Markets slide as inflation cools in June, but gold nears its record highs

Dow went up only 32 after a nice pop in early trading, advancers over decliners about 6-1 & NAZ tumbled 364.  The MLP index was steady near 290 & the REIT index remained up 10+ to the 391s.  Junk bond funds barely budged in price & Treasuries continued to see substantial buying which reduced yields sharply.  Oil rose higher in the 82s & gold soared 41 to 2421 near its record reached in Mar (more on both below).

Dow Jones Industrials 

Mortgage rates fell slightly this week but are still hovering around 7%, remaining uncomfortably high for many would-be buyers.  Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate on the benchmark 30-year fixed mortgage ticked down to 6.89% this week from 6.95% last week.  The average rate on a 30-year loan was 6.96% a year ago.  The average rate on the 15-year fixed mortgage also declined, dropping to 6.17% from 6.25% last week.  1 year ago, the rate on the 15-year fixed note averaged 6.30%.

Mortgage rates tick down, still stuck near 7%

Tesla (TSLA) reported that the electric vehicle maker is delaying the unveiling of its Robotaxi by 2 months.  After previously announcing that it would introduce its robotaxi on Aug 8, TSLA has pushed the launch back to Oct to give teams working on the project more time to build prototypes.  This followed an 11-day rally that was sparked by a better-than-expected deliveries report for the 2nd qtr.  That jump wiped out the stock's loss for the year.  However, the shares are now back in negative territory for 2024, a year that has been marred by sweeping layoffs & a drop in sales due in part to an aging lineup of EVs & increased competition in China.  CEO Elon Musk has promised shareholders a robotaxi for years. In 2015, he said Tesla's cars would achieve “full autonomy” within 3 years.  In 2016, Musk said TSLA would be able to send 1 of its cars on a cross-country drive without requiring any human intervention by the end of the following year.  The empty promises continued into 2019, when Musk said on a call with institutional investors that TSLA would have 1M robotaxi-ready vehicles on the road in 2020.  However, the company has yet to deliver a robotaxi, autonomous vehicle or technology that can turn its cars into “level 3” automated vehicles.  Meanwhile the competition has leaped ahead of TSLA.  Following a dreary first-qtr earnings report in Apr, Musk reiterated his vision of TSLA as a company dedicated to developing robotaxis that will make money for their owners & a driverless transportation network.  “If somebody doesn’t believe Tesla’s going to solve autonomy, I think they should not be an investor in the company,” Musk said.  The company is scheduled to report 2nd-qtr results later this month.  At TSLA, “unveil” dates do not predict a near-future date for a commercial release of a new product.  For example, TSLA unveiled its fully electric heavy-duty truck, the Semi, in 2017, & did not begin deliveries until Dec 2022.  The stock tumbled 22.03 (8%).

Tesla shares fall 6% after report of robotaxi unveiling delay

Pfizer (PFE) said it will move forward with a once-daily version of its weight loss pill, danuglipron, after it saw “encouraging” data in an ongoing early-stage study.  The company evaluated several once-daily formulations of the drug & identified 1 with “the most favorable profile” in terms of safety & how the body reacts to the medication.  PFE plans to conduct more early-stage trials in the 2nd ½ of the year to identify the ideal dose of the drug, with results expected in the first qtr of next year.  The company said those trials will “inform the registration enabling studies,” which are used in applications for regulatory approval.  Danuglipron “has demonstrated good efficacy in a twice-daily formulation, and we believe a once-daily formulation has the potential to have a competitive profile in the oral GLP-1 space,” outgoing PFE Chief Scientific Officer Dr Mikael Dolsten said.  Notably, the company did not observe any liver safety issues in patients who received once-daily formulations of the drug.  PFE is 1 of several drugmakers racing to win a slice of the market for a highly popular class of weight loss & diabetes drugs called GLP-1 agonists.  Some analysts expect the industry to be worth roughly $100B by the end of the decade.  But PFE has so far struggled to break into the market.  Investors have been pessimistic about the company's potential in the GLP-1 space ever since it scrapped a different once-daily pill in Jun 2023 due to elevated liver enzymes in patients who received the treatment.  Those were among a string of setbacks PFE faced last year on top of the rapid decline of its Covid business, which battered its stock.  Still, PFE has other experimental obesity drugs in early stages of development.  “Obesity is a key therapeutic area for Pfizer, and the company has a robust pipeline of three clinical and several pre-clinical candidates,” Dolsten said.  PFE also believes GLP-1s are only “scratching the surface of what we will see in obesity,” CEO Albert Bourla said in Jun.  The stock was up3126¢.

Pfizer moves forward with once-daily version of weight loss pill after setbacks

Gold jumped above $2400 an ounce to close in on the record price set in May, after an unexpected drop in US consumer prices bolstered hopes that the Federal Reserve will soon start cutting interest rates.  Gold climbed as much as 2.3% after Bureau of Labor Statistics data showed a 0.1% monthly decline in consumer prices, marking the first negative reading in more than 4 years.  Another key core price gauge, which excludes food & energy, rose only 0.1%, further supporting the case for a Sep rate cut.  Gold has surprised many observers this year by surging to records despite high interest rates & sticky inflation that pushed out expectations for a Fed pivot.  Prices have been buoyed by strong buying by central banks, haven demand from investors amid geopolitical tensions & purchases by Chinese consumers.  Spot gold traded up 2% at $2418 an ounce, bringing the metal into striking distance of the all-time high $2450.  Treasury yields & the $ fell.

Gold Tops $2,400 as Easing Inflation Bolsters Rate-Cut Optimism

Oil edged higher as traders weighed the Intl Energy Agency's (IEA) estimate that demand growth is slowing against a US gov report showing signs of strengthening fuel consumption after the Fourth of July holiday.  West Texas Intermediate (WTI) bounced between gains & losses during a choppy session before settling 0.6% higher, topping $82 a barrel.  Futures have moved within a roughly $4 range for the past 3 weeks.  Volumes for the commodity have remained muted, coming in below their 100-day moving average, signaling the low liquidity typical of summer trading.  The IEA predicted that global oil demand growth will come in at less than 1M barrels a day this year, partly due to China's post-Covid rebound having run its course.  The agency's bearish tone conflicts with data showing US oil stockpiles fell by 3.44M barrels last week, with gauges of jet fuel & gasoline consumption both rising as the summer travel season continues.  Crude has rallied about 18% this year, supported by OPEC+ supply cutbacks, although relatively muted moves have caused volatility to decline to multi-year lows this month.  While some members of the cartel are continuing to pump above agreed limits, key producer Russia made noticeable reductions in Jun.  WTI for Aug climbed 0.6% to settle at $82.62 a barrel & Brent for Sep settlement rose 0.4% to $85.40 a barrel.

Oil Rises as US Summer Demand Signs Counter Downbeat IEA View

Stock gains picked up pace this week after Fed Chair Jerome Powell suggested that conditions are almost right for the Federal Reserve to start making interest-rate cuts.  Today's inflation report bolstered bets on a cut by Sep, with around 90% of traders expecting such an outcome, according to the CME FedWatch tool.  At the same time negative thinking investors are ready to take gold to new heights & there was profit taking in tech stocks which have had an excellent year, so far.

Markets rise on improved inflation data for June

Dow gained 127, advancers over decliners an impressive 8-1 & NAZ retreated 211.  The MLP index was fractionally higher to the 291s & the REIT index soared 9+ to the 391s on lower interest rates.  Junk bond funds inched higher & Treasuries had heavy buying which sharply reduced yields (more below).  Oil was up chump change in the 82s following recent selling & gold jumped 42 to 2421 (nearing its record highs made earlier this year.

Dow Jones Industrials 

Inflation cooled more than expected in Jun, a welcome sign for the Federal Reserve even as prices remained uncomfortably high for Ms of Americans.  The Labor Dept said that the consumer price index (CPI), a broad measure of how much everyday goods like gasoline, groceries & rent cost, dropped 0.1% in Jun from the previous month, the first monthly decline since May 2020.  But prices remain up 3% from the same time last year.  Both of those figures are lower than the 0.1% monthly increase & 3.1% headline gain forecast.  Another data point that measures underlying inflationary pressures within the economy also moderated last month.  Core prices, which exclude the more volatile measurements of gasoline & food in order to better assess price growth trends, increased 0.1% in Jun.  From the same time last year, the gauge climbed 3.3%, the lowest reading since Apr 2021.  Altogether, the report indicates that inflation is loosening its stranglehold on the US economy, though prices still remain above the Fed's 2% target.  The softer-than-expected report comes as Federal Reserve policymakers look for evidence that high inflation has been successfully tamed as they contemplate when to start cutting interest rates.  Fed Chair Jerome Powell said during congressional testimony this week that more "good" inflation data would bolster the case for rate cuts this year.  "Incoming data for the first quarter of this year did not support such greater confidence. The most recent inflation readings, however, have shown some modest further progress, and more good data would strengthen our confidence that inflation is moving sustainably toward 2 percent," he added.  A 3.8% drop in gas prices last month helped to offset a 0.2% increase in both food & rent costs.  Housing has been one of the biggest drivers of inflation, but there are signs that shelter costs are easing.  Rent costs rose 0.43% for the month, the smallest increase since Aug 2021, & are up 5.2% from the same time last year.  High rents are concerning because higher housing costs most directly & acutely affect household budgets.  Consumers also saw a rise in food prices, which have been one of the most visceral reminders of inflation for many households.  The cost of food rose 0.2% over the course of the month, which included a 0.1% increase in groceries.

Inflation unexpectedly falls in June as Americans struggle with soaring prices

Treasury yields tumbled after the latest inflation data showed a dip last month, suggesting the Federal Reserve could start to lower interest rates this year.   The yield on the 10-year Treasury fell 9 basis points at 4.18% & the 2-year Treasury yield was down 13 basis points at 4.494%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  The Jun consumer price index, which measures the costs for a basket of goods & services, slid 0.1% from the prior month.  That pushed the 12-month rate to 3%, or its lowest level in more than 3 years.  The forecast expected CPI to reflect a 0.1% rise on a monthly basis & 3.1% from a year earlier.  Core CPI, which excludes volatile food & energy prices, rose 0.1 % on a monthly basis & 3.3% from the year-ago period.  The forecast was for increases of 0.2% & 3.4%, respectively.  Investors are hoping an improvement in inflation will mean the Fed can start to ease monetary policy as soon as this fall.  Odds of a Sep rate cut rose to greater than 80% based on fed funds futures trading following the CPI data, according to the CME FedWatch tool.  Traders still see the Fed standing pat at its meeting later this month.  Investors also weighed comments Fed Chair Jerome Powell made on Capitol Hill this week.  While Powell did not give a clear indication of when interest rates could be cut, he said the central bank did not need to wait until the 2% target had been reached before cutting rates.

10-year Treasury yield dives after June CPI unexpectedly decreases

Delta Air Lines (DAL) forecast record revenue for the 3rd qtr thanks to booming summer travel demand, but its projection fell short of estimates as carriers discounted fares after expanding flights.  In the current qtr, DAL expects sales to rise no more than 4%, below the 5.8% growth estimated & it forecast adjusted EPS of $1.70 - $2.00, short of the $2.05 estimate.  The carrier kicked off an airline earnings season marked by packed planes but profits under pressure as costs rise & increased capacity weighs on fares.  The Transportation Security Administration said it screened more than 3M people for the first time on Sun at US airports.  DAL is a standout in the US airline industry as the most profitable carrier, & this report is a sign that competitors, particularly those focused on the oversupplied US air travel market, could struggle this summer.  For the 3 months ended Jun 30, revenue was $15.4B, up 5.4% from last year & shy of estimates.  EPS was $2.01, with operating expenses up 10% from last year.  Adjusting for 1-time items, EPS was $2.36, in line with estimates.  “The second quarter was a really strong performance,” CEO Ed Bastian said.  “What you see happening is the impact in the domestic marketplace to the lower fare discounting that’s been going on this quarter.”  Airfare in Jun was 5.1% lower than a year earlier & 5.7% lower than the month prior, according to today's latest read on consumer prices, which showed easing inflation.  DAL reiterated its full-year EPS forecast of $6-$7  & said it still expects to generate free cash flow of as much as $4B.  The stock dropped 2.82.

Delta shares fall as a glut of flights drives down fares despite high demand

Stocks started lower, but the bulls returned to lift the stock market.  But tech stocks ran into profit taking in what has been a strong year for them.  In addition there is heavy buying in safe haven gold & Treasuries.  There may be more volatility in the PM.

Markets climb on Powell’s closer attention to a cooling job market

Dow rose 429 (session high), advancers over decliners 5-2 & NAZ gained 218 to yet another record.  The MLP index was off 1 to 290 & the REIT index crawled up 1+ to 380.  Junk bond funds continued to be mixed & Treasuries saw more buying which reduced yields.  Oil added almost 1 to the low 82s & gold gained 11 to 2379 (more on both below).

Dow Jones Industrials 

Federal Reserve Chair Jerome Powell said the central bank would make decisions on interest rates "when and as they need to be made" with no consideration to the coming presidential election.  In response to a lawmaker's question about the possibility of the Fed cutting interest rates at its meeting in mid-Sep, less than 2 months before Election Day, Powell said: "Our undertaking is to make decisions when and as they need to be made, based on the data, the incoming data, the evolving outlook and the balance of risks, and not in consideration of other factors, and that would include political factors."  "We'll make those decisions," Powell continued.  "We have a long history of doing that, including during election years, and that is the undertaking we will make. Anything we do will be very well grounded. It's just not appropriate for us to get into the business of thinking about election cycles at all, one way or the other."

Fed's Powell: Will act 'when and as' needed, regardless of election

Signs of a “stagnant late-spring housing market“ emerged in Jun as US home prices declined for the first time this year & purchase mortgage locks fell by 8% year over year.  That's a key takeaway from the Jun 2024 Market Advantage report released by Optimal Blue.  The report, which covers the 20 largest US metro areas, shows that the average home purchase price of $479K in Jun was down about $1500 compared to May.  The volume of locked loans (including purchases & refinances) rose 2% from the prior month when accounting for fewer days of production in Jun.  “Despite an improvement in interest rates, purchase activity was subdued in June,” Brennan O’Connell, director of data solutions at Optimal Blue, said.  However, many homeowners with higher rates — particularly those who closed on their mortgage in the last 12 to 18 months — jumped at the opportunity to refinance, even for a small reduction in monthly payments.  “This behavior speaks to the ongoing inventory and affordability challenges consumers are experiencing. As we look toward the back half of 2024 and the potential for rate relief from the Fed, purchase lock counts will provide insight into if and when production will turn the corner.”  Optimal Blue noted that a pullback in mortgage rates, which ended Jun at 6.938% for 30-year conforming loans, drove a significant increase in refinances.  Rate-&-term refis jumped 39% from May to Jun, while cash-out refi activity was up 11% during the month.  The average loan size in Jun was down slightly to $374K.

Tepid housing market conditions persist: Optimal Blue

1 area of outsized growth for Tesla (TSLA) beyond its car business could be energy.  In its 2nd qtr production & delivery report, TSLA said that it deployed 9.4 GWh (gigawatt hours) of battery energy storage, its highest quarterly amount ever & more than double the amount of battery storage the company deployed in the first qtr.  TSLA's energy storage business, part of Tesla Energy, includes installations as small as Powerwall batteries for the home to massive Megapack storage facilities meant for utilities & municipalities to store large amounts of energy for deployment at peak energy usage times.  While a Powerwall typically holds around 12.2 kilowatt-hours of usable energy, or enough to power a small home for a day, 1 Megapack installation can hold 3.9 megawatt-hours of energy, enough to power 3600 homes for 1 hour, TSLA said.  Though TSLA only booked $1.6B in revenue from its energy storage business in the first qtr, the company reported a healthy $403M in gross profit from the business, good for a gross margin of 24.6%.  TSLA's overall gross profit was $3.7B in Q1, with a gross margin of 17.4%, which was down from 19.3% a year ago.  The drop in gross margin was due to TSLA's EV price cuts, which were meant to spur demand & have been eating into profits over the past year.  TSLA stock rose 93¢.

Tesla's energy business could be its next big growth driver

Gold edged higher as Federal Reserve Chair Jerome Powell told US lawmakers that he can see inflation headed lower, sustaining hopes for a pivot on interest-rates this year.  The precious metal traded near $2380 an ounce after eking out a small gain in the previous session.  Powell again addressed lawmakers today on Capitol Hill, saying that he has some confidence that inflation is headed downward & that the Fed doesn’t need price gains to dip below 2% before cutting rates.  Still, he also stressed that the central bank has more work to do & needs to be more confident about inflation.  Traders will get more data on inflation later this week, with a reading of the consumer price index for Jun to be released tomorrow.  Lower borrowing costs are generally supportive for non-interest bearing bullion.  Gold-backed exchange-traded funds saw inflows for a 2nd consecutive month in Jun, with buying in European & Asian markets offsetting outflows from North America, according to a report from the World Gold Council.  Spot gold traded 0.7% higher at $2379 an ounce, while the Bloomberg Dollar Spot Index was little changed.

Gold Edges Higher as Powell Sees Progress on Inflation Fight

West Texas Intermediate (WTI) crude oil rose following 3-losing sessions as OPEC kept a bullish demand forecast in place & a report showing a larger than expected drop in US inventories last week.  WTI crude for Aug closed up 69¢ to settle $82.10 per barrel, while Sep Brent crude, the global benchmark, was last seen up 48 to $85.14.  In its weekly survey, the Energy Information Administration reported US oil inventories fell by 3.4M barrels per day last week, well more than the consensus estimate for a 1.3M-barrel draw.  Gasoline stocks fell by 2M barrels while distillate inventories rose by 4.9M barrels.  OPEC left its 2024 demand forecast in place in its Jul Monthly Oil Market Report, calling for a rise of 2.2M barrels per day over 2023 levels.  The forecast remains above the expectations of other agencies, with the Energy Information Administration yesterday reiterating its demand-growth outlook of 1.1M bpd this year in its Jul Short-Term Energy Outlook.  Weak growth in China, the #1 oil importer, is checking prices.  The country yesterday reported inflation fell to 0.2% in Jun, under the expectation for a rise of 0.4% poll, showing the country's economy continues to slow.

WTI Oil Closes Higher as U.S. Inventories Dropped Last Week While China's Inflation Slowed in June

The bulls were cheered by Powell's comments & bid stocks higher after his testimony.  Bets on interest rate cuts have helped stocks eke out fresh gains.  Powell hinted the stage is almost set for lowering interest rates from 2-decade highs, pointing to a cooling in inflation & in the jobs market.  He also cautioned that keeping rates elevated for too long could weaken the economy, giving hope to rate-cut-hungry investors.  Meanwhile, Dow has lagged behind other indices recently & it is only back to where it was in late Mar.

Markets edge higher as Powell gives a second day of testimony

Dow went up 70, advances over decliners about 2-1 & NAZ gained 83.  The MLP index slid back 1 to 290 & the REIT index remained steady in the 378s.  Junk bond funds were little changed & Treasuries had marginal buying bringing yields a little lower.  Oil climbed higher to the high 81s & gold advanced 15 to 2383.

Dow Jones Industrials 

The recent run-up in home prices, a staggering increase of more than 40% from pre-pandemic levels, should have current homeowners rushing to refinance.  But for most, pulling that cash out simply costs too much now that interest rates are more than twice what they were just 2 years ago.  Applications to refinance a home dropped last week for the 4th straight week, down 2%, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index.  Last week's results included an adjustment for the July Fourth holiday.  Demand is still 28% higher than it was the same week 1 year ago, when rates were 7 basis points higher.  Homeowners were sitting on a collective $17T in equity at the end of the first qtr of 2024, according to CoreLogic.  In just 1 year, homeowners gained $1.5T, or $28K per borrower.  “Although home equity gains have been significant in recent years, most borrowers do not have much of an incentive to refinance at current rates,” said Joel Kan, an MBA economist.  The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766K or less) decreased last week to 7.00% from 7.03%, with points falling to 0.60 from 0.62 (including the origination fee) for loans with a 20% down payment.  Applications for a mortgage to purchase a home increased 1% for the week but were 13% lower than the same week 1 year ago.  “Purchase activity picked up slightly, driven primarily by increases in FHA and VA applications,” Kan added.  Mortgage rates haven't moved at all so far this week, despite Federal Reserve Chair Jerome Powell's testimony before Congress yesterday.  That is likely to change with new economic data coming tomorrow with the latest read on the consumer price index.  “Fed Chair Powell reiterated the same messages heard from multiple Fed speakers,” wrote Matthew Graham, chief operating officer at Mortgage News Daily.  “After CPI comes out, [rate] movement is all but guaranteed, for better or worse.”

Mortgage refinance demand drops despite homeowners sitting on huge equity

Walmart (WMT), a Dow stock, will open 5 automated distribution centers for fresh food across the country, as the retailer chases efficiency & its online grocery business grows.  The discounter's new facilities are roughly 700K square feet on average.  Chilled & frozen areas have automation that stores & retrieves perishable items, such as strawberries & frozen chicken nuggets that are later sold at stores or added to customers' e-commerce orders.  WMT is the nation's largest grocer, but it is modernizing its supply chain to keep up with customers who are increasingly picking up orders in the parking lot or getting groceries delivered to their doors.  Store pickup & delivery drove it 22% e-commerce gains in the US in its most recent qtr.  The retailer has been automating supply chain facilities across the country, including distribution centers that handle shelf-stable items & fulfillment centers that help pack & ship online orders.  Automation, along with higher-margin businesses like advertising, is a key reason why CEO Doug McMillon said in Apr 2023 that WMT would grow its profits faster than sales over the next 5 years.  Dave Guggina, exec VP of its supply chain, said the automated facilities give the company a more precise picture of its inventory & allow it to get groceries to stores faster.  “We know what we own, in what quantity and where it is, all in near real time,” he said.  “And we know that at a level of proficiency that is significantly improved than what we’ve been able to achieve with manual processes or legacy software.”  The stock slid back 11¢.

Walmart is opening five automated distribution centers as it tries to keep its grocery dominance

There is a "historic surge" of corp bankruptcies underway in the US, as debt-saddled companies struggle to adjust to the new era of high interest rates.  New figures published by S&P Global Intelligence show that 75 companies filed for bankruptcy in Jun, the highest number recorded in a single month since early 2020 at the height of the COVID-19 pandemic.  That pushed this year's total number of bankruptcies so far to 346, which is notably higher than comparable levels seen in the past 13 years.  Before this, the highest ½-year figure recorded was in 2010, with 437 companies filing for bankruptcy in Jan - Jun.  The S&P report blamed high interest rates, supply chain issues & slowing consumer spending for the spike in bankruptcies this year.  The Federal Reserve raised interest rates sharply in 2022 & 2023 to the highest level since 2001 in a bid to crush high inflation, bringing to an end more than a decade of ultra-easy money.  Officials are now grappling with when they should take their foot off the brake amid signs that economic growth is slowing & inflation is once again falling.  Most investors expect the Fed to begin cutting rates in Sep or Nov & are penciling in just 1 or 2 reductions this year, a dramatic shift from the start of the year, when they anticipated 6 rate cuts beginning as soon as Mar.  Even then, rates will likely remain elevated.  Some economists have called on the central bank to cut rates sooner, citing concerns that high interest rates pose a risk to the financial system.  "The economy has weathered the Fed’s higher-for-longer strategy admirably well, but there is a mounting threat that the ongoing pressure will expose fault lines in the financial system," Moody's chief economist Mark Zandi wrote.  "As last year’s banking crisis showed, the relentless strain of high rates can cause parts of the financial system to buckle in ways that are difficult to predict and control."  Bankruptcies started to rise notably in Apr as companies continued to "feel the burden of high interest rates," & as it dawned on many businesses that rates would likely remain at peak levels for some time.

Companies are going bankrupt at the fastest pace since 2020: A 'historic surge'

Chair Jerome Powell is back on Capitol Hill to testify before the House Financial Services Committee on US monetary policy.  Stock averages are holding near all-time highs as his remarks to the Senate buoyed rate-cut hopes.  Yesterday, Powell hinted the stage is almost set for lowering interest rates from 2-decade highs, pointing to cooling in inflation & the jobs market.  He also cautioned that keeping rates elevated for too long could weaken the economy, giving hope to rate-cut-hungry investors.  At the same time, nervous investors are buying gold.

Markets held near records after Powell gave testimony

Dow dropped 52, decliners over advancers 3-2 & NAZ was up 25.  The MLP index remained near 291 & the REIT index hardly budged in the 378s.  Junk bond funds crawler higher & Treasuries continued to be sold which took yields a little higher.  Oil eased fractionally lower to the 81s & gold rose 7 to 2370 (more on both below).

Dow Jones Industrials 

The US job market is slowly stabilizing, as shown by the 206K jobs added in Jun, according to the Bureau of Labor Statistics.  The industries driving this growth include gov, health care, social assistance & construction.  Although more jobs were added, unemployment did increase, but barely, to 4.1%.  Last month, the unemployment rate sat at 4%, so the increase was minimal month to month.  The unemployment rate is currently higher than it was last year, when the jobless rate was 3.6%.  Gov jobs led the charge for job growth, adding 70K jobs in Jun.  This is much higher than the average monthly gain of 49K gov jobs the US has seen in the last 12 months.  Local govs & state govs added the most jobs over all at 34K & 26K respectively.  The health care industry also added a substantial number of jobs at 49K.  However, this is lower than the average monthly gain of 64K seen in the last year.  Hospitals & ambulatory services added the most jobs in the industry, both increasing by 22K.  Another public service sector, social assistance, added 34K jobs in Jun, mostly in individual family services.  This addition is also larger than the average for the last 12 months, which was 22K additional jobs.  Construction jobs grew in Jun as well, with 27K new jobs.  The industries that lost jobs were retail, dropping by 9K positions & furniture retailers also lost about 6K jobs.  Wages for many industries are up across the board, on average.  Over the last year, hourly wages have risen by 3.9%.  The general consumer outlook for the economy is back on the rise after months of decline. The Conference Board Consumer Confidence Index rose in May to 102, up from 97.5.  A score of over 100 tends to signal a strong economy.  The Present Situation Index, which measures consumer opinions on current business market conditions, also increased.  The index rose to 143.1 in May from 140.6 in Apr, indicating that there's a more positive view of the current labor market.  "Consumers' assessment of current business conditions was slightly less positive than last month.  However, the strong labor market continued to bolster consumers' overall assessment of the present situation," Dana M Peterson, chief economist at The Conference Board said.  "Views of current labor market conditions improved in May, as fewer respondents said jobs were 'hard to get,' which outweighed a slight decline in the number who said jobs were 'plentiful.' Looking ahead, fewer consumers expected deterioration in future business conditions, job availability, and income, resulting in an increase in the Expectation Index," Peterson added.  While the economic outlook is generally positive these days, the possibility of a recession still remains a major concern for many consumers.

Economic optimism rises as U.S. job market adds 206,000 jobs

Boeing (BA), a Dow stock, delivered more commercial jets in Jun than in any other month this year, but the total of 44 planes represented a 27% drop on an annual basis amid a whirlwind of legal & production challenges.  The company has pledged to expand production by the end of the year, after wrestling with supply chain snags & operating a slower assembly line since a Jan 5 mid-air blowout of a door plug on a 737 MAX 9 jet that heightened regulatory scrutiny.  On Sun, the Justice Dept said BA agreed to plead guilty to a criminal fraud conspiracy charge linked to 2 737 MAX fatal crashes in 2018 & 2019, raising questions about the planemaker's ability to secure gov contracts.  The company handed over 5 777 freighters, including 2 of the jets to Air China, confirming a report that widebody deliveries to China have resumed after being halted this spring due to a Chinese regulatory review.  BA also reported 11 orders in Jun for 777 freighters, the 3rd-highest month ever for the model, out of a total of 14 gross orders for the month.  After adjustments to reflect the backlog, BA reported adjusted net orders for the month of a negative 104.  That brought the gross order total so far this year to 156.  After removing cancellations & conversions, BA posted a net total of 115 orders since the start of 2024.  Following further accounting adjustments, BA reported adjusted net orders of 26 airplanes so far this year.  BA delivered 175 planes YTD, trailing its European rival Airbus which delivered 323 airplanes in the first ½.  The world's largest planemaker also said this week that it had won 327 gross orders in the first 6 months of 2024, or a net total of 310 after cancellations.  The stock dropped 2.57.

Boeing deliveries drop 27% in June year-on-year

House Dems convened at their national party headquarters in DC for a pivotal closed-door meeting, as members weigh whether to continue backing Pres Biden's reelection bid or seek his withdrawal from the race.  Lawmakers had no access to their phones during the meeting, which marked the first time the full caucus has assembled since Biden's disastrous debate against former Pres's Trump in Jun sparked a full-blown campaign crisis.  Many members refused to answer questions as they trickled out of the building after the meeting today.  "I promised I wouldn't talk at all about what was said," Rep Mike Quigley said.  When a reporter asked Rep Steve Cohen if Dems were on the same page, Cohen replied, "No ... we're not even in the same book."  Cohen also said that some members in the caucus meeting said that Biden should withdraw.  A spokesman for Cohen did not immediately respond to a  request to confirm that comment.  Biden's feeble, raspy showing in the debate set off panic among Dems, prompting some top donors, pundits & allies to openly urge Biden, 81, to abandon his bid for another 4 years in office.  That growing chorus includes at least 8 sitting House Dems.  Rep Jerry Nadler, who also called on Biden to drop out, said that he now backs the incumbent.  "I'm fully supportive of him. I plan to campaign for him. And it's essential that he wins," Nadler said.  But Rep Lori Trahan expressed deep reservations about Biden's continued candidacy.  "Since the debate, I have met with fellow Biden voters in Massachusetts who have real concerns about the President's ability to beat Donald Trump. I share those concerns," Trahan, the co-chair of the Dem Policy & Communications Committee, said.  "While President Biden has made clear he feels he is the best candidate to win this election, nothing that has happened over the past twelve days suggests that voters see things the same way," Trahan said.  "A second Trump presidency will do irreparable damage to women and to our country, and President Biden must act with urgency to restore Americans' confidence so we win in November."

Democrats hold pivotal meetings on Biden, as divisions deepen after Trump debate

Gold prices eked out gains despite a stronger $ & higher bond yields, as investors looked forward to the US Jun inflation data due later this week for more clarity on the US interest rate path.  Spot gold rose 0.2% to $2363 per ounce after dropping more than 1% in the previous session.  US gold futures settled about 0.2% higher to $2367.  The $ was up about 0.2% against its rivals, making gold more expensive for other currency holders, while benchmark 10-year Treasury yields inched higher.  There's an expectation that the Federal Reserve is more likely to start cutting rates as early as Sep, which is contributing positively to current market conditions.  Recent US economic data pointed to a slackening labor market, cementing expectations that the central bank is on course to start cutting interest rates soon.  Traders currently see about a 75% chance of a rate cut in Sep, according to the CME Group's FedWatch Tool.  Non-yielding bullion's appeal tends to grow when interest rates are lower.

Gold ticks higher with focus on US inflation data

West Texas Intermediate (WTI) crude oil fell for a 3rd-straight session as demand concerns continue while Hurricane Beryl passed over the Texas refining hub with little damage to refineries & ports.  WTI crude oil for Aug closed down 92¢ to settle at $81.41 per barrel, while Sepr Brent crude was last seen down 98¢ to $84.77.  The drop comes after Beryl hit the Houston area at Category 1 strength.  While refineries & ports were shut as the storm passed over, there was little damage to the region's cluster of refineries, with a report that most of the facilities have begun restarting operations.  The shutdowns had little affect on oil or refined product pricing.  Demand concerns continue despite last week's 12.2M barrel fall in US oil inventories.  Even with the bullish drop, the refining sector remains weak, with a warning due to weak refining margins & the potential scaling back of refining operations due to weak demand.

WTI Crude Oil Weakens Again as Beryl Leaves Texas Refineries Undamaged

There was a modest midday rally, but that did not last.  The rally in the stock market is tired & all the confusion by the Dems on the presidential race is keeping some stock buyers on the sidelines.  Many are wondering who is in charge & who is making decisions affecting the economy.  Also, the future of rate cuts is not clear to everybody.

Markets slump as Powell highlights risk of leaving rates high for too long

Dow declined 108, decliners over advancers 1.8 to 1 & NAZ slid back 29.  The MLP index stayed near 291 & the REIT index slid back 1+ to the 376s.  Junk bond funds inched higher & Treasuries saw selling which raised yields (but still at high levels), more below.  Oil was off pennies in the low 82s & gold retreated 5 to 2358.

Dow Jones Industrials 

Federal Reserve Chair Jerome Powell expressed concern that holding interest rates too high for too long could jeopardize economic growth.  Setting the stage for a 2-day appearance on Capitol Hill this week, he said the economy remains strong as does the labor market, despite some recent cooling.  Powell cited some easing in inflation, which he said policymakers stay resolute in bringing down to their 2% goal.  “At the same time, in light of the progress made both in lowering inflation and in cooling the labor market over the past two years, elevated inflation is not the only risk we face,” he added.  “Reducing policy restraint too late or too little could unduly weaken economic activity and employment.”  The commentary coincides with the approaching 1-year anniversary of the last time the Federal Open Market Committee raised benchmark interest rates.  The Fed's overnight borrowing rate currently sits in a rage of 5.25%-5.50%, the highest level in 23 years & the product of 11 consecutive hikes after inflation hit its highest level since the early 1980s.  Markets expect the Fed to begin cutting rates in Sep & likely following up with another qtr percentage point reduction by the end of the year.  FOMC members at their Jun meeting, however, indicated just 1 cut.  In recent days, Powell & his colleagues have indicated that inflation data has been somewhat encouraging after a surprise jump to start the year.  Inflation as judged by the Fed's preferred personal consumption expenditures price index was at 2.6% in May after peaking above 7% in Jun 2022.  “After a lack of progress toward our 2 percent inflation objective in the early part of this year, the most recent monthly readings have shown modest further progress,” Powell said.  “More good data would strengthen our confidence that inflation is moving sustainably toward 2 percent.”

Fed Chair Powell says holding rates high for too long could jeopardize economic growth

Treasury yields remained higher as investors digested comments from Federal Reserve Chair Jerome Powell.  The yield on the 10-year Treasury was up by over 2 basis points at 4.30% & the 2-year Treasury yield was slightly higher at 4.64%.  Yields & prices have an inverted relationship & 1 basis point equals 0.01%.  Before the Senate Banking Committee, Powell teased in his testimony that the central bank was thinking about getting less restrictive with its monetary policy.  “Reducing policy restraint too late or too little could unduly weaken economic activity and employment,” Powell said.  “More good data would strengthen our confidence that inflation is moving sustainably toward 2 percent.”  Bond yields have been falling in recent months with the benchmark 10-year rate declining nearly 40 basis points since May.  Markets expect the Fed to begin cutting rates in Sep & likely following up with another qtr percentage point reduction by the end of the year.  CME Group's FedWatch tool showed that trader were last pricing in an around 77% chance of rates being cut in Sep.

Treasury yields bounce even as Powell notes progress on inflation

Alaska's largest oil company has filed a lawsuit against the Dept of the Interior, asking a judge to toss out new rules imposed by the Biden administration that they say "thwart and prevent the production of petroleum" across Ms of acres of an Alaskan reserve.  The recent filing from ConocoPhillips Alaska in US District Court comes months after the regulations surrounding the National Petroleum Reserve in Alaska (NPR-A) were set in place by the Bureau of Land Management (BLM).  The federal agency describes the reserve as a "vast, approximately 23-million-acre area on Alaska's North Slope" that was set aside by Pres Harding in 1923 as an "emergency oil supply for the U.S. Navy" before its administration was transferred into BLM's hands about 5 decades later.  ConocoPhillips’ is arguing in the lawsuit that "BLM issued final regulations that drastically and fundamentally change the priorities, substantive standards, and processes for management and administration of the Petroleum Reserve."  "In promulgating the Rules, BLM has attempted to override and evade clear Congressional mandates, changing the management priority for the Petroleum Reserve from expeditious leasing and production to meet the Nation’s energy needs to creating ‘maximum protection’ of surface values and prohibiting development activities," the lawsuit says.  "BLM ignored Congress’ direction and made a unilateral policy choice that 13 million acres of the Petroleum Reserve are ‘too special to develop’ for oil and gas and should instead be preserved as wilderness areas, and gave itself unlimited authority to expand those ‘too special’ 13 million acres at will."  ConocoPhillips (COP), which describes itself in the lawsuit as Alaska's largest oil producer & one that holds "1.8 million acres of state and federal leases in Alaska, including 1 million net undeveloped acres as of year-end 2023," is now asking a judge to vacate the rules in their entirety.  The stock fell 40¢.

ConocoPhillips sues Biden administration over Alaska drilling restrictions

Popular stock averages continue to be a record or near record levels.  However Dow is just under its record & the longer term trend has been flattish while interest rates continue in elevated territory & gold is not far from its latest records.  Now uncertainty about the presidential election adds 1 more unknown to the equation.  Investors have a lot to think about.

Markets meander looking for direction ahead of inflation data

Dow dropped 31, advancers over decliners 5-4 & NAZ finished up 50.  The MLP index rose 1+ to the 291s, & the REIT index crawled up 1+ to the 378s.  Junk bond funds fluctuated  & Treasuries were flattish, keeping yields close to even.  Oil fell 1 to the low 82s & gold sank 35 to 2363 (more on both below).

Dow Jones Industrials 

The cost of buying a new house just hit another all-time high.  Findings from Redfin show the median US home sale price soared to $398K in Jun, a nearly 5% increase from a year earlier.  That marks the highest level on record & the biggest annual increase since Mar.  The monthly mortgage payment at that price, when accounting for the 6.86% median interest rate for a 30-year mortgage, is now $2749.  That is roughly $88 shy of Apr's record, thanks to a slight drop in mortgage rates.  "High mortgage rates and record-setting home prices have made affordability the biggest challenge in the housing market in 2024," said Lisa Sturtevant, Bright MLS chief economist.  "Even as more inventory comes onto the market, more buyers are being priced out in markets across the U.S. Some buyers are going to wait for rates to come down in the second half of the year which means that it could be a relatively slow summer for home sales."  There are a number of driving forces behind the affordability crisis.  Years of underbuilding fueled a shortage of homes in the country, a problem that was later exacerbated by the rapid rise in mortgage rates & expensive construction materials.  Higher mortgage rates over the past 3 years have also created a "golden handcuff" effect in the housing market.  Sellers who locked in a record-low mortgage rate of 3% or less during the pandemic began have been reluctant to sell, limiting supply further & leaving few options for eager would-be buyers.  Mortgage buyer Freddie Mac said that the average rate on a 30-year loan this week inched higher to 6.95%.  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%.  Mortgage buyer Freddie Mac said that the average rate on a 30-year loan this week inched higher to 6.95%.  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%.  Available home supply remains down a stunning 34.3% from the typical amount before the COVID-19 pandemic began in early 2020, according to a separate report published by Realtor.com.  Most homeowners say they are nearly twice as willing to sell their home if their mortgage rate is 5% or higher, according to a Zillow survey.  Currently, about 80% of mortgage holders have a rate below 5%.

US home prices just hit another all-time high

As Americans' political focus turns towards this fall's elections, the winner of the presidential race will be confronted with a national debt that's on pace to reach a record-setting level in the next 4 years, as well as looming deadlines that may force their hand on fiscal policy.  A recent update to the federal gov's long-term budget outlook by the nonpartisan Congressional Budget Office (CBO) found that budget deficits are projected to widen from about $1.9T this year to more than $2T annually starting in 2030, before nearing $2.9T in 2034.  In that period, the debt held by the public will rise from more than $28T this year to over $50T in 2034.  When compared to the size of the US economy in terms of gross domestic product, debt held by the public is projected to rise from 99% of GDP this year to 106% of GDP in 2027 in the 2nd ½ of the next presidential term, which would top a record set in 1946 amid the post-World War II demobilization.  Debt to GDP is projected to reach 122% in 2034 & is on track to continue to rise to 166% of GDP in 2054 & higher after that date.  As the debt grows, the risk of the US gov facing a debt crisis caused by investors losing confidence in its ability to repay its debt also rises.  That would likely cause interest rates to increase, making it more costly to service the existing debt without defaulting.  Although it's unclear what level of debt is a tipping point, some estimates identified by the Congressional Research Service put debt-to-GDP ratios of 80-200% & beyond in the danger zone for a crisis.  The Penn-Wharton Budget Model in Oct noted that the "U.S. debt held by the public cannot exceed about 200 percent of GDP even under today's generally favorable market conditions."  "We are not now at an immediate risk of a fiscal crisis, but the rising national debt makes one more likely, and also makes us less prepared to address other unexpected future crises," the nonpartisan Peterson Foundation said.  With the country facing a bleak budgetary outlook, a series of fiscal policy deadlines & changes slated to take effect in 2025 offer lawmakers & the public an opportunity to discuss reforms to alter that trajectory.  The first of those deadlines will arrive on Jan 1 when the debt limit, which was suspended in Jun 2023, is reactivated.  That will prompt the Treasury Dept to use "extraordinary measures" to stave off default for a period of several months while lawmakers in Congress work on the next increase or suspension of the debt limit.

US national debt to surge to record levels without reform, raising prospect of debt crisis

Boeing (BA), a Dow stock, has agreed to plead guilty to criminal fraud tied to the fatal 737 Max crashes, a decision that brands the US aerospace giant a felon but allows it to avoid trial while it tries to turn the page from safety & manufacturing crises.  Under the deal, BA would face a fine of up to $487M, though the Justice Dept recommended that the court credit BA with ½ that amount it paid under a previous agreement, resulting in a fine of $243M.  The plea deal requires the approval of a federal judge to take effect.  If the deal is accepted, it could complicate BA's ability to sell products to the US gov as a felon, though the company could seek waivers.  About 32% of BA's nearly $78B in revenue last year came from its defense, space & security unit.  An independent compliance monitor would also be installed to oversee compliance at BA for 3 years during a probationary period.   BA would also have to invest at least $455M in compliance & safety programs.  BA also agreed for its board of directors to meet with crash victims' family members.  The Justice Dept unveiled the deal yesterday, months after US prosecutors said the aerospace giant violated a 2021 settlement that shielded it from prosecution for 3 years.  The plea deal offer forced BA to decide between a guilty plea & the attached terms, or going to trial, just as the company was seeking to turn a corner in its manufacturing & safety crises, pick a new CEO & acquire its fuselage maker, Spirit AeroSystems (SPR).  “We can confirm that we have reached an agreement in principle on terms of a resolution with the Justice Dept, subject to the memorialization and approval of specific terms,” BA said.  BA stock edged up 1.02.

Boeing to plead guilty to criminal fraud charge stemming from 737 Max crashes

Gold prices fell more than 1%, hurt by a risk-on rally in equities & profit-taking by investors after a sharp rally in the previous session over expectations that the Federal Reserve could cut interest rates in Sep.  Spot gold was down 1.4% to $2357 per ounce after rising to its highest level since May 22 on Fri.  US gold futures settled 1.4% lower to $2363.  Data last week pointed to a slackening labor market keeping the US central bank on course to start cutting interest rates soon.  Markets are currently pricing in a 71% chance of the Fed cutting interest rates in Sep & another cut in Dec.  Investors this week will be focused on Fed Chair Jerome Powell's semi-annual Congressional testimony, comments from a series of Fed officials & US inflation data due on Thurs.  Elsewhere, top consumer China's central bank refrained from gold purchases to its reserves for a 2nd consecutive month in Jun.

Gold drops more than 1% as risk appetite grows

West Texas Intermediate (WTI) crude oil closed lower, falling for a 2nd day on lower geopolitical risk as Iran elected a more moderate pres amid ceasefire talks between Israel & Hamas, while Hurricane Beryl made landfall in Texas, closing export facilities.  WTI crude for Aug closed down 83¢ to settle at $82.33 per barrel, while Sep Brent crude, the global benchmark, was last seen down 74¢ to $85.80.  Iran elected reformist Masoud Pezeshkian as its pres, who looks to improve the country's relationship with the West & bring an end to sanctions, though he is expected to face opposition from the military & religious authorities.  As well, ceasefire talks to end the 9-month war between Israel & the Hamas militant group, moderated by Egypt & Qatar, are continuing.  Hurricane Beryl made landfall on Texas' southern coast at Category 1 strength with heavy rain & 75 mile per hour winds, shuttering some oil-export facilities near Houston.

WTI Oil Weaken for a Second Session as Geopolitical Risk Eases and Hurricane Beryl Hits Texas

Dow was up about 300 in the first hour of trading, but that enthusiasm faded fast & Dow remained near even for the  rest of the session.  Uncertainty about rate cuts is a very dark cloud hanging over the stock market.  The new pres in Iran is getting a lot of attention since he's labeled as a "reformer."  But he is only #2.  The real #1 is 85 & in poor health.  But he is in charge & at his age of 85 is not interested in changes.  Dow remains flattish in recent months (see chart above).

Markets nudged up ahead of inflation data and earnings

Dow went up 55, advancers over decliners better than 3-2 & NAZ added 58.  The MLP index edged up 1 to the 291s & the REIT index was steady in the 377s.  Junk bond funds inched higher & Treasuries had limited selling which allowed yields to ease higher (more below).  Oil slid back into the 82s as Israel-Hamas cease-fire talks ease supply worries (more below) & gold fell 16 to 2381.

Dow Jones Industrials 

Treasury yields were higher as investors looked ahead to key economic data due throughout the week, including fresh inflation insights.  The yield on the 10-year Treasury was up by less than 1 basis point at 4.281% & the 2-year Treasury yield also climbed more than 2 basis points to 4.62%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Data released Fri showed that nonfarm payrolls increased by 206K in Jun, more than the forecast of 200K.  Jun's jobs report also showed that the unemployment rate unexpectedly rose to 4.1% rather than holding steady at 4% as expected.  The data comes at a time when uncertainty about when interest rate cuts could begin remains widespread.  Minutes from the Fed's latest meeting last week showed that policymakers are looking for more evidence that inflation is easing before deciding to move rates.  Jun's consumer price index is slated for this week & could provide clues about when the first rate cut could come, depending on whether the data suggests inflation is easing back to the Fed's 2% target.  The producer price index, which tracks wholesale inflation, is also due this week & Federal Chair Jerome Powell is expected to give testimony about expectations for the economy & monetary policy before Congress.

Treasury yields rise as investors look to inflation data due in week ahead

Record summer air travel demand isn't translating to record US airline profits.  Carriers will have to answer for that disconnect when they report quarterly results this month.  Some airlines have forecast record demand, & in some cases, revenue.  Yesterday, the Transportation Security Administration screened more than 3M people, a 1-day record.  But higher labor & other costs have eaten into airlines' bottom lines.  To adapt to slower demand growth & other challenges, some carriers have slowed if not halted hiring compared with hiring sprees when they rebuilt after the pandemic.  And some airlines are facing delays of new, more fuel-efficient aircraft from Airbus & Boeing (BA), a Dow stock, at the same time that a Pratt & Whitney engine recall has grounded dozens of jets.  Yet US airlines have increased capacity, flying about 6% more seats in Jul than they did in Jul 2023, according to aviation data firm OAG.  The expansion is keeping airfare in check  stocks in the sector have fallen behind the broader market.  The NYSE Arca Airline Index, which tracks 16 mostly US airlines, is down almost 19% this year, while the S&P 500 has advanced more than 16%.  BA went up 3.84.

Air travel demand is breaking records. Airline profits are not

US crude oil futures fell nearly 1% as traders monitored the impact of Hurricane Beryl on Gulf Coast refining, production & export infrastructure.  Beryl made landfall near Matagorda, Texas, as a Category 1 hurricane with maximum sustained winds of 80 miles per hour, according to the National Hurricane Center.  Matagorda is about 150 miles northeast of Corpus Christi, a leading crude export facility in the US.  US crude oil closed lower on Fri while still booking a 4th consecutive weekly gain, as traders took advantage of recent prices after the benchmark touched a 2-month high of $84.52 per barrel.  West Texas Intermediate Aug contract was $82.51 down 65¢ (0.8%), & YTD US oil gained 15.1%.  Brent Sep contract was $86.02 per barrel, down 52¢ (0.6%) & YTD the global benchmark is ahead 11.6%.  The storm is not expected to affect either supply or price to any significant degree.

U.S. crude oil prices fall nearly 1% as market tracks path of Hurricane Beryl

Powell's comment to Congress on Wed will be followed by the Jun inflation data.  In addition new govs in UK & France along with ceasefire talks in the Mideast will be watched by investors.