EPS of $1.43.  The company also mentioned that it incurred losses totaling $117M as of early May, after a tornado destroyed the company's distribution center in Marietta, Oklahoma, on Apr 28.  The facility sustained significant damage & the inventory in the facility as well as the facility itself are not salvageable.  The company expects the incurred losses to be offset by insurance recoveries.  The stock dropped 5.92 (5%).

Dollar Tree is exploring a sale of its Family Dollar brand.

Pres Biden has made the push for broader adoption of electric vehicles a key pillar of his agenda to fight climate change since he entered the White House, but the latest data shows a major chunk of Americans still have no intention of buying an EV in the near future.  A new poll by The Associated Press-NORC Center for Public Affairs Research & the Energy Policy Institute at the University of Chicago found nearly ½ of Americans (47%) said they are not likely to purchase an EV for their next vehicle.  Only 19% of respondents said they were either "very" or "extremely" likely to buy an EV for their next car purchase & another 22% said they were "somewhat likely" to do so.  Despite hefty tax incentives for purchasing all-electric cars, a majority of US adults, 6 in 10, of those surveyed cited high prices as the major reason they would not buy an EV & some 25% cited cost as a minor reason.  The AP noted that the average price of a new EV is out of reach for many Americans' budgets at $58K, according to Kelley Blue Book, while the average vehicle sold in the US is under $46K.  75% of those surveyed in the poll cited too few charging stations as a reason they would not purchase an EV & 70% said EVs take too long to charge.  67% of respondents said they prefer gas-powered cars.  The Biden administration's new emissions rules effectively require that nearly all vehicles must be EVs by 2032 & the AP poll indicates consumers will take a lot more convincing for enough to be willing to buy those vehicles.  Only 8% of US adults surveyed said that they or someone in their household owns or leases an EV.

Poll shows Americans still not sold on EVs despite Biden push

Gold prices edged higher, helped by weakness in the $ & Treasury yields after private payroll data came in lighter than expected.  Spot gold was up 0.6% at $2341 per ounce after a 1% fall in the previous session.  US gold futures rose 0.6% to $2361.  The $ inched up after hitting a near 2-month low in the last session, while benchmark 10-year Treasury yields lingered near their lowest level in almost 3 weeks, making bullion more attractive to investors.  The ADP said that private companies added 152K jobs in May, lower than the 188K seen in the prior month & below the forecast of 175K.  That's the lowest monthly number since Jan.  Higher interest rates increase the opportunity cost of holding the non-yielding asset.

Gold Rises Following Light Private Employment Report

West Texas Intermediate (WTI) crude oil rose, rebounding from a 4-month low following 5 losing sessions despite a surprise rise in US inventories.  West Texas Intermediate crude for Jul closed up 82¢ to settle at $74.07 per barrel, while Jul Brent crude, the global benchmark, was last seen up 82¢ to $78.34.  The rise comes despite signals of soft demand, with the Energy Information Administration's weekly survey showing a 1.2M barrel rise in US oil inventories last week, while the estimate called for a 2.3M drop in stocks.  Gasoline & distillate inventories also rose despite the beginning of the normally high-demand US summer driving season.  Still, it appears prices reached a bottom following dismay over OPEC+ saying this weekend said it plans to roll back 2.2M barrels of voluntary production cuts in the 4th qtr.

WTI Crude Oil Rises Off a Four-Month Low Despite an Unexpected Rise in U.S. Inventories

The stock market rose, buoyed by hope for interest rate cuts with signs of a slowing slowing economy.  Stocks have had a bumpy ride as the market wavers over whether to interpret a softening in economic readings as a positive sign for the chances of rate cuts from the Federal Reserve or a negative sign signaling the start of a broader slowdown.  Meanwhile NAZ with the sexy tech stocks keeps roaring ahead, setting new records.  Next week is the Fed meeting, but little drama is expected to come  from it.

Markets are mixed while Nasdaq reaches new heights

Dow fell 27, advancers over decliners about 5-4 & NAZ rose 197 to a new record.  The MLP index stayed in the 274s & the REIT index was off 1 to the 374s.  Junk bond funds inched higher & Treasuries had limited buying which reduced yields slightly.  Oil crawled higher in the 73s & gold rebounded 20 to 2368.

Dow Jones Industrials 

Hiring by US companies slowed more than expected in May, pointing to a labor market that is continuing to cool in the face of higher interest rates, according to the ADP National Employment Report.  Companies added 152K jobs last month, below both the 175K increase predicted & the downwardly revised Apr gain of 188K.  It marked the worst month for job creation since Jan.  At the same time, the report showed that wage growth, a key driver of inflation, held steady at 5%, where it has been for 3 straight months.  For workers who changed jobs, wages climbed 7.8%, a steep drop from the 9.3% boost recorded in Apr.  "Job gains and pay growth are slowing going into the second half of the year," said Nela Richardson, ADP chief economist.  "The labor market is solid, but we're monitoring notable pockets of weakness tied to both producers and consumers."  Job growth was almost entirely concentrated in the services sector, with goods producers contributing just 3K jobs to the total.  Trade, transportation & utilities led the way with 55K new jobs, followed by education & health services with 46K & construction with 32K.  Leisure & hospitality, once a leading source of job creation, saw payrolls rise by just 12K last month.  There were also sectors that saw steep declines last month.  Manufacturing shed 20K jobs, while natural resources & mining lost 9K.  The weaker-than-expected report comes in the wake of an aggressive tightening campaign by the Federal Reserve, which has raised interest rates to the highest level since 2001.  Investors are watching the labor market closely for signs that it is finally cooling, so the Fed can pivot to cutting interest rates. 

Private sector job growth cools in May to 152,000, worse than expected

Mortgage interest rates last week moved to the highest level since early May & that pushed mortgage demand lower for the 2nd straight week.  Total mortgage application volume fell 5.2% last week, compared with the previous week, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index.  An additional adjustment was made to account for the Memorial Day holiday.  The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766K or less) increased to 7.07% from 7.05%, with points rising to 0.65 from 0.63 (including the origination fee) for loans with a 20% down payment.  “Mortgage rates moved slightly higher last week, with the 30-year conforming rate reaching 7.07 percent – its highest level since early May – despite incoming data indicating somewhat slower economic growth,” said Mike Fratantoni, senior VP & chief economist at the MBA.  Applications to refinance a home loan fell 7% from the previous week & were 5% higher than the same week one year ago.  Mortgage rates are still about a qtr of a percentage point higher than they were at this time last year, but some borrowers may be refinancing to pull out home equity.  Mortgage applications to purchase a home dropped 4% for the week & were 16% lower than the same week a year ago.  Buyers are not only contending with higher interest rates & home prices are still rising & competition, especially on the lower end, is fierce.  “Government purchase volume was down less, helped by growth in VA applications. The market is relying on first-time homebuyer demand, and many first-time buyers do use government lending programs,” Fratantoni noted.

Mortgage demand falls for the second straight week, but all eyes are on Friday’s jobs report

Walmart WMT, a Dow stock & Dividend Aristocratic, will offer new training programs & certifications to fill high-demand roles across its business, such as HVAC technicians, opticians & software engineers.  The big-box retailer said it will also offer another reason for hourly store workers to stick around: a bonus of up to $1K per year.  WMT, the nation's largest private employer, has been investing in its stores & its workforce as it tries to hang on to the title of the nation’s top retailer.  The retail giant aims to retain market share gains, particularly in the grocery department, during a period of high inflation.  Early this year, the company announced that store managers could earn more than $400K a year, including bonuses, as it began offering $20K of stock grants in Apr.  WMT also kicked off a $9B project to upgrade & modernize more than 1400 of its stores, representing more than a qtr of its total stores across the country.  Its average hourly wage is nearly $18, up by about 30% over the past 5 years.  The starting pay in stores ranges from $14 to $19, depending on the location.  WMT raised its minimum wage in Jan 2023.  Yet WMT, which reported about $648B in total revenue last year & has a market value of nearly $537B, still faces criticism for its wages. The company’s total annual compensation for the median employee was $27K in the most recent fiscal year.  For a family of 4 people, that falls below the poverty line of $31K, according to the Dept of Health & Human Services.  The stock rose 14¢.

Walmart rolls out new job training programs as it tries to fill key roles

The stock market edge higher, buoyed by tentative optimism for interest rate cuts amid signs of slowing labor demand & a cooling economy.  Meanwhile bulls are taking NAZ to new heights in what has to be considered an overbought market & interest rates remain very high.

Markets rise carefully as they try to shake off sluggish start to June

Dow went up 140, decliners over advancers 3-2 & NAZ slid back 28.  The MLP index stayed in the 273s & the REIT index rose 3+ to the 375s.  Junk bond funds fluctuated & Treasuries continued to be in demand which reduced yields.  Oil fell about 1 to the low 73s (below 76 when 2022 started) & gold dropped 22 to 2346 (more on both below).

Dow Jones Industrials 

US chipmaker Intel (INTC), a Dow stock, announced new artificial intelligence chips for data centers, as it looks to take on rivals Nvidia (NVDA) & AMD (AMD), which have showcased upcoming chips in the last 2 days.  INTC's Xeon 6 processor will deliver better performance & power efficiency for high-intensity data center workloads as compared with its predecessor, CEO Pat Gelsinger said during a conference in Taiwan.  The announcement comes as rivals NVDA & AMD launched new AI chips on Sun & yesterday, respectively, as they jostle for leadership in the booming industry.  It also comes 6 months after INTC launched its 5th Gen Intel Xeon processors for data center workloads & 2 months after announcing the Gaudi 3 processor for AI model training and deployment.  INTC also revealed that prices for the Gaudi 2 & Gaudi 3 AI accelerators are lower than that of rival chips.  “Customers are looking for high performance, cost-effective gen AI training and inferencing solutions. And they’ve started to turn to alternatives like Gaudi. They want choice. They want open software and hardware solutions and time to market solutions at dramatically lower TCOs [total cost of ownership],” Gelsinger said.  INTC also revealed architecture details for its upcoming Lunar Lake processors “to continue to grow the AI PC category.”  The Lunar Lake chips, expected to ship in the 3rd qtr, will compete against NVDA's & AMD's chips that are specifically designed for AI PCs.  INTC is trying to catch up to NVDA & AMD, after having largely been on the sidelines of the AI frenzy which saw tech giants buying up as many NVDA chips as possible.  INTC stock fell 26¢.

Intel unveils new AI chips as it seeks to reclaim market share from Nvidia and AMD

Ford Motor's (F) US new vehicle sales rose 11.2% last month compared with May of last year, boosted by strong sales growth for all-electric & hybrid models.  The Detroit automaker reported 65% increases in sales of both hybrid & all-electric vehicles.  That’s compared with a 5.6% rise in sales of Ford's traditional vehicles with internal combustion engines.  Despite the notable increases in hybrids & EVs, the sales in those segments totaled about 26K vehicles combined.  That’s 14% of the automaker's more than 190K total sales last month.  The boost to EV sales is a conundrum for investors.  Ford wants to grow EV sales to build scale & assist in offsetting tightening fuel economy standards & emissions, but the company's Model E electric vehicle unit has reported massive losses.  Ford reported in Apr the division lost $1.32B on 10K vehicles wholesaled from Jan-Mar.  While the unit also includes EV-related business such as software, those losses equate to a loss of $132K for each vehicle the unit sells.  In May, Ford nearly doubled sales of its all-electric F-150 Lightning pickups, compared with May 2023.  Sales of the Mustang Mach-E EV also jumped, up 46% year over year.  The spike in hybrid sales is part of Ford's plan to double down on the technology.  The automaker earlier this year said it would delay production of new all-electric vehicles to instead focus on offering hybrid options across its entire North American lineup by 2030.  Ford reported total YTD US sales thru May of 877K units, up 5.6% compared with the same time period in 2023.  The sales have been led by a roughly 10% increase in SUV sales & 2.5% uptick in truck & van sales.  The stock fell 16¢.

Ford EV and hybrid sales surge 65% in May

Warner Bros Discovery's (WBD) Max announced price increases for its ad-free options, as a range of streamers make their memberships more expensive.  The move comes only 12 days before the debut of season 2 of HBO's “Game of Thrones” prequel “House of the Dragon,” whose series premiere garnered nearly 10M viewers, making it the biggest in HBO's history.  Max currently has 3 pricing options: with ads; ad-free; & ultimate ad-free, which allows for more devices and downloads than the cheaper plans.  The price of the ad-free option of the streaming service will increase by $1 per month to $16.99, while the yearly ad-free plan will rise by $20 a year to $169.99.  The cost of the ultimate ad-free plan will also increase by $1 per month to $20.99, while the yearly ultimate plan will jump $10 per year to $209.99.  The ad-supported option will remain unchanged at $9.99 a month or $99.99 a year.  While the prices will take effect immediately for new subscribers, existing subscribers will see the price hike starting from their next billing cycle on or after Jul 4.  The price hike follows its competitor's decisions to bundle their streaming services.  The bundle will be available in both ad-supported & ad-free tiers.  While the pricing has not been disclosed, it was reported that it will be offered at a discount in an effort to make it a more desirable option.  WBD last month missed both top & bottom-line estimates for its first-qtr earnings report, despite adding 2M direct-to-consumer streaming subscribers during the qtr.  CEO David Zaslav said WBD is hoping the subscribers will stick with the bundle offering to take advantage of cheaper prices, decreasing the loss of customers, which he said has been “the killer” in the streaming business.  This is only the 2nd time Max has raised prices for its ad-free service since its launch.  In early 2023, Max raised the ad-free tier price from $14.99 to $15.99 a month, an increase the company said would allow it to invest in its content & user experience.   The stock was off 9¢.

Warner Bros. Discovery hikes prices for Max streaming service

Gold fell as technical selling intensified despite data showing further signs of a slowdown in the US labor market reinforced bets that the Federal Reserve will be able to cut interest rates this year.  US job openings fell in Apr to the lowest level in more than 3 years, consistent with a gradual slowdown in the labor market, according to the Job Openings & Labor Turnover Survey.  The result was below all estimates.  Treasury yields pushed lower after the print & Fed swaps are pricing in a faster pace of 2024 rate cuts.  But that didn't stop gold traders from selling, with the metal down as much as 1.5%.  Recent data indicate the US labor market is cooling, but it has been gradual through slower hiring rather than outright job cuts.  Fed officials say they hope that trend will continue in order to rein in demand & tame inflation without putting Ms of people out of work.  Traders will now focus on Fri's jobs report for further clues on the timing of the Fed's long-anticipated pivot to lowering borrowing costs.  Higher rates typically pose a headwind for the precious metal.  Bullion has risen almost 13% this year & reached an all-time high in May, largely driven by optimism for a Fed pivot to monetary easing this year.  It has also been supported by haven purchases due to the conflicts in Ukraine & the Middle East, as well as buying by central banks & Chinese consumers.  Spot gold traded 1.5% lower at $2326 an ounce.

Gold Slips as Traders Book Profit Despite Data Fuel Fed Cut Bets

West Texas Intermediate (WTI) crude oil fell to a fresh 4-month low, dropping for a 2nd day after OPEC+ said it plans to roll back voluntary production cuts beginning in the 4th qtr.  WTI crude for Jul closed down 97¢ to $73.25 per barrel, the lowest since Feb 5, while Aug Brent crude, the global benchmark, was last seen down 64¢ to $77.72.  OPEC+ ministers yesterday decided to leave voluntary cuts of 2.2M barrels per day slated to end on Jun 30 in place thru the 3rd qtr.  The plan is to roll back the cuts in the 4th qtr, depending on market conditions.  The cartel's decision to add additional barrels to the market later this year comes amid rising global inventories, as demand remains light and additional production from the United States, Canada & other western hemisphere producers has helped offset the cuts.

WTI Oil Falls Again on Worries OPEC+ Decision to Roll Back Voluntary Cuts in Q4 Will Swell Global Inventories

In the AM, stocks didn't do much.  In the PM they got a rally going but sellers returned in the last hour of trading.  The stock market is meandering, looking for direction.  High interest rates along with uncertainty about rate cuts are keeping investors away from risky investments like stocks.

Markets drift lower as economy might be starting to show faults

Dow slid back 46, decliners over advancers 3-2 & NAZ was off 62.  The MLP index fell 1+ to 272 & the REIT index added 2+ to the 375s.  Junk bond funds edged higher & Treasuries saw more buying which lowered yields again (more below).  Oil was off another 1+, taking it under 73 for another 4 month low, & gold dropped 29 to 2339.

Dow Jones Industrials 

US job openings tumbled in Apr to the lowest level in more than 3 years, the latest sign that the labor market is cooling off as the economy slows.  The Labor Dept said there were 8.1M job openings in Apr, a decrease from the downwardly revised 8.35M openings reported the previous month.  The forecast expected a reading of 8.3M.  It marked the lowest level for job openings since Feb 2021.  The Federal Reserve closely watches these figures as it tries to gauge labor market tightness & wrestle inflation under control.  Still, job openings remain historically high.  Before the COVID-19 pandemic began in early 2020, the highest on record was 7.6M.  There are roughly 1.5 jobs per unemployed American.  The number of Americans quitting their jobs, meanwhile, was mostly unchanged at 3.6M, roughly 2.2% of the workforce, indicating that workers remain confident they can leave their jobs & find employment elsewhere.  The report also indicated that layoffs were largely unchanged last month, hovering around 1.5M.

Job openings unexpectedly fall in April to lowest level in 3 years

Neel Kashkari, the pres of the Federal Reserve Bank of Minneapolis, says one of the things he has learned in the past few years is that consumers would rather see the economy fall into a recession than to continue to suffer the pain of soaring prices.   "The American people – and maybe people in Europe, equally – really hate high inflation," Kashkari said.  "I mean, really, viscerally hate high inflation."  The Minneapolis Fed chief said the labor leader represented workers in grocery stores & hotels, not higher-paid laborers like autoworkers or welders.  "She said to me, ‘Inflation is worse than a recession,’" Kashkari recalled.  "That is contrary to conventional economic thinking. And I said, 'I don't understand that. How can inflation be worse than a recession? In a recession, you lose your job. Inflation is paying higher prices, [but] you still have a job.'" Kashkari said the labor leader told him that her members were used to dealing with recessions, & the way they get through a recession is by relying on friends & family.  For instance, if they lose their job, they can lean on a sibling, parents or friends for help.   But high inflation affects everybody, she told the Fed pres.  Meaning, there is no one in her members' networks that they can lean on for help because everyone they know is experiencing the same thing.  "That was a profound comment for me to hear," Kashkari said.  He said that comment led him & the economists at the Minneapolis Fed to debate it a lot because the labor leader "was on to something."  "If you look now, the economy is, in the U.S., quite strong, the labor market is strong, inflation is coming down, and many, many people are deeply unhappy about the status of the economy," Kashkair said.  "I think it's because of the high inflation that they've experienced."

Fed president: People would rather have recession than high inflation

Treasury yields slipped as investors considered the latest economic data & what it could mean for the economy.  The yield on the 10-year Treasury was down by nearly 3 basis point at 4.364% & the 2-year Treasury yield was last trading at 4.79% after dipping about 3 basis points.  Yields & prices move in opposite directions & 1 basis point is equivalent to 0.01%.  Employment data from the Labor Dept showed 8.1M vacancies in Apr, compared to an estimate that called for 8.4M, the lowest level in over 3 years.  The fresh reading is fueling investor hope that the labor market is perhaps weak enough to allow the Federal Reserve to cut interest rates.  However, further weakening could also fuel worry over an impending recession.  Yields had fallen, with the 10-year Treasury yield tumbling close to 12 basis points, after economic data indicated a contraction of the manufacturing sector.  The ISM manufacturing index came in at 48.7 for the month of May, below the expected 49.6 figure.  Readings below 50 indicate a contraction.  Tomorow ISM's services index will also be released, giving investors insights into another sector.  Also this week, the May jobs report is due, providing fresh data from the labor market, including nonfarm payrolls & the unemployment rate.

10-year Treasury yield continues June slide on signs of weak labor market

Dow started to go higher at the opening, but the bulls could not stay in command.  There are more indications that the economy is slowing.  While that may give courage for the Fed to begin lowering rates, thoughts of headwinds in economic activity are not welcome by investors.

Markets waffle on concerns about the economy

Dow slid back 115 (above session lows), decliners over advancers 5-4 & NAZ went up 93.  The MLP index fell 3+ to 273 & the REIT index was 1+ lower to 372.  Junk bond funds continued higher & Treasuries continued to see heavy buying which reduced yields significantly.  Oil dropped almost 3 to 74 (4 month low) & gold rebounded 22 to 2368 (more on both below).

Dow Jones Industrials 

A growing number of home sellers are slashing their prices as they try to lure back lukewarm buyers who are facing both high costs & steep interest rates.  That's according to a new report published by Redfin, which found that 6.4% of sellers cut their asking price during the 4 weeks ended May 26, the highest share since Nov 2022.  The median asking price for a typical home on the market also fell by about $3K to $417K, the first time that prices had decelerated in 6 months.  On top of that, the number of days active listings have been on the market started to rise in May for the first time in 8 months, hitting a median of 46 days.  Together, the metrics suggest that sale-price growth could "soften in the coming months as persistently high mortgage rates turn off homebuyers," the report said.  While buyers received a modicum of relief on housing costs at the end of May, monthly housing payments dropped to a 6-week low thanks to a modest decline in mortgage rates, many Americans are still paying a record-high amount to buy a house.  The median home sale price hit $390K, according to the report, the highest level on record & a 4.3% increase from the same time last year.   Mortgage buyer Freddie Mac said that the average rate on a 30-year loan rose slightly to 7.04%.  While that is down from a peak of 7.79% in the fall, it remains sharply higher than the pandemic-era lows of just 3%.

US house sellers are cutting prices for the first time in over a year

US crude oil fell more than 3% as OPEC+ announced plans to phase out voluntary production cuts totaling 2.2M barrels per day.  A coalition of 8 OPEC+ members led by Saudi Arabia & Russia announced yesterday that they would begin phasing out those cuts over the course of 12 months starting in Oct.  The planned phase out, however, will be subject to market conditions & could be reversed.  OPEC+ is keeping separate tranches of production cuts totaling 3.6M bpd in place until the end of 2025.  “Some people read the OPEC statement, particularly the part about the adding barrels back from the voluntary cut, as bearish,” said Helima Croft, head of global commodity strategy at RBC Capital Markets.  “They were pretty clear that this is going to be data dependent,” Croft added.  “As we get to the end of August, if the fundamental picture looks worse than what we have now, they would pause that addition.”  Under the plan, more than 500K bpd would return to the market by Dec & 1.8M bpd would come back by Jun of 2025.  Andrew Lipow, pres of Lipow Oil Associates, said the decision will limit upside for crude prices.  The production that the countries plan to add to the market from Oct 2024 - Sep 2025 is equivalent to OPEC's demand growth forecast of 2.2M bpd for this year, Lipow said.  “In essence, the volume that they’re putting back on the market is equal to the optimistic demand growth forecasts that OPEC has put out for 2024,” Lipow added.  “And the upshot is that they are adding sufficient supply to meet the growth that’s anticipated in the market.”

U.S. crude oil falls more than 3% as OPEC+ plans phasing out production cuts

Jeep plans to grow US sales of its plug-in hybrid electric vehicles by as much as 50% this year as it leans into the technology as a bridge between its traditional gas-guzzling SUVs & all-electric vehicles amid a slower-than-expected sales pace of EVs.  The Stellantis (STLA) brand expects to sell 160-170K plug-in hybrid electric vehicles, or PHEVs, in the US this year, an increase of 40% to 50% from last year, Jeep CEO Antonio Filosa said.  The target comes as Jeep launches its first all-electric SUVs in the US, beginning with the Wagoneer S.  “It’s the best time to be flexible, as we are,” Filosa said.  “One of the pillars of growth for the market is going to be freedom of choice.”  PHEVs, which combine an internal combustion engine with EV technologies, could help accelerate consumer adoption of electrified vehicles, as a sort of stutter step to all-electric models.  PHEV sales at the level Jeep is expecting this year would top STLA' total 2023 US sales of the vehicles, at roughly 143K units.  They also would outperform an industry forecast for 27.5% segment growth this year, according to AutoPacific.  That compares with the consulting & data firm’s 17% growth for EVs.  Jeep's PHEV sales last year totaled 113K units, including 67K Jeep Wranglers & 46K Jeep Grand Cherokees.  Thru the first qtr of this year, sales totaled 31K, up 47% from the same period a year earlier.  The brand is first in the US in PHEV sales.  Jeep has leaned into PHEVs more than others to offset sales of the brand's gas-guzzling SUVs amid tightening emissions & fuel economy standards.  STLA fell 29¢.

Jeep expects to grow plug-in hybrid SUV sales by as much as 50% in 2024

Gold prices ticked up, as investors awaited multiple US economic reports this week for clues on health of the economy, after a recent inflation report suggested the Federal Reserve might have room for rate cuts in 2024.  Spot gold edged 0.3% higher to $2332 per ounce & the dollar index (.DXY) ticked 0.1% lower.  Bullion gained 2% in May & about 13% YTD.  US gold futures rose 0.3% to $2353.  Investors will look at the Institute of Supply Management's (ISM) nationwide PMI reading, Wed's ADP employment report & non-farm payrolls data due on Fri.  Data last Fri showed that US inflation had stabilized in Apr, raising bets for a rate cut in Sep.  Traders are currently pricing in about a 56% chance of a cut in Sep, versus about 49% before the report.  While bullion is considered an inflation hedge, higher rates increase the opportunity cost of holding the non-yielding asset.  Elsewhere, the European Central Bank is seen almost certain to trim rates by a qtr point to 3.75% on Thurs, making it the first major central bank to cut rates this cycle.

Gold Prices Edge up as Investors Seek more US Data

West Texas Intermediate (WTI) crude oil fell to the lowest since Feb 6 after OPEC+ over the weekend rolled 2.2M barrels per day of voluntary production cuts into the 3rd qtr, while planning to roll back the cuts beginning in Oct & extending other cuts slated to expire at year end thru 2025.  WTI crude oil for Jul closed down $2.77 to settle at $74.22 per barrel, while Aug Brent crude, the global benchmark, was last seen down $2.82 to $78.29.  OPEC staged a ministerial meeting on yesterday to decide on the future of 2.2M barrels per day of voluntary cuts slated to end on Jun 30, leaving them in place thru the high-demand 3rd qtr while planning to roll them back beginning in the 4th qtr depending on market conditions.  The cartel left another 3.6M bpd of group & voluntary quota cuts in place & extended them thru 2025, though the UAE will be allowed to raise its output by 0.3M bpd next year.

WTI Crude Oil Falls to a Four-Month Low As OPEC+ Rolls Production Cuts into Q3 but Plans to Return Output Afterward

The stock market dipped lower in the AM, then a few buyers returned to trim losses.  Tech stocks on NAZ are seeing a little buying, but that's nor really significant.   A weak manufacturing report spurred concern that the world's largest economy is losing further traction.  Today nervous investors were buying safe haven gold & Treasuries.

Markets waffle again as investors worry about interest rate cuts

Dow dropped 200, decliners over advancers 5-4 & NAZ was up 34.  The MLP index fell 2+ to the 274s & the REIT index was steady in the 373s.  Junk bond funds rose & Treasuries were heavily purchased lowering yields significantly (more below).  Oil fell a big 2+ to the high 78s & gold rose 17 to 2364.

Dow Jones Industrials 

Inflation in the US is unlikely to fall to the Federal Reserve's 2% target for at least 3 more years, according to a new report published by the Cleveland Federal Reserve Bank.  The findings suggest the pandemic-era shocks that stoked high inflation, including supply chain disruptions & rabid consumer demand, have been resolved, but that there are other "very persistent" forces fueling price pressures within the economy.  "There are both theoretical and empirical reasons to think that, absent X factors such as continued favorable supply shocks or strong productivity gains, the last half-mile could well take several years," Cleveland Fed economist Randal Verbrugge wrote in the report.  That suggests inflation will not return to pre-pandemic levels until mid-2027 at the earliest.  Verbrugge differentiates between the 2 sources of inflation: extrinsic, meaning external shocks like production costs or the overheated labor market, & intrinsic, meaning internal shocks like wage-setting & price-setting decisions & the way that inflation expectations are formed.  The resolution of supply chain issues contributed to the notable decline in inflation last year.  But that progress appears to have run its course, & inflation's path seems like it will be "governed by its intrinsic dynamics" moving forward.  Those forces include wage growth & corps raising or lowering their prices.  "Hence, according to this analysis, inflation could take several years to return to its target," Verbrugge wrote.  High inflation has created severe financial pressures for most US households, which are forced to pay more for everyday necessities like food & rent.  Grocery prices are up more than 21% from the start of 2021, while shelter costs are up 18% & energy prices, meanwhile, are up 38.%.  Several Fed officials have suggested in recent weeks that borrowing costs should stay higher for longer as inflation remains abnormally high.  "I don’t expect to get that greater confidence that we need to see on the inflation progress towards a 2% goal in the very near term," New York Fed Pres John Williams said earlier in May.

Inflation will take years to fall to 2% target, according to Cleveland Fed model

The influential Organization of the Petroleum Exporting Countries & its allies, OPEC+, agreed to extend their official crude output cuts into 2025, also stretching 2 other sets of supply curbs over different periods.  The decision came in line with the forecasts of analysts & OPEC+ delegates who said prior to the meeting that the alliance would likely extend its existing cuts.  The coalition will produce a combined 39.7M barrels per day next year.  The figure marks the production levels required of individual members before applying any additional production adjustments & factors in the group departure of long-standing OPEC member Angola earlier this Jan.  OPEC+, including kingpins Saudi Arabia & Russia, said they would extend a set of nearly 1.7M barrels per day of voluntary cuts that were set to expire at the end of this year.  These reductions will now be implemented throughout 2025.  This smaller group of OPEC+ member will also stretch another round of voluntary output cuts totaling 2.2M barrels per day until the end of the 3rd qtr of this year.  These trims were initially only scheduled to last until the end of the 2nd qtr.  “The quantities of this reduction, amounting to 2.2 million barrels per day, will then be restored gradually, on a monthly basis, until the end of September 2025,” the statement said.  Saudi Arabia's Abdulaziz bin Salman, who chairs the OPEC+ coalition, said  that there is no “rocket science” to forecasts & acknowledged that, where the OPEC report may be making a “higher assessment” on the call for crude, there are likewise “those who are also taking a very pessimistic view on demand.”  He flagged that the OPEC+ group is approaching supply-demand considerations with prudence & precaution, saying of the prospect of impending market tightness, “I will believe it when I see it.”  OPEC+ ministers will next meet to discuss policy steps on Dec 1.

Oil alliance OPEC+ extends collective crude production cuts into 2025

Treasury yields fell as investors assessed weak US manufacturing data and looked toward a key jobs report slated for the end of the week.  The yield on the 10-year Treasury was down more than 8 basis points at 4.43% & the 2-year Treasury yield was last more than 6 basis points lower at 4.83%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Signs of contraction in the US manufacturing sector weighed on yields.  The ISM manufacturing index measured 48.7 in May, below an estimate that called for 49.6.  A reading below 50 is an indication of a contraction.  Investors are awaiting further economic data this week that could provide fresh hints about the state of the economy & the path of monetary policy.  This includes JOLTS job openings figures for Apr, as well as the May jobs report, which includes nonfarm payrolls & the unemployment rate for the month.  Elsewhere, the European Central Bank is set to meet Thurs & is widely expected to announce its first interest rate cut since 2019.  That comes ahead of the next Federal Reserve meeting on Jun 11-12.  Traders are not pricing in a rate cut from the Fed until Sep, according to CME Group's FedWatch Tool, but will be watching the meeting closely for hints about the monetary policy outlook.  Investors today also continued to digest Fri's release of the personal consumption expenditures (PCE) price index for Apr.  The core PCE, which strips out food & energy costs, rose 0.2% on a monthly basis & 2.8% from a year earlier.  The monthly figure was in line with expectations, while the annual reading came in 0.1 percentage points above the forecast.  Including food & energy costs, the PCE increased 0.3% from the previous month & 2.7% on an annual basis, as expected.

Treasury yields slip as U.S. manufacturing sector shows signs of contraction

Continued high interest rates that are likely to persist, making investors nervous.  Additionally there are no indications about quick fixes.  One tiny plus on inflation is that oil prices (WTI), an important part of the inflation story, have flattish under $80 since 2022.