Markets slump after jobs data muddies rate cut outlook

Dow dropped 410, decliners over advancers better than 3-1 & NAZ retreated 436.  The MLP index fell 2+ to the 279s & the REIT index was off about 1 to the 426s.  Junk bond funds were mixed & Treasuries had limited buying which brought lower yields.  Oil was down 1+ to the 67s & gold dropped 18 to 2525 (more on both below).

Dow Jones Industrials 

Federal Reserve Governor Christopher Waller backed an interest rate cut at the upcoming central bank policy meeting in less than 2 weeks & indicated he'd be open to a substantial reduction if necessary.  “Considering the achieved and continuing progress on inflation and moderation in the labor market, I believe the time has come to lower the target range for the federal funds rate at our upcoming meeting,” Waller said.  Other policymakers recently have advocated easing policy soon, but this is 1 of the clearest indications it will happen at the Sep 17-18 Federal Open Market Committee meeting.  Waller repeated verbiage that Fed Chair Jerome Powell used in late Aug, that the “time has come” for adjustments to monetary policy.  “Determining the pace of rate cuts and ultimately the total reduction in the policy rate are decisions that lie in the future,” Waller added.  He noted that he is “open-minded about the size and pace of cuts” & said, “If the data suggests the need for larger cuts, then I will support that as well.”  His remarks followed a weaker-than-expected nonfarm payrolls report today that added to the belief that the pace of hiring is weakening.  The Labor Dept reported job growth of 142K, higher than Jul but still below the 161K forecast.  Waller did not specify how much he thinks the Fed should cut or how frequently.  But he said he is open to the possibility that it may need to be aggressive in keeping the labor market afloat as inflation moderates toward the central bank’s 2% goal.  He noted that if the labor market deteriorates more quickly than expected, the Fed should react with larger cuts, which he said would lead to “a greater likelihood of achieving a soft landing.”  “Furthermore, I do not expect this first cut to be the last. With inflation and employment near our longer-run goals and the labor market moderating, it is likely that a series of reductions will be appropriate,” he added.

Fed Governor Waller backs interest rate cut at September meeting, open to larger move

The supply of homes for sale is still low by historical standards, but it is rising quickly.  Nationwide, active listings in Aug were up 36% compared with the same month last year, according to a new report from Realtor.com.  That was the 10th straight month of annual growth.  Supply is still, however, 26% lower than in Aug 2019, pre-pandemic.  As inventory grows, sellers are pulling back.  There were fewer new listings in Aug (-1%) than there were the year before.  The growth in supply is due to the fact that homes are sitting on the market longer.  “This August, as the number of homes on the market continues to climb, price cuts are more common, asking prices are moderating, and homes are taking longer to sell,” wrote Danielle Hale, chief economist at Realtor.com, in a release.  “The widely anticipated Fed rate cut has already ushered in lower mortgage rates, but it seems that some buyers and sellers are waiting for additional declines.”  That can be seen in weekly mortgage data.  Applications for loans to buy a home are down about 4% compared with this time last year, according to the Mortgage Bankers Association.  This, even though the average rate on the 30-year fixed mortgage is about 75 basis points lower now than it was then.  While supply is increasing in most cities, some are seeing huge gains. Tampa, Florida’s inventory is up more than 90% compared with a year ago.  San Diego is up 80%, Miami is up 72%, Seattle is up 69% & Denver is up 67%.  More supply is causing homes to sit for sale longer.  The typical home spent 53 days on the market in Aug, an increase of 7 days from a year ago & the slowest Aug pace in 5 years.  “We have found that the market slows by about one day for every 5.5 percentage point increase in the year-over-year number of active listings,” said Ralph McLaughlin, senior economist at Realtor.com.  “Given the rapid growth in inventory we’re seeing now, that can mean changes in some markets of up to 15-20 more days on the market than last year.”  More supply & longer selling times are finally translating into lower prices.  The share of homes with price reductions rose in Aug to 19%, up 3 percentage points from the prior Aug.  The median list price was down 1.3% year over year.  Part of that is due to the mix of homes on the market, as more smaller homes are being listed.  Prices are still 36% higher than Aug 2019.

Home listings are up more than 60% in some cities

Broadcom's (AVGO) shares sold off, after the chipmaker's tepid revenue forecast spooked investors betting on robust demand for AI chips to drive strong growth.  Chipmakers are bearing the brunt of lofty expectations after a months-long rally in the shares of semiconductor firms, as investors bet heavily on the hardware that supports generative AI technology.  AVGO posted big declines in revenues from its broadband & non-AI networking divisions, while a hike in its forecast for AI chip sales failed to impress growth-hungry investors who have driven a more than 35% increase in its shares so far this year.  The company increased its sales forecast for AI chips by $1B for the fiscal year ending Oct to $12B, in line with widespread expectations.  Artificial intelligence-linked chips are still a bright spot for the company, as Big Tech invests in the datacenter infrastructure necessary to move around the hoards of data used by AI models.  However, its custom AI chip business could see lumpy growth due to its dependence on a limited number of customers spending large amounts of capital.  Revenue from its semiconductor segment, which supplies products for data centers & networking, grew 5% year-on-year in the qtr ending Jul, but just 1% from the previous qtr.  The stock sank 15.83 (10%).

Broadcom shares slump as revenue target disappoints investors hoping for big AI boost

Gold prices eased, retreating from near-record levels reached earlier in the session, after mixed US jobs data cast doubts on the scale of interest-rate cut from the Federal Reserve later this month.  Spot gold fell 0.8% to $2495 per ounce, having hit its highest since Aug 20, when gold last scaled a record peak.  US gold futures settled 0.7% lower at $2524.  A Labor Dept report showed non-farm payrolls rose by 142K in Aug, compared with estimates of 160K.  Jul numbers were also revised down to 89K.  However, the unemployment rate stood at 4.2%, in line with expectations, but down from 4.3% a month earlier.  Traders currently see a 73% chance of a 25-basis-point reduction by the central bank this month & a 27% chance of a 50-bp cut, according to the CME FedWatch tool.  Fed New York Pres John Williams said lowering rates soon will be about helping keep the job market balanced.  Federal Reserve Governor Christopher Waller also said "the time has come" for the central bank to begin a series of interest rate cuts, adding that he is open-minded about the size & pace of those reductions.  Lower interest rates reduce the opportunity cost of holding the zero-yield bullion.

Gold Drops from Near-Record Level as US Jobs Data Blurs Rate Outlook

Oil posted its biggest weekly drop in 11 months as a weak US jobs report added to concerns about tepid demand in the world's largest consumer of crude.  West Texas Intermediate fell 2.1% to settle at $67.67 a barrel, cementing the biggest weekly plunge since Oct 2023.  While the US jobs data increased speculation that the Fed may make a super-sized interest rate cut, it also bolstered the narrative of flagging oil consumption that has weighed on crude prices for weeks.  Recent moves to restrict supplies have failed to arrest crude's decline.  While the OPEC+ coalition this week scrapped a plan to boost output by 180K barrels a day in Oct & Nov, a longer-term plan to revive 2.2M barrels a day over the course of a year remained in place, with the completion date pushed back 2 months to Dec 2025.  Brent futures have trended lower since early Jul, with weakness in the economies of China & the US, the top 2 oil consumers, stoking fears about demand.  Crude production in the world's largest economy has also steadily risen in recent years, adding supply pressure to global balances.  The upshot is that even the OPEC+ delay & an almost 7M-barrel weekly drop in US crude inventories have failed to significantly push up oil prices.  Next week's monthly market outlooks from OPEC, the Energy Information Administration & the Intl Energy Agency will be closely watched.  WTI for Oct fell 2.1% to settle at $67.67 a barrel & Brent for Nov slid 2.2% to settle at $71.06.

Oil Sinks as Weak US Jobs Report Adds to Concerns About Demand

The stock market began the month with a very ugly week with the Dow dropping a big 1218.   Tech stocks after leading the rally this year, also led the decline when AI stocks lost their sex appeal in recent weeks.  When Fed officials talk about interest rate cuts is being ignored, stocks (risk investments) are in trouble.  The Fed meeting will take on major importance in a couple of weeks.

Markets tumble after a disappointing jobs report

Dow dropped 271, decliners over advancers 5-2 & NAZ declined 378.  The MLP index was down about 1 to 281 & the REIT index was off 2+ to the 424s.  Junk bond funds were little changed & Treasuries saw more buying which reduced yields (see below).  Oil was off 1+, falling to the high 67s, & gold pulled back 7 to 2536.

Dow Jones Industrials

US job growth picked up in Aug but missed expectations, while the unemployment rate was little changed.  The Dept of Labor reported that employers added 142K jobs in Aug, compared to the 160K gain that was projected.  The unemployment rate also dipped slightly to 4.2%, in line with expectations, after it had unexpectedly risen to 4.3% in Jul, which was the highest level for the jobless rate since Oct 2021.  The number of jobs added in the prior 2 months were both revised downward, with job creation in Jun revised down by 61K from a gain of 179K to 118K, while Jul was revised down by 25K from 114K to 89K.  With the revision, Jul's job creation was the lowest nonfarm payrolls reading since Dec 2020.  Private sector payrolls missed expectations with 118K jobs added against a prediction of 139K.  Manufacturing payrolls declined by 24K in Aug, below estimates that expected the sector's employment level to remain flat.  The labor force participation rate remained at 62.7% in Aug & has been little changed over the course of the year.  The long-term unemployment picture was virtually unchanged in Aug, with the number of people who have been jobless for 27 weeks coming in at 1.5M.  The long-term unemployed account for 21.3% of all unemployed people.  The construction sector saw employment rise by 34K, above the average monthly gain of 19K over the last 12 months.  Health care employment increased by 31K jobs, below the 12-month average of 60K.  Average hourly earnings for all employees on private nonfarm payrolls rose by 14¢ (0.4%) to $35.21, which brings gains over the past 12 months to 3.8% thru Aug.

US economy added 142,000 jobs in August, below economists' expectations

The 10-year Treasury yield was little changed as investors digested an Aug jobs report that showed an easing labor market, as concerns about an economic slowdown have been growing.  The yield on the 10-year Treasury was less than 1 basis point lower at 3.732% & the 2-year Treasury yield was last more than 4 basis points lower at 3.714%.  Yields & prices move in opposite directions & 1 basis point is equivalent to 0.01%.  Data yesterday showed that private payrolls grew by 99K in Aug, far lower than the 140K estimate.  The figures renewed concerns about an economic downturn & a softening labor market, which were first prompted by Jul's weaker-than-expected jobs report.  Weekly initial jobless claims meanwhile fell from the previous week, figures showed.  Investors will be looking closely at economic data releases until then, including today's jobs data & inflation figures slated for next week, for clues about the path ahead for Fed policy & interest rates.

10-year Treasury yield is flat on mixed jobs report

Americans are already thinking about the holidays & how they intend spend money this year & for many it means spending less, according to Bankrate.  In a recently-published survey of 2300 US adults, Bankrate said it found 33% of holiday shoppers reported they planned to not spend as much this year as 2023.  Consumer caution around spending & credit cards could be driving that, according to H Squared Research chief research officer Hitha Herzog.  "There’s a real convergence of shoppers who have in the past spent a lot on their credit cards and really leaned on credit card debt to take them through the holiday season. Now that interest rates are, you know, there’s talk that they’re going to come down, but they haven’t come down to a point where consumers really feel good about amassing a lot of debt on their credit card. They are now wanting to cut back a little bit more," she said.  Interest rates have been elevated as the Federal Reserve seeks to curb inflation.  The Consumer Price Index, a measure of inflation, rose 0.2% month-over-month and 2.9% year-over-year in Jul.  Inflation is expected to "change the way I shop" this year for 34% of holiday shoppers, according to Bankrate.  Other survey data points about potential budget strain & their feelings about holiday shopping costs indicated some Americans are feeling anxiety about their wallets for the season.  Bankrate also found that, on the flip-side to those expecting to open their wallets less, 24% of holiday shoppers think they will splash out more on purchases.  Another 43% see their purchases staying the same during the 2024 holiday shopping season.  "With the consumer, there’s a real bifurcation, meaning there’s a delineation – and I think it’s always been there with the consumer –  of people who are very conscious of how they spend and they want to make sure they’re staying in their budgets and they start shopping early to take advantage of sales and they’re very price sensitive. And then there are consumers who are not price sensitive," Herzog added.  The share expecting their holiday spending to go up or stay flat "are probably the people who are on the other side of the delineation where they are not price sensitive" & are still spending regardless of prices, she continued.  Doing holiday shopping online appeared poised to be the more common route among respondents, with 42% reporting they'd use the internet for "most" of their purchases & 23% saying in-store.  Some (27%) anticipate they will see themselves wrack up debt.  During the holiday period spanning Nov-Dec last year, there was $964B worth of core retail sales, the National Retail Federation reported.

More than a third of holiday shoppers' will spend less this year than in 2023

Stocks led by Tech stocks were hit with selling as investors digested a crucial jobs report that provided clues to the size of this month's expected interest rate cut & the resilience of the US economy.  Today's report shifted expectations for the Fed to enact a more sizable rate cut at its meeting in less than 2 weeks & the CME FedWatch tool, traders see a 50-50 chance of a 50 basis point cut, up significantly from yesterday.  Despite anemic closes, stocks have whipsawed this week as the market assessed incoming economic data to set expectations on the size of the Fed's rate cut.  All 3 indices are set for significant weekly declines.

Markets fall as growth fears simmer ahead of major jobs report

Dow fell 219, decliners were modestly ahead of advancers & NAZ went up 43.  The MLP index added 1+ to the 282s & the REIT index slid back 1+ to the 427s.  Junk bond funds hardly budged & Treasuries were higher which reduced yields.  Oil was flattish in the low 69s & gold advanced 20 to 2546 (more on both below).

Dow Jones Industrials 

Long-term mortgage rates remained unmoved this week while shorter notes fell some, but did little to spur on demand.  Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate on the benchmark 30-year fixed mortgage held steady at 6.35% & the average rate on a 30-year loan was 7.12% a year ago.  "Mortgage rates remained flat this week as markets await the release of the highly anticipated August jobs report," said Sam Khater, Freddie Mac's chief economist.  "Even though rates have come down over the summer, home sales have been lackluster."  Khater noted there has been an uptick in activity for refinancing.  Many would-be buyers & sellers are holding out to see if rates fall further.  Currently, about 80% of mortgage holders have a rate below 5%, according to a Zillow survey.  The average rate on the 15-year fixed mortgage declined to 5.47% from 5.51% last week.  One year ago, the rate on the 15-year fixed note averaged 6.52%.

Mortgage rates in limbo as home sales remain 'lackluster'

Layoffs soared in Aug, hitting their highest total for the month in 15 years, while YTD hiring reached a historic low, outplacement firm Challenger, Gray & Christmas reported.  Announced job cuts totaled 76K for the month, lurching 193% higher than Jul.  Though the total was just 1% higher than the same month in 2023, it was the highest number for Aug going back to 2009, as the economy was still escaping the worst of the global financial crisis.  On the hiring front, companies said they were adding just 6101 new workers, up by nearly 2500 since Jul, but down more than 21% from Aug 2023.  The YTD hiring announcements of nearly 80K is the lowest total in history going back to 2005.  “August’s surge in job cuts reflects growing economic uncertainty and shifting market dynamics,” said Andrew Challenger, the firm’s senior VP.  “Companies are facing a variety of pressures, from rising operational costs to concerns about a potential economic slowdown, leading them to make tough decisions about workforce management.”  The report comes with concerns rising that the labor market is weakening even though the US economy has seen growth of 1.4M in nonfarm payrolls this year.  Payrolls processing firm ADP reported yesterday that private companies added just 99K workers in Aug, the smallest gain since Jan 2021.  Markets expect a softening jobs picture to prod the Federal Reserve into lowering interest rates later this month even with inflation running higher than the central bank's 2% target.  The Challenger layoffs data is somewhat out of sync with gov reports, which show that initial claims for unemployment benefits have been slightly elevated in recent weeks but not reflective of a major escalation.  For last week, jobless claims totaled 227K, a slight decrease from the previous period.  Today's report showed the biggest growth in planned layoffs came in the technology field, with companies announcing 42K cuts, the most in 20 months.  “The labor market overall is softening,” Challenger said.  Companies announcing job cuts most often cited cost-cutting & economic conditions as the reasons, though artificial intelligence also was listed for the first time since Apr.

Layoffs jump in August while hiring in 2024 is at a historic low, Challenger report shows

The number of Americans filing for unemployment benefits fell to its lowest level in 2 months last week, signaling that layoffs remain relatively low despite other signs of labor market cooling.  Jobless claims fell by 5K to 227K for last week, the Labor Dept reported.  That's the fewest since the week of Jul 6, when 223K Americans filed claims.  It's also less than the 230K new filings that were expected.  The 4-week average of claims, which evens out some of the week-to-week volatility, fell by 1750 to 230K, the lowest 4-week average since early Jun.  Weekly filings for unemployment benefits, considered a proxy for layoffs, remain low by historic standards, though they are up from earlier this year.  During the first 4 months of 2024, claims averaged a historically low 213K a week.  But they started rising in May.  They hit 250K in late Jul, adding to evidence that high interest rates were finally cooling a red-hot US job market.

Applications for US jobless benefits fall to 2-month low as layoffs remain at healthy levels

Gold prices rose to near 1-week highs, on the back of a weaker $ & lower yields after signs of labor market losing steam led investors to expect a super-sized rate cut from the Federal Reserve this month.  Spot gold was up 0.9% at $2515 per ounce, rising as much as 1.1% earlier in the session.  Prices slightly pared gains after the US services sector data.  US gold futures settled 0.7% higher at $2543.  US private employers hired the fewest number of workers in 3½-years in Aug, potentially hinting at a sharp labor market slowdown.  This follows data yesterday showing a sharp decline in US job openings in Jul.  Traders currently see a 59% chance of a 25-basis-point (bp) reduction by the central bank this month & a 41% chance of a 50-bp cut, according to the CME FedWatch tool.  Attention turns to the upcoming non-farm payrolls report tomorrow.

Gold Gains as Investors Anticipate Super-Sized Fed Rate Cut

WTI crude futures settled at $69.10 per barrel, remaining near a 14-month low, as concerns over slowing demand in the US & China, combined with the potential for increased oil supply from Libya, outweighed a larger-than-expected drop in US crude inventories.  The Energy Information Administration reported a 6.9M barrel reduction in stockpiles for last week ending, well above forecasts.  At the same time, OPEC+ delayed planned production hikes for Oct & Nov, which could tighten 4th-qtr supply by 100-200K barrels per day.  In Libya, despite political tensions, tankers began loading crude again.  Meanwhile, positive US economic data calmed fears over the Federal Reserve's potential interest rate cuts, with many anticipating a reduction at its Sep meeting.  Lower rates could help spur economic growth & boost oil demand.

Oil Settles Near 14-Month Low

Jobs market data serves as an appetizer for tomorrow's jobs report for Aug, crucial to the Fed's policy decision making & will be closely watched.  While recent soft readings make the case for deeper rate cuts, they could also be a sign the US is on the brink of recession & suggest a "soft landing" is no longer in the cards.

Markets mixed while tech shares' rebound fails

Dow fell 333 & sliding lower in the last hour, advancers modestly ahead of decliners & NAZ was off 50.  The MLP index added 2+ to the 283s & the REIT index was steady in the 428s.  Junk bond funds crawled higher & Treasuries had limited buying which brought slightly lower yields.  Oil rebounded 1+ to go over 70 (more below) & gold gained 13 to 2539.

Dow Jones Industrials

Private sector payrolls grew at the weakest pace in more than 3½ years in Aug, providing yet another sign of a deteriorating labor market, according to ADP.  Companies hired just 99K workers for the month, less than the downwardly revised 111K in Jul & below the forecast for 140K.  Aug was the weakest month for job growth since Jan 2021, according to data from the payrolls processing firm.  “The job market’s downward drift brought us to slower-than-normal hiring after two years of outsized growth,” ADP's chief economist, Nela Richardson, said.  The report corroborates multiple data points recently that show hiring has slowed considerably from its blistering pace following the Covid outbreak in early 2020.  Job openings in Jul also touched their lowest point since Jan 2021, according to a Labor Dept report yesterday, while outplacement firm Challenger, Gray & Christmas reported that this was the worst Aug for layoffs since 2009 & the slowest year for hiring since the firm started tracking the metric in 2005.  Wages kept rising, but continued to show an easing pace than some of the earlier gains.  Annual pay increased 4.8% for those who stayed in their jobs, about the same level as Jul, according to ADP.  Markets expect the weakening jobs picture to push the Federal Reserve into lowering interest rates when it meets Sep 17-18.  The main question is how quickly & how aggressively the Fed will move, with current market pricing indicating at least a qtr percentage point cut at this month's meeting & a full percentage point lopped off the federal funds rate by the end of 2024.

August private payrolls rose by 99,000, smallest gain since 2021 and far below estimates, ADP says

Members of the OPEC+ oil alliance have delayed plans to hike production by a scheduled 180K barrels per day in Oct, as part of a program to gradually return a broader 2.2M barrels per day to the market over the following months.  The increase has been delayed by 2 months, according to OPEC+ sources.  The 2.2M-barrel-per-day decline had been a short-term voluntary cut implemented by just 8 members of the OPEC+ alliance.  Crude futures, which slumped in the earlier part of the week, picked up today, with the Ice Brent contract with Nov expiry was trading at $73.63 per barrel, up 1% from the previous settlement.  The front-month Oct Nymex contract was at $70.17 per barrel, higher by 1% from the previous close price.  The 2.2M-barrel-per-day cut, which was implemented over the 2nd & 3rd qtrs, was due to expire at the end of this month.  It was undertaken by Algeria, Iraq, Kazakhstan, Kuwait, Oman, Russia, Saudi Arabia & the UAE as a voluntary reduction that falls outside of the official policy binding all members of the OPEC+ coalition, which sums the Organization of the Petroleum Exporting Countries & its allies.  Under official policy, OPEC+ will produce a combined 39.7M barrels per day next year.  A subset of the group's members are separately curbing their output by another 1.7M barrels per day throughout 2025, also on a voluntary basis.

OPEC+ members delay plans to hike production by two months after oil price slump

Ford's (F) US vehicle sales jumped 13.4% last month, led by increases in the company's F-Series trucks & hybrid models. The Detroit automaker reported sales of nearly 183K vehicles in Aug, including a 12.3% increase in trucks & a roughly 50% jump in hybrid vehicles compared to a year earlier.  Its all-electric vehicle sales jumped 29% during that time, including a notable increase in its F-150 Lightning pickup.  Despite the increase in electrified vehicles, traditional cars & trucks with internal combustion engines still represented 86% of Ford's sales last month.  Ford's Aug sales outpaced overall industry estimates of a roughly 6% year-over-year increase from a year earlier, according to Barclays.  Despite steep prices & high interest rates, US auto sales have remained stable in 2024, but they’re not as high as some expected to begin the year.  Barclays lowered its 2024 sales forecast from 16M vehicles to 15.8M, citing a 15.7M sales pace thru Aug.  Ford's US sales thru Aug were up 4.3% to 1.4M units.  Ford stock fell 10¢.

Ford truck, hybrid models lead to 13% increase in August sales

Investors digested more weaker-than-expected labor market data that could help set expectations for both interest rate cut hopes & the health of the US economy.  The market is torn between conflicting impulses as data releases paint a downbeat picture of the economy.  Recent soft readings make the case for deeper rate cuts.  But they could also be a sign the US is on the brink of recession & a "soft landing" is no longer in the cards.  Traders see an almost 50-50 chance the Federal Reserve will lower rates by 0.5% at its Sep meeting.  So far in Sep, Dow is down more than 900.

Markets waver after yesterday's sharp decline

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

Dow Jones Industrials 

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

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

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

Intel Stock Drops Further as Silicon Wafers Reportedly Fail Broadcom Tests

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

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

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

Gold Rebounds From Lows After Weak US Jobs Openings Data

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

Crude Extends Losses on Prospects of Higher Supply

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

Markets edge higher as data reveals fewer job openings than expected

Dow was up 123, advancers over decliners about 3-1 & NAZ gained 33.  The MLP index added 2+ to the 284s & the REIT index crawled up 1+ to the 429s.  Junk bond funds were mixed & Treasuries saw more buying which lowered yields.  Oil slid back pennies to 70 & gold was up 5 to 2528.

Dow Jones Industrials

Job openings slumped to their lowest level in 3½ years in Jul, the Labor Dept reported in another sign of slack in the labor market.  The closely watched Job Openings & Labor Turnover Survey (JOLTS)  showed that available positions fell to 7.67M on the month, off 237K from Jun's downwardly revised number & the lowest level since Jan 2021.  The forecast had been looking for 8.1M.  With the decline, it brought the ratio of job openings per available worker down to less than 1.1, about ½ where it was from its peak of more than 2 to 1 in early 2022.  The data likely provides further ammunition to Federal Reserve officials who are widely expected to begin lowering interest rates when they meet for their next policy meeting on Sep 17-18.  Fed officials watch the JOLTS report closely as an indicator of labor market strength.  While the job openings level declined, layoffs increased to 1.76M, up 202K from Jun.  Total separations jumped by 336K, pushing the separations rate as a share of the labor force up to 3.4%.  However, hires rose as well, up 273K on the month, putting the rate at 3.5% or 0.2 percentage point better than Jun.

Job openings fell more than expected in July in another sign of labor market softening

Atlanta Federal Reserve Pres Raphael Bostic signaled that he is ready to start lowering interest rates even though inflation is still running above the central bank's target.  Previously 1 of the more hawkish policymakers, or in favor of tighter policy to fight inflation, Bostic noted that his focus is shifting more towards the employment side of the Fed's mandate as signs increase of labor market softening.  “I believe we cannot wait until inflation has actually fallen all the way to 2 percent to begin removing restriction because that would risk labor market disruptions that could inflict unnecessary pain and suffering,” he wrote on the Atlanta Fed's website.  The Fed's preferred measure showed inflation running at a 2.5% rate in Jul & just a slightly higher 2.6% core rate when excluding food & energy.  Bostic did not specify how much or when he thinks the Fed should start easing.  However, the missive comes with markets already widely expecting the central bank to cut its benchmark borrowing rate by at least a qtr percentage point when it meets Sep 17-18.  As an FOMC voting member this year, Bostic's views carry extra weight & add another level of assurance that the Fed will enact its first easing since the emergency measures it took more than 4 years ago in the early days of the Covid crisis.  Bostic said his experiences with business leaders in the Atlanta area reflect that concern.  “Rest assured, I do not sense a looming crash or panic among business contacts. However, the data and our grassroots feedback describe an economy and labor market losing momentum,” he added.  “The upside to this is that the slowdown in activity is feeding a continuing, welcome decline in the pace of inflation.”  He cited multiple factors indicating that inflation is progressing convincingly back to the Fed's target as the labor market moderates.  “Given the circumstances before us — eroding pricing power and a cooling labor market — I’ve rebalanced my focus toward both sides of the dual mandate for the first time since early 2021,” he noted.

Atlanta Fed’s Bostic says officials can’t wait for 2% inflation to start cutting

Qualcomm (QCOM) launched a new PC processor as it looks to capitalize on electronics makers' desire to put artificial intelligence on their devices.  Qualcomm took the wraps off the Snapdragon X Plus 8-core at the IFA conference in Berlin, Germany.  The processor, designed for PCs running Microsoft's (MSFT) Windows operating system, promises to power AI processes with a long battery life.  The latest chips expand QCOM's Snapdragon X Series for PCs, which it launched last year.  The US chip giant said the Snapdragon X Plus 8-core is designed for PCs costing as low as $700 as it looks to expand its semiconductors to more devices.  Qualcomm has traditionally designed chips that are used in the smartphones of many of the world's biggest players, including Samsung.  But the company stepped up its PC efforts this year when MSFT announced a Surface Laptop & a Surface Pro tablet with Qualcomm’s X Series chips that can run some AI tasks without an internet connection. MSFT calls these Copilot+ PCs.  Analysts said QCOM's timing to jump into PCs is key.  Neil Shah, a partner at Counterpoint Research, highlighted a few converging themes that are helping the company.  He highlighted the push toward “on-device AI,” where artificial intelligence applications are processed on a piece of hardware rather than via the internet.  QCOM has designed processors for smartphones that do this.  “Since the AI boom happened last year, everything has been centered around AI which works well for Qualcomm because they have been ahead in the low powered AI device experiences on mobile,” Shah said.  “Translating that to the PC form factor was not that difficult.”  The support of MSFT has also been important for QCOM to hit the mainstream in PCs, since Windows is one of the world's biggest operating systems, Shah said.  QCOM rose 3.10 & MSFT fell 72¢.

Qualcomm ramps up challenge to Intel and AMD with latest AI PC chip

The stock market recovered some losses, coming off a steep sell-off fueled by worries about economic growth & the artificial intelligence trade.  Stocks appeared to turn positive after fresh data showed further signs of the labor market cooling, prompting bond yields to fall & investors to ramp up their hopes for more extensive interest rate cuts in 2024.  The up & down start to Sep has investors bracing for more volatility as a historically tough month for stocks follows a turbulent Aug.

Markets slide further after a weak ISM manufacturing data report

Dow tumbled 626 (near session lows), decliners over advancers 5-2 & NAZ dropped 577.  The MLP index pulled back 3+ to the 283s & the REIT index was off 1+ to 426.  Junk bond funds remained weak & Treasuries continued in demand, bringing lower yields.  Oil sank 3+ to a little over 70 & gold was off 6 to 2520 (more on both below).

Dow Jones Industrials 

Semiconductor stocks, led by Nvidia (NVDA), fell during an overall down day for the stock market.  The SMH, an index that tracks semiconductor stocks, was down 6%, on pace for its biggest 1-day loss in a month.  Markets were sluggish today after the ISM manufacturing index reported Aug figures that came in below consensus expectations, raising fears about the strength of the economy but also potentially increasing chances that the Federal Reserve will cut interest rates.  Chip stocks have been rising in the past year on optimism that the artificial intelligence boom will require companies to buy more semiconductors & memory to keep up with rising computational requirements for AI applications.  The sector has been led by NVDA, which is still up nearly 129% so far in 2024, & which dominates the market for AI data center chips.  Last week, NVDA reported $30B in quarterly earnings for the qtr ending in Jul, higher than the already elevated expectations.  Revenue in the company's data center business, which includes AI processors, climbed 154% on an annual basis, partially powered by a handful of cloud & internet giants that buy Bs of $s of NVDA chips each qtr.   NVDA expects 80% sales growth in the current qtr.  But some investors saw NVDA's forecast last week as a slowdown in growth, briefly hitting chipmakers that supply NVDA with memory & other parts.  NVDA stock sank 11.22.

Nvidia tumbles, leading chip stocks lower

Spaceship. Dream car. UFO. Dumpster. Cool. Stupid. Phenomenal. Abomination.  Those were all words used to describe the Tesla (TSLA) Cybertruck during a 24-hour rental of the vehicle in metropolitan Detroit.  They were expressed by strangers, friends, family & auto industry experts & employees.  A word not used much? “Truck.”  That's because the Tesla Cybertruck is far more “cyber” than “truck.”  It indeed has some truck capabilities, such as a pickup bed & other utilitarian features, but it is not a truck in any traditional sense of the word.  It is a unique product that only comes along every so often.  Similar to the first SUV, minivan or “roadster pickups” such as the Ford Ranchero (F) & Chevrolet El Camino, it has created a new segment in the automotive industry that it solely holds.  That's good & bad for both TSLA & its competitors, specifically the truck-reliant automakers from Detroit that have spent decades refining their trucks to meet the needs of their customers.  That includes things such as bed access & door handle sizes to seating height & interior components.  The Cybertruck is not a direct competitor for electric trucks from traditional automakers.  The Cybertruck is a “truck” for TSLA fans/owners & an experiment for the company in many ways regarding its technologies, including a new electrical architecture & steering system.  TSLA stock fell 3.52.

Tesla Cybertruck is in a category of its own for better or worse

Volkswagen targeting €10B in savings by 2026 as it attempts to streamline spending.  Thomas Schaefer, head of the VW brand, warned: “The situation is extremely tense and cannot be overcome by simple cost-cutting measures.”  Pushing the changes thru will be a delicate task.  VW employs around 650K workers globally, almost 300K of whom are in Germany, & the threat of factory closures sparked an immediate fierce backlash from unions.  ½ the seats on the company's supervisory board are held by worker representatives, & the German state of Lower Saxony, which owns a 20% stake, often sides with trade union bodies.  Daniela Cavallo, chief exec of the VW works council, said on VW's intranet that management had made “many wrong decisions” in recent years, including not investing in hybrids or being faster at developing affordable battery-electric cars.  She argued that instead of plant closures, the board should be reducing complexity & taking advantage of synergies across the VW group's plans, criticizing the company's “documentation madness” & “salami-slicing tactics.”

VW considers closing German factory for first time in 87-year history

Gold prices eased to their lowest in more than a week, pressured by a firm $, while investors awaited US non-farm payrolls data that could determine the size of the potential cut in the Federal Reserve's Sep policy meeting.  Spot gold fell 0.4% to $2490 per ounce.  US gold futures settled 0.2% lower to $2523.  The dollar (.DXY), rose 0.2%, hitting a 2-week high, making gold more expensive for other currency holders.  Focus will be on Fri's US payrolls report along with ISM surveys, JOLTS job openings & the ADP employment report due later this week.  Markets are pricing in a 63% chance of a 25 basis point (bps) cut when the Fed meets on Sep 17-18, with a 37% probability of a 50-bps cut, the CME FedWatch tool, showed.  Bullion is heading for its best year since 2020, driven by investor optimism about upcoming US rate cuts & lingering concerns about the Middle East conflict.

Gold at Over One-Week Low on Firm Dollar, US Payrolls Data Awaited

Oil plummeted, erasing its gains for the year, after a prospective deal to restore supplies from Libya turned traders' attention back to concerns about tepid global demand for crude.  Global benchmark Brent dropped 4.9% to settle below $74 a barrel after earlier touching the lowest intraday price since mid-Dec 2023.  The plunge came after a Libyan central banker said a deal that would revive the OPEC nation's output appears imminent.  With more than 0.5M barrels of Libyan crude possibly coming back into the market, the focus is once again on tepid global oil consumption.  Economic concerns in key consumer countries, including China & the US, have weighed on sentiment in recent months, with only occasional geopolitical concerns & minor supply disruptions masking the angst.  Looking ahead, the market is bracing for OPEC+ to gradually restore production, starting with 180K barrels of daily supplies within weeks.  The concerns about China have only grown louder in recent days after a drumbeat of economic data over the weekend raised doubts that the world's top crude importer may struggle to meet this year's economic growth target.  Options are signaling the market is now anticipating a lower risk of futures spiking.  The bias toward puts in Brent's 2nd-month options skew has deepened to the most bearish since early Jun as traders continue to protect against price drops.  The US, meanwhile, is laying the groundwork for new sanctions on Venezuelan gov officials in response to Nicolás Maduro's disputed reelection.  The measures target key leaders that the US says collaborated with Maduro to undermine the Jul 28 vote.  WTI for Oct fell 4.4% from the Fri close to settle at $70.34 a barrel.  Futures didn't settle yesterday due to the Labor Day holiday.  Brent for Nov declined 4.9% to settle at $73.75 a barrel.

Oil Plunges as Rising Supplies, Tepid Demand Intensify Gloom

US stocks fell to kick off a historically tough month for markets.  Stocks are retreating from near highs as traders hunker down after a rollercoaster Aug, with the prospect of a potentially stormy Sep ahead which includes the Fed meeting.  Investors are assessing the risk of data shocks or presidential race surprises.

Markets decline as key data shows continued economic weakening

Dow dropped 448, decliners over advancers better than 2-1 & NAZ retreated 408.  The MLP index declined 5+ to 281 & the REIT index was up about 1 to the 428s.  Junk bond funds were sold  & Treasuries saw buying which lowered yields (more below).  Oil dropped 2+ to go under 71 (more below) & gold was off 12 to 2515.

Dow Jones Industrials

US factories remained in slowdown mode in Aug, fueling fears about where the economy is headed, according to separate manufacturing gauges.  The Institute for Supply Management (ISM) monthly survey of purchasing managers showed that just 47.2% reported expansion during the month, below the 50% breakeven point for activity.  Though that was slightly above the 46.8% recorded for Jul, it was below the for 47.9%.  “While still in contraction territory, U.S. manufacturing activity contracted slower compared to last month. Demand continues to be weak, output declined, and inputs stayed accommodative,” said Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee.  “Demand remains subdued, as companies show an unwillingness to invest in capital and inventory due to current federal monetary policy and election uncertainty,” he added.  While the index level suggests contraction in the manufacturing sector, Fiore pointed out that any reading above 42.5% generally points to expansion across the broader economy.  It was a weaker-than-expected reading last month that sent markets further into a tailspin.  Another weak economic reading raises the probability the Federal Reserve will be cutting interest rates by at least a qtr percentage point later this month.  Following the ISM report, traders raised the odds of a more aggressive ½-point reduction to 39%, according to the CME Group's FedWatch measure.  The ISM results were backed up by another PMI reading from S&P, which showed a decrease to 47.9 in Aug from 49.6 in Jul.  The S&P employment index showed a decrease for the first time this year, while the input cost measure climbed to a 16-month high, another sign that inflation remains present if well off its mid-2022 highs.  “A further downward lurch in the PMI points to the manufacturing sector acting as an increased drag on the economy midway through the third quarter. Forward-looking indicators suggest this drag could intensify in the coming months,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

Weak manufacturing measures raise specter of U.S. economic slowdown

Weak manufacturing measures raise specter of US economic slowdown.  Crude oil futures fell more than 3%, erasing all gains for the year, as OPEC+ is poised to increase production in the coming weeks & China's economy remains soft.  OPEC+ delegates have indicated that the group is still planning to increase oil production in Oct.  Manufacturing in China, meanwhile, fell to a 6-month low in Aug, according to data released over the weekend.  China is the world's largest importer of crude oil.  West Texas Intermediate Oct contract was $70.97 per barrel, down $2.58 (3.5%) & YTD US crude oil has fallen 1%.  Brent Nov contract was $74.42 per barrel, down $3.10 (4%) & YTD, the global benchmark has dropped 3.47%.  OPEC+, however, made clear in Jun that it could reverse the planned production increase based on market conditions.  The prospect of increased oil output from OPEC & a weak economy in China are overshadowing major production disruptions in Libya.  Libya's eastern gov in Benghazi has sought to shut down production & exports, amid a dispute with the UN-backed gov in Tripoli over who should lead the country's central bank. Libya's National Oil declared a force majeure at the El-Feel oil field.

U.S. crude oil falls more than 3%, erases 2024 gains as China demand, OPEC output hike loom

Treasury yields slid as markets reopened after the Labor Day holiday & investors evaluated economic data.  The yield on the 10-year Treasury yield was last trading at 3.833% after dropping close to 8 basis points & the 2-year Treasury yield was last down more than 6 basis points at 3.863%.  Yields & prices moonomive in opposite directions & 1 basis point equals 0.01%.  Investors weighed the state of the economy & considered the outlook for interest rates as they looked to key labor market data due this week.  2 readings of manufacturing production showed signs of weakness, bolstering concerns around slowing growth within the US economy.  S&P Global’s showed a decline from Jul to Aug, while the Institute for Supply Management's came in below the estimate.  Investors will be watching the data closely for fresh signals about the economic outlook.  Last month, the Jul jobs report raised fears about a recession & questions about whether the Federal Reserve should have already cut interest rates, sparking market volatility.  Recession concerns have eased since then, with the 2nd-qtr GDP last week being revised higher from the initial 2.8% reading to 3% growth.

Treasury yields slide as investors weigh slowing growth fears

Today's economic data is making investors nervous.  Of course, overbought conditions in the stock market are not helping matters.