Markets seesaw after JPMorgan tempers guidance on income

Dow pulled back 92 but well off its midday low on JPM's earnings forecast (see below), decliners modestly ahead of advancers but NAZ rose 141.  The MLP index added 1 to 281 & the REIT index rose 6+ to the 437s as yields declined.  Junk bond funds fluctuated & Treasuries were purchased which lowered yields.  Oil was off a very big 2+ to 66 & gold gained 12 to 2545 (more on both below).

Dow Jones Industrials 

JPMorgan (JPM), a Dow stock, shares fell after the bank's pres told analysts that expectations for net interest income (NII) & expenses in 2025 were too optimistic.  While the bank expects to be in the “ballpark” of the 2024 target for NII of about $91.5B, the current estimate for next year of about $90B “is not very reasonable” because the Federal Reserve will cut interest rates, JPM Pres Daniel Pinto said at a financial conference.  “I think that that number will be lower,” Pinto said.  He declined to give a specific figure.  JPM, the biggest US bank by assets, has been a winner among lenders in recent years, benefiting from better-than-expected growth in NII as the bank gathered more deposits & made more loans than expected.  But skittish investors are now concerned about the outlook for a bellwether banking stock, along with broader concerns about slowing US economic growth.  NII, one of the main ways banks make money, is the difference in the cost of a bank's deposits & what it earns by lending money or investing it in securities.  When interest rates decline, new loans made by the bank & new bonds it purchases will yield less.  Falling rates can help banks in the sense that customers will slow the rotation out of checking accounts & into higher-yielding instruments like CDs or money market funds.  But they also make new assets lower yielding, which complicates the picture.  “Clearly, as rates go lower, you have less pressure on repricing of deposits,” Pinto said.  “But as you know, we are quite asset sensitive.”  When it comes to expenses, the analyst estimate for next year of roughly $94B “is also a bit too optimistic” because of lingering inflation & new investments the firm is making, Pinto said.  “There are a bunch of components that tell us that probably the number on expenses will be a bit higher than what is expected at the moment,” Pinto added.  When it comes to trading, JPM expects 3rd-qtr revenue to be flat to up about 2% from a year ago, while investment banking fees are headed for a 15% jump.  The stock sank 11.22 (5%).

JPMorgan Chase shares drop 7% after bank tempers guidance on interest income and expenses

Europe's top court ruled against Apple (AAPL), a Dow stock, in the tech giant's 10-year court battle over its tax affairs in Ireland.  The case stems back to 2016 when the European Commission ordered Ireland to recover up to €13B ($14.4B) in back taxes from AAPL.  The European Court of Justice’s decision comes hours after the company unveiled new products to revitalize its iPhone, Apple Watch & AirPod lineups.  The Irish gov said that the AAPL case “involved an issue that is now of historical relevance only,” adding that its position has always been that it “does not give preferential tax treatment to any companies or taxpayers.”  AAPL said in a filing that it will incur a 1-time income tax charge of about $10B in its 4th fiscal qtr ending Sep 28, 2024.  The gov noted it will now begin the process of transferring the assets in the escrow fund to Ireland.  “This case has never been about how much tax we pay, but which government we are required to pay it to. We always pay all the taxes we owe wherever we operate and there has never been a special deal,” an AAPL spokesperson said.  “The European Commission is trying to retroactively change the rules and ignore that, as required by international tax law, our income was already subject to taxes in the US.”  The stock fell 16¢.

Apple must pay $14.4 billion in back taxes, EU's top court rules

Pity the poor active trader.  Sep is living up to its reputation as a difficult month.  “Squirrelly” is how 1 trader described the market.  In other words, a tough, choppy market for investors.  The markets opened positive, with a nice lift from Oracle (ORCL), which is keeping the expanding artificial intelligence story going.  The company’s positive comments on AI helped lift the hyperscalers as well.  But that was about it.  None of the other semiconductors got a lift from ORCL.  Everything else in the group is down.  Elsewhere, banks, a former leadership group, have been trending down for the past week, & at midmorning, word on 3rd-qtr guidance from JPM at a Barclays conference, where it said net interest income expectations for 2025 were “too high.”  Stock in the country's largest bank immediately sold off.  That alone is chopping about 100 points off the Dow.   But Goldman Sachs (GS), down about 5%, is also knocking about 160 points off the Dow.  These were 2 major leadership stocks in the S&P 500.  Both were at historic highs going into Sep, not anymore.  Even regional banks are now lower.  The issues facing the market are well known: weak seasonals thru Oct, concerns about a slowing jobs market & valuations that are still on the high side.  Put this all together, & it reinforces the view that there is no reason to stick your neck out.

September is living up to its reputation as a difficult, choppy month

Gold prices held firm above the $2500 level as market participants positioned themselves ahead of US inflation data for further clues on the depth of interest rate cuts by the Federal Reserve next week.  Spot gold rose 0.3% to $2512 per ounce & US gold futures settled 0.4% higher at $2543.  Investors will closely scan thru US Consumer Price Index (CPI) data tomorrow & the Producer Price Index reading on Thurs.  The CPI for Aug is expected to have risen by 0.2% month-over-month, unchanged from the previous month.  Markets are currently pricing in a 67% chance of a 25-basis-point US rate cut at the Fed's Sep 17-18 meeting & a 33% chance of a 50-bps cut, the CME FedWatch tool showed.

Gold holds firm above $2,500 level as US inflation data looms

West Texas Intermediate (WTI) crude oil fell to the lowest in more than 3 years as the market again focused on demand concerns as China's economy weakens, while 2 forecasting agencies cut their 2024 demand forecasts, even as Tropical Storm Francine forces the closure of some Gulf of Mexico platforms, cutting into supply.  WTI crude oil for Oct closed down $2.96 to settle at $65.75 per barrel, the lowest since Aug 2021 & Nov Brent crude, the global benchmark, was last seen down $2.85 to $68.99.  Oil moved higher yesterday following 5 losing sessions that pushed prices down by 11%.  However the release of China's Aug economic data, showing producer-price disinflation as its economy slows, countered any lingering optimism.

WTI Crude Oil Falls to a Three-Year Low With the Focus on Demand as China's Economy Slows

Stocks traded mixed in a rollercoaster session as investors geared up for a looming consumer inflation report seen as crucial to determining the size of an interest-rate next week.  In the meantime, safe haven gold remains in demand & oil is at a more than 3 year low.  Sep has a well deserved reputation for being a tough time in the stock market.

Markets stumble ahead of inflation reports

Dow fell 155, decliners over advancers 5-4 & NAZ went up 68.  The MLP index was little changed at 280 & the REIT index rose 4+ to the 435s.  Junk bond funds crawled higher & Treasuries saw buying which lowered yields (more below).  Oil dropped 2+ to the 66s & gold added 6 to 2538.

Dow Jones Industrials

A report released by the Federal Reserve Bank of New York found that US consumers see inflation easing, but that worries about the labor market & managing household debt loads rose.  The New York Fed's latest Survey of Consumer Expectations found that respondents continue to see inflation at 3% a year from now & 2.8% in 5 years, findings that are unchanged from the prior month.  It found that consumers' price expectations over the next year involved larger increases for gas, rent & medical care, as well as smaller increases for food & college expenses.  The survey also found that for the 3rd straight month, respondents' expectations of missing a debt payment in the next 3 months increased with a 0.3 percentage point rise in Aug to 13.6%, the highest level since the early stages of the COVID pandemic in Apr 2020.  Consumers' views of the labor market were mixed in the report, with fewer worries about losing a job but also less optimism about voluntarily leaving a current job or finding a new job after losing their present role.  The perceived probability of an individual losing their job in the next 12 months fell by 1 percentage point to 13.3%, below the 12-month trailing average of 13.7%, while the probability of leaving a job voluntarily also fell to 19.1% from 20.7%.  The report also found that the perceived probability of finding a job if an individual lost their job decreased, with a decline of 0.2 percentage points to 52.3%, below the 12-month average of 53.9%.  Expectations for growth in household incomes increased by 0.1 percentage points to 3.1%, while spending growth expectations increased by the same amount to 5.0%.

Consumers see inflation easing, anxious about job market, personal debt: NY Fed survey

Europe's top courtupheld a €2.4B ($2.65B) fine imposed on Google (GOOGL) for abusing its dominant position by favoring its own shopping comparison service.  The fine stems from an antitrust investigation by the European Commission, the exec arm of the EU, which concluded in 2017.  The commission said at the time that GOOGL had favored its own shopping comparison service over those of its rivals.  GOOGL appealed the decision with the General Court, the EU's 2nd-highest court, which also upheld the fine.  GOOGL then brought the case before the European Court of Justice (ECJ), the EU's top court.  The ECJ on dismissed the appeal & upheld the commission's fine.  “We are disappointed with the decision of the Court,” a GOOGL spokesperson said.  “This judgment relates to a very specific set of facts. We made changes back in 2017 to comply with the European Commission’s decision. Our approach has worked successfully for more than seven years, generating billions of clicks for more than 800 comparison shopping services.”  To address European concerns, GOOGL in 2017 made changes that meant it will have to bid in the same way as competitors for advertising slots within shopping search results.  The decision caps off another major case for the EU after the ECJ also confirmed a European Commission decision from 2016 that Apple (AAPL), a Dow stock, should pay €13B in back taxes in Ireland.  Regulators are mounting pressure on Alphabet owned GOOGL globally.  In Mar, the EU launched an investigation into Alphabet under its sweeping Digital Markets Act, which scrutinizes the practices of tech companies in Europe.  In the US GOOGL is in the midst of an antitrust case brought by the Dept of Justice with regard to its advertising business after losing another antitrust case earlier this year.  GOOGL stock rose 1.93 & AAPL stock fell 13¢.

Google's 2.4 billion euro fine upheld by Europe's top court

Treasury yields dipped ahead of the final major inflation report before the Federal Reserve's Sep meeting.  The yield on the 10-year Treasury was nearly 3 basis points lower at 3.674%, with the 2-year Treasury yield also down by more than 2 basis points at 3.642%.  Yields & prices move in opposite directions & 1 basis point is equivalent to 0.01%.  Treasury yields have stabilized after tumbling last week when a series of labor market releases missed estimates.  The data also sent US stocks to their worst week of the year.  Investors are now keenly awaiting Aug's consumer price index, set to be published tomorrow to see if headline inflation will ease further from Jul's 2.9% reading as expected.  That will be followed by the producer price index on Thurs.  Debate has erupted over whether the Fed could opt for a 50 basis point rather than a 25 basis point interest rate cut during the Sep 17-18 meeting.  Some analysts argue such a move would show the Fed's commitment to supporting jobs growth, as others contend it would be an unnecessary step that could sow market panic. CME Group's FedWatch Tool currently places market pricing for a 50 basis point move at 27%, against 73% for the smaller move.

Treasury yields edge higher ahead of final inflation prints before Fed meeting

Stocks wavered as investors geared up for a looming consumer inflation report seen as crucial to determining the size of the first US interest-rate cut in years.  The moves follows yesterday's sharp rebound, which saw the major gauges surge over 1% as investors went post-rout bargain hunting.  Volatility is expected in the markets as investors waver between hopes for a hefty 0.5% rate cut from the Federal Reserve & worries about recession risks.

Markets climb as bargain hunters purchase stocks

Dow jumped 484, advancers over decliners better than 2-1 & NAZ was up 193.  The MLP index held steady, a little above 280, & the REIT index gained 4+ to the 431s.  Junk bond funds fluctuated & Treasuries saw very limited buying which allowed rates to inch higher.  Oil was up 1.09 to the 68s & gold added 7 to 2532 (more on both below).

Dow Jones Industrials 

Apple (AAPL), a Dow stock, unveiled the latest version of its flagship iPhone during its "Glowtime" event.  CEO Tim Cook described the iPhone 16 lineup as the "first iPhones designed from the ground up for Apple Intelligence and its breakthrough capabilities."  To run Apple Intelligence & other capabilities, the phones have been built with A18 chips, according to the tech giant.  AAPL said the iPhone 16 base model will sport a 6.1-inch display.  For the iPhone 16 Plus, it will be 6.7 inches.  The stock was up 9¢.

Apple unveils AI-infused iPhone 16 during tech giant's 'Glowtime' event

Europe's leading battery maker is to slash jobs & scale back its commitments as the “challenging” market for electric vehicles bites manufacturers.  Northvolt, the Swedish company which raised £10B to challenge China's dominance of batteries, today pledged to refocus efforts on improving its struggling factory in Skellefteå & cutting costs.  This will involve “a re-scope of operations and appropriate resizing of our workforce”, an announcement said.  The company, which counts German car giants BMW & Volkswagen among its backers, also said it would sell or seek investment from outside partners in its energy storage business.  It is the latest business to scale back its investment plans as a slowdown in EV sales spooks the automotive industry.  Last week, Volkswagen warned that it could be forced to close a factory in Germany for the first time & make large cost savings as it manages the transition away from petrol cars.  Battery maker Northvolt said it would suspend cathode active material production at its gigafactory in Sweden & cut costs under a plan that could lead to job losses as the company scales back its rapid expansion.  Billed as a frontrunner in Europe's effort to build a battery industry of its own, Northvolt is focusing on its large-scale cell manufacturing after a strategic review following a series of setbacks.  It has suffered production delays & the cancellation by BMW.  Northvolt's decision to pause cathode active materials (CAM) production at its Skelleftea gigafactory means the company will need to import it instead, said Daniel Brandell, a research leader at Uppsala University's battery research group Angstrom Advanced Battery Centre.  "This (CAM) is the most complex part of the lithium ion battery, and they don't think that their in-house material is of a good enough quality, and therefore they need to buy it instead and will need to import this from other suppliers," Brandell added.

Swedish battery maker Northvolt mulls job cuts as it seeks to save costs

China's consumer inflation accelerated in Aug to the fastest pace in ½ a year but the uptick was due more to higher food costs from weather disruptions than a recovery in domestic demand as producer price deflation worsened.  A sputtering start in the 2nd half is mounting pressure on the world's 2nd-largest economy to roll out more policies amid a prolonged housing downturn, persistent joblessness, debt woes & rising trade tensions.  The consumer price index (CPI) rose 0.6% from a year earlier last month, versus a 0.5% rise in Jul, data from the National Bureau of Statistics (NBS) showed, but less than a 0.7% increase forecast.  Extreme weather this summer from deadly floods to scorching heat has pushed up farm produce prices, contributing to faster inflation.  China's affected crops due to various natural disasters.  "The higher CPI in August was due to high temperatures and the rainy weather," NBS statistician Dong Lijuan said.  Food prices jumped 2.8% on year in Aug from an unchanged outcome in Jul, while non-food inflation was 0.2%, easing from 0.7% in Jul.  "But the rebound was softer than expected and did little to ease deflation concerns. Much of the improvement has been food reflation, which is susceptible to fluctuating weather conditions and capacity changes," said Junyu Tan, North Asia Economist at Coface.  Core inflation, excluding volatile food & fuel prices, was 0.3% in Aug - the lowest in nearly 3½ years, down from 0.4% in Jul.  The consumer inflation gauge was up 0.4% month-on-month, compared with a 0.5% increase in Jul & missing expectations of a 0.5% gain.  China's yuan dipped against the $ as long-dated yields hit record lows after monthly inflation data added to economic worries & calls for fresh easing.

China's consumer prices rise in August, PPI stuck in deflation

Gold prices held their ground, as investors awaited the US inflation report for further clues on the potential size of the Federal Reserve's interest-rate cut.  Spot gold was little changed at $2499 per ounce & US gold futures settled 0.3% higher at $2532.70.  Bullion hit a record high of $2531 on Aug 20.  Traders now see a 73% chance of a 25-basis-point cut at the Fed's meeting next week & a 27% chance of a 50 bp reduction, according to the CME FedWatch tool.  The US public's outlook for inflationary pressures was little changed last month, according to a report released by the New York Federal Reserve.

Gold prices steady with spotlight on US inflation data

Oil futures rose by about 1% as a potential hurricane approaching the Gulf Coast helped oil prices to recover some of the previous week's heavy losses.  Brent crude rose 67¢ (0.9%) to $71.73 a barrel while West Texas Intermediate crude futures were up 68¢ (1%) at $68.35.  Prices of Brent crude had fallen in each of the past 6 trading sessions, retreating by more than 11%, nearly $9 a barrel, to register the lowest closing price since Dec 2021 on Fri.  Analysts said today's rebound was partly in response to a potential hurricane near the US Gulf Coast.  A weather system in the southwestern Gulf of Mexico is forecast to become a hurricane before it reaches the northwestern US Gulf Coast, the National Hurricane Center said yesterday & the Gulf Coast accounts for about 60% of US refining capacity.

Oil Rebounds from Week of Heavy Losses as Storm Approaches US Gulf Coast

Stocks rebounded on the heels of the worst week since early 2023.  The major averages regained some of the ground they had lost although the Aug jobs report did not settle settle how aggressively will the Federal Reserve will lower interest rates?  2 inflation reports due later this week will give clues.  Meanwhile China with its large economy also has inflation problems.

Markets rebound after last week's substantial sell-off

Dow advanced 487, advancers over decliners a modest 2-1 & NAZ gained 119.  The MLP index hardly budged above 280 & the REIT index was up 2+ to the 429s.  Junk bond funds were flattish & Treasuries had very limited buying, taking yields a little lower (more below).  Oil was up pennies in the 67s (more below) & gold slid back 1 to 2523.

Dow Jones Industrials

Boeing (BA) a Dow stock, announced it reached a tentative agreement with the union representing 33K workers in the Pacific Northwest, just days ahead of a possible strike scheduled later this week.  If the deal is approved, the proposed 4-year contract would provide employees with a general wage increase of 25%, along with a commitment to build the next commercial airplane in the Seattle region.  The agreement is the first full labor deal reached between the 2 entities in 16 years.  While providing an increase in wages, the deal would provide better retirement benefits & give the union greater input in the safety & quality of BAs production system.  "We've heard what’s important to you for the new contract. And we have reached a tentative agreement with the union on a historic offer that takes care of you and your family," BA Commercial Airplanes Pres & CEO Stephanie Pope said.  "The contract offer provides the largest-ever general wage increase, lower medical cost share to make healthcare more affordable, greater company contributions toward your retirement, and improvements for a better work-life balance."  Pope also said the contract will deepen the company's commitment to the Pacific Northwest, where BA planted its roots.  "This would go along with our other flagship models, meaning job security for generations to come," she said.  "It’s a commitment to you and to our community."  The Intl Association of Machinists and Aerospace Workers (IAM) called the agreement the best contract it had ever negotiated & described union workers as committed to building quality airplanes.  The stock rose 5.56.

Boeing strikes tentative labor deal with union representing over 32K workers

Treasury yields were slightly higher as investors look ahead to fresh inflation prints following a series of weaker-than-expected US economic data releases.  The yield on the 10-year Treasury was less than 1 basis point higher at 3.712% & the 2-year Treasury yield rose about 2 basis points to 3.671%.  Yields & prices move in opposite directions.  1 basis point is equivalent to 0.01%.  Aug's consumer price index will be out Wed, followed by the producer price index on Thurs.  Treasury yields tumbled across the first week of Sep trade as reports on nonfarm payrolls & private payrolls both missed forecast estimates, reviving concerns about the extent of the slowdown in the US economy.  The unemployment rate dipped as expected to 4.2%.  The Federal Reserve holds its next monetary policy meeting next Wed, on Sep 18.  Markets were last pricing a 71% probability of a 25-basis-point cut in interest rates, against a 29% probability of a 50-basis-point cut, according to CME Group's FedWatch Tool.

Yields rise as investors gear up for inflation prints after weak jobs data

US crude oil futures rebounded nearly 1% after posting the worst week since Oct 2023.  The US benchmark, West Texas Intermediate, has fallen 15.8% so far in the 3rd qtr while the Brent global benchmark has fallen more than 16.6%.  The West Texas Intermediate Oct contract was $68.13 per barrel, up 46¢ (0.7%) & YTD US crude oil has fallen 4.8%.  Bent Nov was $71.56 per barrel, up 50¢ (0.7%) & YTD, the global benchmark has pulled back 7%.  Weak demand in China has weighed on the crude market, with consumption expected to soften in Europe & the US as the summer driving season winds down & refineries go into maintenance mode.  OPEC+ has delayed a production boost originally scheduled to begin in Oct as prices have deteriorated.  Some analysts expect the group to start increasing production in Dec & forecast that Brent will trade around $70-85 per barrel.

U.S. crude oil rebounds after worst week since 2023

Buyers returned as inflation came back into focus for investors gauging pressures that could influence the size of interest rate cuts.  Comments by Fed officials appeared to tilt the market in favor of a 0.25% cut by suggesting that incoming data would have to support the need for larger & further easing.

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.