Markets climb as the Fed's favored inflation gauge cools

Dow shot up 439, advancers over decliners better than 4-1 & NAZ surprisingly fell 46.  The MLP index rebounded 1+ to the 283s & the REIT index rose about 3 to 438.  Junk bond funds were little changed & Treasuries saw a little buying which took yields slightly lower (more below).  Oil added chump change to 67 & gold slid back 11 to 2683.

Dow Jones Industrials

An inflation gauge closely watched by Federal Reserve policymakers continued to slow in Aug as the pace of price growth trended closer to the Fed's target.  The Commerce Dept reported that the personal consumption expenditures (PCE) price index rose 0.1% from the prior month & 2.2% year over year.  The annual figure came in cooler than the estimate.  Core PCE, which excludes volatile food & energy prices, rose 0.1% for the month & increased 2.7% from a year ago, in line with estimates & little changed from a month ago.  The Federal Reserve is focusing on the PCE headline figure as it tries to bring the pace of price increases back to 2%, although policymakers view the core data as a better indicator of inflation.  Both the core & headline figures suggest that inflation is continuing to cool.  The headline PCE data showed that prices for goods decreased 0.2% while prices for services increased 0.2% on a monthly basis in Aug.  Food prices rose 0.1% & energy prices decreased 0.8% from a month ago.  Compared with last Aug, prices for goods are down 0.9% while prices for services are up 3.7%.  Food prices are up 1.1% & energy prices are down 5% from a year ago.  The report also showed that wages & salaries were up 0.5% in Aug, showing slightly faster growth than the 0.3% increase in Jul, but notably slower than the 1% monthly gain seen in Jan.  It also found that the personal savings rate as a percentage of disposable income was 4.8% in Aug, down slightly from the 4.9% reading a month ago & 5.5% in Jan.

Inflation measure closely watched by the Fed fell to 2.2% in August

The Food & Drug Administration approved Bristol Myers Squibb's (BMY) highly anticipated schizophrenia drug Cobenfy, the first novel type of treatment for the debilitating, chronic mental disorder in more than 7 decades.  Schizophrenia affects how a person thinks, feels & behaves & can cause paranoia, delusions, hallucinations & changes in emotions, movements & behavior.  Those symptoms can disrupt a patient's everyday life, making it difficult to go to school or work, socialize & complete other daily activities.  Most people are diagnosed in their late teens to early 30s.  BMY expects the twice-daily pill, which will be sold under the brand name Cobenfy, to be available in late Oct.  The drug is a badly needed new option for the nearly 3M adults in the US living with schizophrenia, some medical experts say.  Only 1.6M of those patients are treated for the condition & 75% of them stop taking existing medications in the first 18 months because they struggle to find treatments that are effective or easy for them to tolerate, according to the drugmaker.  Cobenfy could also be a huge long-term sales opportunity for BMY, which faces pressure to offset the potential loss of revenue from top-selling treatments that will see their patents expire. The drug comes from the company's whopping $14B acquisition of biotech company Karuna Therapeutics at the end of last year.  Cobenfy will cost $1850 for a month's supply or $22K annually before insurance & other rebates, BMY execs said.  They said that pricing is in line with existing branded oral schizophrenia treatments & that they expect most patients, particularly those enrolled in Medicare & Medicaid plans, to have minimal out-of-pocket costs for the drug.  Around 80% of patients living with the condition are covered by gov insurance, according to BMY.  The stock rose 1.49.

FDA approves Bristol Myers Squibb’s schizophrenia drug, the first new type of treatment in decades

Treasury yields dipped after the release of key inflation data that showed the rate of price increases is close to the Federal Reserve’s target.  The yield on the 10-year Treasury was down about 3 basis points at 3.756% & the 2-year Treasury yield was last at 3.586% after falling nearly 4 points.  Yields & prices have an inverted relationship & 1 basis point equals 0.01%.  Investors focused on the release of Aug's personal consumption expenditures price index, which is the Federal Reserve's preferred inflation gauge & could therefore provide clues about the monetary policy outlook.  The PCE data comes as investors have been giving renewed attention to the state of the economy after the Fed announced a hotly anticipated interest rate cut earlier in the month.  Data published yesterday calmed questions about whether there could be an economic downturn ahead & indicated to some investors that the Fed's reasoning for cutting rates was not a weakening economy.  The final reading of the 2nd-qtr gross domestic product was unrevised, remaining at 3%, while weekly initial jobless claims pulled back by more than expected & durable goods orders for Aug were unchanged compared to the forecast decline. 

Treasury yields ease after tame inflation reading

Investors welcomed an inflation report seen as crucial to the Federal Reserve's next decision on interest rate cuts.  The "core" PCE index, which is most closely watched by policymakers, came in lower than forecasts.  Confidence in the economy returned to the market.  A solid GDP reading, combined with continued cooling in inflation, has signaled a growing conviction that the Fed can nail a soft landing as it embarks on a rate-cutting campaign.  However tech stocks on NAZ did participate in today's rally.

Markets rise to new records on solid economic data, tech stock gains

Dow went up 260 to another record, advancers over decliners 3-2 & NAZ advanced 108.  The MLP index retreated 3+ to the 283s & the REIT index fell 4+ to the 434s.  Junk bond funds fluctuated & Treasuries had limited selling which brought slightly higher yields.  Oil sank 2+ to the 67s & gold jumped 14 to a whopping 2698 (more on both below).

Dow Jones Industrials 

Mortgage rates barely moved this week, but long-term notes declined to the lowest levels Americans have seen since 2022.  Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate on the benchmark 30-year fixed mortgage ticked down to 6.08% from last week's reading of 6.09% & the average rate on a 30-year loan was 7.31% a year ago.  "Although this week’s decline was slight, the 30-year fixed-rate mortgage trended down to its lowest level in two years," said Sam Khater, Freddie Mac's chief economist.  "Given the downward trajectory of rates, refinance activity continues to pick up, creating opportunities for many homeowners to trim their monthly mortgage payment," Khater added.  "Meanwhile, many looking to purchase a home are playing the waiting game to see if rates decrease further as additional economic data is released over the next several weeks."  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 rose slightly to 5.16% from 5.15% last week.  One year ago, the rate on the 15-year fixed note averaged 6.72%.

Long-term mortgage rates drop to two year low

US sales of new vehicles are expected to have struggled during the 3rd qtr amid economic & political uncertainties, as well as elevated interest rates and prices, according to industry forecasters.  Sales are projected to fall roughly 2% during the 3rd qtr compared with the same time in 2023, to about 3.9M vehicles sold, according to Cox Automotive & Edmunds.com.  That would be a roughly 5% decrease compared with the 2nd qtr of this year.  Analysts note that the Federal Reserve's decision last week to cut rates was a step in the right direction, but it does not necessarily guarantee a major uptick in auto sales thru the rest of the year.  “2024 has been a volatile year for the new vehicle market, and more of the same is expected in Q4,” said Charlie Chesbrough, Cox Automotive senior economist.  “Affordability remains the main obstacle to a stronger market, but it is improving, so we remain optimistic on the outlook for industry sales.”  Both Cox & Edmunds expect light-duty US vehicle sales to total about 15.7M vehicles in 2024.  Edmunds has maintained its guidance since the beginning of the year, while Cox lowered it from an initial forecast of 16M.  Jessica Caldwell, Edmunds' head of insights, said the current market is just too expensive for many consumers, limiting the number of Americans who can purchase a new vehicle.  “Who can afford new cars seems to be the big issue.  People, on average, are having to finance $40,000 for a new car,” she said.  “The new market is quite limiting for a lot of buyers.”  The average transaction price for a new vehicle is down from a year ago but remains elevated compared with historical levels at $48K, according to Cox.

U.S. new vehicle sales expected to have struggled during third quarter

Orders for US durable goods were flat in Aug, the Commerce Dept reported.  The result was much better than anticipated.  The forecast called for a 3% fall in orders for durable goods, products made to last at least 3 years.  Durable good orders rose a revised 9.9% in Jul, up slightly from the prior estimate of a 9.8% gain.  Core capital goods orders, which exclude volatile sectors like transportation & defense, rose 0.2% last month after a 0.2% drop in Jul.  Shipments of core goods, which are factored into GDP, rose 0.1% in Aug.  Details of the report were stronger than expected.  Transportation orders fell 0.8% in Aug after a strong 34.6% gain in the prior month.  Orders for motor vehicles & parts rose 0.2% after a 3.5% drop in Jul.  Orders excluding transportation rose 0.5% & excluding defense goods fell 0.2%.  Orders for primary metals & fabricated metals rose in Aug as did orders for machinery & computer equipment.  Huge swings in durable goods orders over the past few months has masked weakness in the manufacturing side of the economy.  Core orders are up a modest 0.3% over the past year.  Economists had been hopeful for a pickup in business spending this year but now have pushed any improvement to next year.

Durable-goods orders were flat in August, beating forecasts of a sharp declines

Gold prices continue their ascension, with the front-month contract setting yet another record-high, closing up 0.4% to $2669 an ounce.  It's the 7th consecutive day that gold has finished higher, closing at record highs for 6 of those sessions.  Fear of gold overextending itself appear minimal, as interest rate cuts have materialized with more expected to come.  Analysts say there is no reason to sell gold since the Fed's projected rate path is supportive.  Gold has gained almost 30% this year, with the rally gaining momentum after the Fed's ½-point cut last week.  The precious metal has also been supported by strong central bank purchases & heightened geopolitical tensions driving haven demand.

Gold Hits Another Record in 7-Day Win Streak

Oil prices settled sharply lower as Saudi Arabia reportedly will abandon its unofficial $100 price target as it looks set to proceed with an OPEC+ to boost output in Dec.  Brent oil futures fell 2.7% to $70.97 a barrel, while West Texas Intermediate crude futures dropped 2.9% to settle at $67.67 a barrel.  A report said that Saudi Arabia, the world's top oil exporter, is preparing to abandon its unofficial price target of $100 a barrel for crude as it prepares to increase output.  The Organization of the Petroleum Exporting Countries, which is traditionally lead by the Saudis, along with the group's allies including Russia, together known as OPEC+, have been cutting oil output to support prices.  Earlier this month, the group decided to push back plans to gradually phase out the additional cuts of 2.2M bpd over the course of a year by 2 months to Dec.  Sources said that OPEC+ is set to proceed with plans to increase oil output on Sep despite the recent fall in oil prices as the impact would likely be blunted by some pledges from members to make deeper cuts to comply offset the production that was in excess of the agreed quotas.  

Oil prices slump on oversupply concerns as Saudi-led OPEC+ eyes production hike

Stocks were looking positive again thanks to a triple-dose of optimism for the AI trade, the health of the US economy & China's stimulus push, which could reverberate thru US markets.  A final update from the US gov on 2nd qtr GDP growth beat expectations, while weekly jobless claims unexpectedly fell to the lowest levels in 4 months.  Meanwhile, China's top leaders signaled they are pulling out the stops to revive its moribund economy with new pledges to lift fiscal spending, halt the property crisis, & support the stock market.  A big jump in mainland stocks set the CSI 300 on track for its best week in a decade.

Markets ease higher as US GDP data lifts expectations

Dow was up 213, advancers over decliners 2-1 & NAZ gained 35.  The MLP index fell 2+ to the 285s & the REIT index slid back 1 to the 438s.  Junk bond funds were mixed & Treasuries had more selling, driving yields higher (more below).  Oil dropped 1+ to the high 68s (more below) & gold crawled up 3 to 2688.

Dow Jones Industrials

The US economy grew at a 3% annual rate in the 2nd qtr, in line with expectations, according to new data from the Commerce Dept's Bureau of Economic Analysis.  The forecast projected an annual growth rate of 3% in the 2nd qtr, after the 2nd advance read came in at 2.8% in Jul.  The report also revised first-qtr GDP growth to 1.6%, up from 1.4% in the prior reading.  That comes after the economy grew 3.4% in the 4th qtr of 2023.

US economy grew 3% in the second quarter, in line with expectation

US crude oil prices fell nearly 3% on a report that Saudi Arabia is committed to pressing ahead with production increases later this year.  Saudi is prepared to ditch its unofficial oil price target of $100 per barrel, people familiar with the kingdom's thinking said.  Saudi officials are ready to increase oil production in Dec even if the move results in a prolonged period of low oil prices.  West Texas Intermediate Nov contract was $68.15 per barrel, down $1.54 (2.2%) & YTD, US crude oil is down about 5%.  Brent Nov contract was $71.86 per barrel, down $1.60 (2.2%) & YTD, the global benchmark is down nearly 7%.  Prices are also under pressure on the expectation that oil production will rise in Libya.  Factions in the North African country reached a deal yesterday to appoint a new central bank governor.  A political dispute over who should lead the bank has led to production disruptions.  The prospect of rising production is set against a backdrop of soft demand in China, the world's largest crude importer & 2nd-largest consumer.  Oil prices rallied earlier in the week after Beijing announced a new stimulus package.

U.S. crude oil falls nearly 3%, trades below $68 on report Saudi committed to production increase

Treasury yields were higher as investors looked to fresh economic data & remarks from Federal Reserve officials.  The yield on the 10-year Treasury was up by 3.4 basis points at 3.815% & the 2-year Treasury yield was last at 3.61%, after rising by 5.7 basis points.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  After the Federal Reserve cut interest rates by 50 basis points earlier this month, investor attention has shifted back to the state of the US economy & whether a slowdown or downturn is on the horizon.  Investors received encouraging economic data today that supported the view that the central bank's decision to cut interest rates isn't in response to a weakening economy.  Weekly jobless claims pulled back more than expected for last, indicating a still-churning labor market.  Durable goods orders for Aug were unchanged while economists forecast a decline.  The final reading of 2nd-qtr GDP was unrevised at 3%, respectively.  A series of Fed policymakers including central bank Chair Jerome Powell are set to give remarks, which investors will be parsing thru for hints about their expectations for the economy.  Elsewhere, the Swiss National Bank cut its key interest rate by a qtr point, marking the 3rd reduction this year.

Treasury yields steady as investors look to economic data, Fed speaker comments

Investors welcomed a slew of updates, including solid US economic data & China's pledges of more stimulus, while they waited to hear from Jerome Powell.  Helping the upbeat mood were growing expectations for another jumbo interest rate cut from the Federal Reserve.  Traders are pricing in 60% odds of a 0.5% move at its Nov meeting, versus 40% a week ago.

Markets drift lower as rally loses steam

Dow dropped 293, decliners over advancers better than 5-2 & NAZ was up 7.  The MLP index fell 1+ to 287 & the REIT index slid back 2+ to the 239s.  Junk bond funds slid lower & Treasuries were sold, raising yields.  Oil fell 1+ to the high 69s as optimism over China stimulus plan fades & gold gained 8 to 2685 (more on both below).

Dow Jones Industrials 

Novo Nordisk’s (NOVO) blockbuster diabetes drug Ozempic may decrease the risk of opioid overdoses in certain patients, demonstrating its potential as an alternative treatment for opioid use disorder, according to a new study.  The active ingredient in Ozempic, semaglutide, was associated with a “significantly lower” opioid overdose risk than other diabetes medications in people diagnosed with both Type 2 diabetes & opioid use disorder, said the paper published in JAMA Network Open.  The results suggest that Ozempic could offer potential as a tool for addressing the ongoing US opioid epidemic, which was declared a public health emergency in 2017.  There are currently 3 effective medications to prevent overdoses from opioid use disorder, but a new alternative is needed because some patients simply don’t use them, said lead study co-author Dr Rong Xu, a biomedical informatics professor at Case Western Reserve University.  In 2022, only about a qtr of patients with opioid use disorder received recommended medications for it, & many discontinued treatment within 6 months, according to the Centers for Disease Control & Prevention.  The National Center for Drug Abuse Statistics says opioids are a factor in around 72% of overdose deaths in the US.  The study results also add to mounting evidence that a highly popular class of diabetes & obesity treatments called GLP-1s may have several health benefits beyond regulating blood sugar & promoting weight loss.  NOVO, its rival Eli Lilly (LLY) & independent researchers have been racing to study those drugs' potential in patients with chronic conditions ranging from kidney disease & sleep apnea to addictive behaviors such as nicotine & alcohol use.  NOVO went up 1.44 & LLY rose 12¢.   

Novo Nordisk’s diabetes drug Ozempic may lower the risk of opioid overdoses, study says

Harley-Davidson (HOG) is recalling about 41K motorcycles over concerns that wiring inside the bikes could experience a short circuit & cause a loss of power.  The company said in a report filed with the National Highway Traffic Safety Administration (NHTSA) that the recalled 2024 FLHX, FLHXSE, FLTRX, FLTRXSE & FLTRXSTSE motorcycles could experience a short circuit if their voltage regulator output wire becomes exposed from rubbing against the crankcase.  "If a short to ground occurs, the 60-amp main fuse may open, resulting in a loss of propulsion, combined with a loss of all electrical power, without prior indication to the rider," the recall report said.  "The unexpected loss of propulsion combined with the loss of all electrical power while in motion, without the ability to restart, may increase the risk of the crash."  The recalled FLHX and FLTRX motorcycles were built between late Oct 2023 & this Jul.  Meanwhile, the production for others occurred between Nov 2023 & Jul.  Authorized Harley-Davidson dealers will fix the recalled motorcycles for free.  Addressing the issue "will include inspection of the voltage regulator output wire harness and installation of a secondary retention strap," according to the report.  "We are not aware of any crashes or injuries associated with this condition," Harley-Davidson said in the report.  The stock was off 28¢.

Harley-Davidson recalls 41K motorcycles over wiring issue that could cause loss of power

More Americans are looking for jobs & unemployment worries are at their highest level in a decade, according to a new survey released by the Federal Reserve Bank of New York.  According to the NY Fed, the average expected likelihood of becoming unemployed in the next 4 months reached 4.4% in Jul, the highest in the survey's 10-year history.  This compared to 3.9% a year ago.  The expected likelihood of moving to a new employer also increased, rising to 11.6% last month from the 10.6% seen in Jul 2023.  More respondents are also actively on the job hunt, with 28.4% saying they've been searching for a new job over the past 4 weeks, the highest level since 2014 & an increase from 19.4% in Jul 2023.  The survey, which also noted decreased satisfaction with wage compensation, non-wage benefits & promotion opportunities at respondents' current jobs, comes as the Federal Reserve weighs recent labor market weakness with the unemployment rate now at 4.3%.  Economists & strategists have warned any further deterioration of the labor market would likely have a negative spillover effect to markets & beyond.

Americans looking for jobs at highest rate

Gold held steady after hitting an all-time high on hopes of another large US rate cut as the spotlight shifted to Fed Chair Jerome Powell's comments & US inflation data due later this week.  Spot gold was steady at $2655 per ounce, after hitting an all-time high of $2670 earlier.  US gold futures gained 0.1% to $2679.  The Federal Reserve delivered a 50-bp cut at its last policy meeting & traders see a 58% chance of another ½-percentage-point cut next month.  Lower interest rates boost non-yielding gold's appeal.  Gold hit a fresh all-time high as markets ramped up bets for another jumbo-sized Fed rate cut in Nov.

Gold Scales Record Peak on Bets of Another Big Fed Rate Cut

West Texas Intermediate (WTI) closed with a loss, giving up some day-prior gains that came as China took steps to stimulate its economy while the 2nd Gulf of Mexico storm in 2 weeks cuts into supply & a report showed a larger than expected drop in US inventories.  WTI crude oil for Nov closed down $1.87 to settle at $69.69 per barrel, while Nov Brent crude, the global benchmark, was last seen down $1.66 to $73.51.  In its weekly survey, the Energy Information Administration reported US oil inventories fell by 4.5M barrels last week, more than the estimate for a drop of 1.1M barrels.  The drop in stocks came as Hurricane Francine earlier this month cut production from the Gulf of Mexico.  Another storm, dubbed Helene, rose to hurricane strength today ahead of landfall in northern Florida tomorrow, according to the National Hurricane Center.  Gulf producers have begun evacuating platforms ahead of Helene's arrival, again cutting into supply.  The Bureau of Safety and Environmental Enforcement, the US offshore regulator, reporting 511K barrels per day have so far been shut in, 29% of gulf output.

WTI Crude Closes Down 2.6% Despite China Stimulus, Falling U.S. Inventories and Supply Cuts

After markets hit all-time highs, investors are looking for new data as to the health of the economy & the chances of another jumbo rate cut.  Stock averages are at records highs, but need more evidence that the rally can continue.

Markets hesitate as investors keep a watchful eye on the economy

Dow dropped 144, decliners over advancers 3-2 & NAZ went up 56.  The MLP index fell 1 to the 287s & the REIT index fluctuated in the 441s.  Junk bond funds eased lower & Treasuries saw more selling, driving yields higher.  Oil dipped under 71 & gold rose 7 to 2684 for another record.

Dow Jones Industrials

Online spending is expected to jump 8.4% to $241B this holiday shopping season, largely driven by a surge in discounts & the popularity of buy now, pay later services, according to Adobe's latest figures.  This estimate surpasses the $222B shoppers spent online during last year's holiday shopping season, which spans from Nov 1 - Dec 31.  The holiday season, according to Adobe lead analyst Vivek Pandya, "has been reshaped in recent years, where consumers are making purchases earlier, driven by a stream of discounts that has allowed shoppers to manage their budgets in different ways."  Pandya said that these "discounting patterns are driving material changes in shopping behavior, with certain consumers now trading up to goods that were previously higher-priced and propelling growth for U.S. retailers."  This year, shoppers will see "strong discounts" for as much as 30% off listed prices, convincing them to "trade up" in certain categories such as electronics, appliances & sporting goods.  This will contribute to over $2B in incremental spending.  At the same time, the buy now, pay later services, which allow consumers to pay in installments, will drive a record $18.5B in online spending, up 11.4% year over year.  In Nov alone, Adobe estimates that the flexible spending method will drive $9.5B in sales, which would be the largest month on record.  However, Cyber Monday is projected to mark the largest day on record for buy now, pay later spending at $993M.  About 39% of millennials will use this payment method, followed by 38% of Gen Z shoppers.  The primary reason consumers cite for using these services is that it frees up cash & allows them to purchase items they otherwise wouldn't be able to afford.

Buy now, pay later discounts drive holiday spending

A steady decline in mortgage rates to 2-year lows has current homeowners rushing to take advantage of potential savings.  Applications to refinance a home loan surged 20% last week compared with the previous week, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index.  Demand was a stunning 175% higher than the same week 1 year ago.  This as the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766K or less) decreased to 6.13% from 6.15%, with points increasing to 0.57 from 0.56 (including the origination fee) for loans with a 20% down payment.  The rate was 128 basis points higher the same week one year ago, or 7.41%.  "The 30-year fixed rate decreased for the eighth straight week to 6.13%, while the FHA rate decreased to 5.99%, breaking the psychologically important 6% level," said Joel Kan, VP & deputy chief economist at the MBA.  "As a result of lower rates, week-over-week gains for both conventional and government refinance applications increased sharply."  The refinance share of applications rose to 55.7%.  While the jump compared with a year ago is large & the share is now a majority of total mortgage demand, the level of refinance activity is still modest compared with prior refi waves, according to Kan.  Part of that is the seasonal slowdown in homebuying.  Mortgage applications to purchase a home rose just 1% for the week & were 2% higher than the same week 1 year ago.  Buyers are still facing high home prices & limited supply of houses for sale.  "Average loan sizes were higher both for purchase and refinance applications, which pushed the overall average loan size to its highest in the survey's history at $413,100," Kan added.  Mortgage rates haven't moved much to start this week, & will likely wait for more pressing economic data later in the week & at the start of Oct.

Mortgage refinance boom takes hold, as weekly demand surges 20%

Treasury yields were slightly higher as investors weighed economic data & considered the state of the economy.  The yield on the 10-year Treasury was up by 3.6 basis points to 3.772% & the 2-year Treasury yield was last at 3.547% after rising by just over 2 basis points.  Yields & prices move in opposite directions 1 basis point equals 0.01%.  Investor attention is refocusing on the state of the US economy after the Federal Reserve announced the hotly anticipated start of its interest rate cuts last week.  Economic data points will therefore be watched closely in the coming days & weeks as concerns about a potential slowdown of the economy linger.  Data yesterday showed that consumer confidence fell to its lowest level in over 3 years in Sep, coming in at 98.7.  That is down from 105.6 in Aug & below the consensus estimate of 104.  New home sales figures for Aug are expected today, before durable goods orders data, weekly initial jobless claims & a final 2nd-qtr GDP reading are slated tomorrow.  Later this week, investors will also hear from Fed officials including Chair Jerome Powell.  They will be watching closely for any new hints about the outlook for monetary policy & the Fed's expectations for the economy.  At the end of the week, key economic data in form of the latest personal consumption expenditures (PCE) price index is also set to be published.  The PCE is the Fed's favored inflation gauge.

Treasury yields inch higher as investors consider the state of the economy

Investors will look at upcoming data for clues to the health of the economy & the chances of another jumbo rate cut.  There are worries the US economy could find itself in a recession, with concerns fanned by a surprisingly weak reading on consumer confidence.  The debate centers on whether the Federal Reserve lowered rates by a bigger-than-usual 0.5% in response to a slowing economy & what further malaise means for another hoped-for deep cut.

Markets rise and gold sets a new record

Dow rose 83, advancers over decliners 3-2 & NAZ gained 100.  The MLP index was flat staying near 289 & the REIT index was even in the 442s.  Junk bond funds were a little higher & Treasuries saw limited buying which reduced yields slightly.  Oil went up 1+ to the 71s & gold soared 29 to a new record at 2682 (more on both below).

Dow Jones Industrials 

US home buyers are gaining tens of thousands in purchasing power as mortgage rates drop.  With 30-year fixed mortgage rates declining from 7.79% in Oct 2023 to 6.2% last week, home buyers in the 100 largest US cities have gained a median of $70K in additional buying power for the same $2100 monthly payment, according to a Realtor.com analysis.  A US buyer can now afford a home $70K more expensive than what they were planning to purchase last year.  The findings are based on the monthly payment for a median-priced home in the US a 20% down payment & a 6.2% mortgage rate.  The analysis applied the same method to each of the 100 largest cities, calculating how much extra buying power homebuyers have in each local market compared with last year.  Those savings will likely grow, too.  With the Federal Reserve cutting its benchmark federal funds rate by 50 basis points last week, mortgage rates are forecasted to decline to 6% or less at some point in 2025.  If that happens, additional buying power for homebuyers in the 100 largest metro areas would increase to $85K for a median-priced home, compared with Oct 2023, according to the analysis.

Mortgage rates dip, U.S. homebuyers gain thousands in additional spending power

Nvidia (NVDA) CEO Jensen Huang is done selling the chipmaker's stock for the time being, cashing in more than $700M under a prearranged plan.  The 61-year-old exec in mid-Mar adopted a trading plan for the sale of up to 6M NVDA shares by the end of the first qtr of 2025.  Huang has hit that threshold months ahead of schedule after a flurry of transactions between Jun 13 - Sep 12.  Even though the sales were made under a 10b5-1 plan, which allows insiders to sell shares under a preplanned structure, NVDA shares seemed to get a boost from the update today.  The chipmaker has been the biggest beneficiary of the artificial intelligence boom, with shares rallying more than 140% this year.  NVDA briefly topped a $3T market cap earlier this year, & its dominance has grown so big that it tends to influence the broader market & investor sentiment.  The stock rose 4.61.

Nvidia shares pop as CEO may be done selling shares after hitting preset limit

Israeli Pres Isaac Herzog threatened further military action against Hezbollah 1 day after Israel launched airstrikes across Lebanon, killing more than 550 people in the country's deadliest day in nearly 2 decades.  It marks a dramatic escalation of hostilities between Israel & Iranian-backed Lebanese militant group Hezbollah following nearly 12 months of strikes since the start of the Israel-Hamas war in Gaza, stoking fears of an all-out regional war.  Thousands of Lebanese residents in the country's south are fleeing their homes amid the bombardments, with many receiving automated text messages & calls telling them to evacuate.  Israel's gov issued warnings to people in areas of Lebanon where it was targeting Hezbollah.  Asked if Israel will launch a full-scale ground operation in Lebanon, Herzog insisted that his country did not want war.  “Israel is not interested, did not want this war, and is not interested in going to war with Lebanon,” Herzog said.  “But Israel has been attacked from Oct. 8 from Lebanon endlessly. And if you look at the situation today, Hezbollah has launched missiles and rockets all over the northern part of Israel. So we will do whatever it takes to bring our citizens back home and enable calm in our cities. That’s the situation.”  “We’ve shown our capabilities, and we have much more on the way, if they will continue,” Herzog added.  Hezbollah has continued firing rockets into northern Israel since the attack, most of which have landed in open areas or been intercepted by air defenses.  On Sat, the group launched a salvo of more than 100 missiles into northern Israel, wounding at least 5 people, Israeli authorities said.  Hezbollah said the strikes were in response to the previous week's pager & device detonation attack that killed 38 people, including some children, & injured more than 3K.  It says the attacks were carried out by Israel, which has not commented.

‘Much more on the way, if they will continue,’ Israel’s president warns Hezbollah

Gold reached another all-time high as weak consumer confidence data bolstered the case for deeper interest-rate cuts from the Federal Reserve this year.  Bullion rose 1.2% to a record $2659 an ounce, beating the previous high set yesterday.  US consumer confidence unexpectedly fell in Sep by the most in 3 years on concerns about the labor market & the outlook for the broader economy.  The $ fell along with Treasury yields.  Gold has advanced since the Fed lowered its benchmark interest rate by ½ a percentage point last week, building on what was already a record-setting year for the precious metal.  Federal Reserve Governor Michelle Bowman said today the central bank should lower interest rates at a "measured" pace, arguing that inflationary risks remain & that the labor market has not shown significant weakening.  That's in contrast to recent comments from other Fed officials who have described the risks to achieving the central bank's 2 goals, maximum employment & stable inflation, as roughly balanced or leaning toward employment.  US economic data due later this week, including personal consumption expenditure figures, will also likely play into market expectations of the central bank's next moves.  Lower rates are often seen as positive for non-interest bearing gold.  Apart from the expectations of Fed rate cuts, bullion's roughly 29% rally so far this year has also been supported by robust purchasing by central banks & haven demand amid conflicts in the Middle East & Ukraine.  Spot gold rose 1.1% to $2656 an ounce.

Gold Hits Another Record as Weak US Data Bolsters Rate-Cut Case

WTI crude oil futures jumped by 1.7% to settle at $71.5 today, driven by China's sweeping economic stimulus measures & rising geopolitical tensions in the Middle East.  China's central bank unveiled its largest stimulus package since the pandemic, featuring increased funding & significant rate cuts, in a bid to revive growth amid fears of a prolonged economic slowdown.  In the Middle East, Israeli airstrikes on Hezbollah positions in Lebanon, resulting in hundreds of casualties, stoked fears of a wider regional conflict that could draw in Iran, a key OPEC member.  Adding to supply concerns, US oil producers in the Gulf of Mexico began evacuating rigs & halting production as a powerful hurricane threatened to disrupt offshore operations for the 2nd time in 2 weeks.

Oil Prices Soar on China's Stimulus and Rising Geopolitical Tensions

Stocks struggle to maintain momentum from the recent rally.   Investors are digesting China's launch of aggressive stimulus that lifted market spirits & a weaker-than-expected reading on consumer confidence.  The Fed's jumbo rate cut last week kicked off the rally, & yesterday, several policymakers hinted the door is open for more big moves.  Today, Fed governor Michelle Bowman explained she dissented to last week's ½ percentage point interest rate cut because upside risks to inflation remain prominent.  At the same time, gold continues its rally.

Markets slip after Fedspeak comments, falling consumer confidence

Dow went up 65, advancers over decliners 3-2 & NAZ fell 45.  The MLP index was even, near 290, & the REIT index inched higher in the 442s.  Junk bond funds were a little higher & Treasuries had limited selling which raised yields.  Oil rose 1+ to the 71s & gold added 9 to a new record at 2662.

Dow Jones Industrials

Federal Reserve Governor Michelle Bowman said she thought her colleagues should have taken a more measured approach to last week's ½ percentage point interest rate cut as she worries that inflation could reignite.  Bowman was the lone dissenter from the Federal Open Market Committee's (FOMC) decision to lower benchmark interest rates for the first time in more than 4 years.  No governor had dissented from an interest rate decision since 2005.  In explaining her rationale, Bowman said the ½ percentage point, or 50 basis point, reduction posed a number of risks to the Fed's twin goals of achieving low inflation and full employment.  The jumbo cut “could be interpreted as a premature declaration of victory on our price-stability mandate.  Accomplishing our mission of returning to low and stable inflation at our 2 percent goal is necessary to foster a strong labor market and an economy that works for everyone in the longer term,” she said.  Inflation by the Fed's preferred metric is running at 2.5%, above the central bank's 2% goal.  Excluding food & energy, core inflation is at 2.6%.  Though Bowman favored a reduction, she preferred the Fed lower by a qtr percentage point, more in line with the traditional moves at the central bank.  The FOMC last cut by ½ a point in the early days of the Covid pandemic in Mar 2020 & before that the global financial crisis in 2008.  Bowman cited several specific concerns: that the big move would indicate that Fed officials see “some fragility or greater downside risks to the economy”; that markets might expect a series of large cuts; that large amounts of sideline cash could be put to work as rates fall, stoking inflation; & her general feeling that rates won't need to come down as much as her fellow policymakers have indicated.  “In light of these considerations, I believe that, by moving at a measured pace toward a more neutral policy stance, we will be better positioned to achieve further progress in bringing inflation down to our 2 percent target, while closely watching the evolution of labor market conditions,” she added.  In recent statements, Fed officials have cited easing inflation & a softening labor market as justification for the cut.  At last week's meeting, individual policymakers indicated they expect another ½ percentage point in cuts this year ½ another full point in 2025.  Market pricing, however, is more aggressive, expecting 2 full percentage points in cuts thru next year.

Fed Governor Bowman explains dissent on rate vote, says she’s worried about inflation

A year after geopolitics as the world’s biggest risk, JPMorgan Chase’s (JPM) CEO sounded the alarm again, warning that the state of global stability has gotten worse.  During his visit to India, Dimon said “My caution is all geopolitics, which may determine the state of the economy.”  “Geopolitics is getting worse, they are not getting better. There is chance for accidents in energy supply. God knows if other countries get involved. You have a lot of war taking place right now,” he added, before referencing attacks conducted by Yemen's Houthi rebel group that have taken place in the Red Sea.  According to the US military, the Houthis have attacked at least 2 crude oil tankers this month.  Geopolitical instability “is my biggest caution,” Dimon noted.  He also urged the US to prepare for a prolonged war between Ukraine & Russia.  The interview came almost a year after Dimon had called geopolitics, after Russia's invasion of Ukraine, the biggest risk that he sees facing the world, larger than high inflation or a US recession.  Following a lengthy period of sticky inflation, the Federal Reserve last week made a jumbo rate cut, its first reduction since 2020.  Traders have piled on, driving the S&P 500 to a fresh closing high yesterday.  But Dimon expressed skepticism about the US economy & what markets are pricing in.  “I’m a long-term optimist, but in the short run, I’m also more skeptical of other people that say everything [is] going to be great. Markets are pricing things like they’re going to be great. Put me on the cautious side of that one,” he said.

JPMorgan CEO Jamie Dimon warns ‘geopolitics is getting worse’

Consumers’ view on the economy tumbled in Sep, falling by the largest level in more than 3 years as fears grew about jobs and business conditions, the Conference Board reported.  The board's Consumer Confidence Index slid to 98.7, down from 105.6 in Aug, the biggest 1-month decline since Aug 2021.  The forecast was for a reading of 104.  Each of the 5 components the organization samples fared worse on the month, with the biggest fall coming among those aged 35-54 & earning less than $50K.  “Consumers’ assessments of current business conditions turned negative while views of the current labor market situation softened further. Consumers were also more pessimistic about future labor market conditions and less positive about future business conditions and future income,” said Dana Peterson, chief economist at The Conference Board.  The last time the confidence index dropped more came as inflation was just beginning a climb to what ultimately was the highest level in more than 40 years.  In addition to the steep drop in the confidence index, the Present Situation measure worsened by 10.3 points to 124.3 & the Expectations Index was off 4.6 points to 81.7.  Respondents' concerns focused mostly on jobs & inflation.  Those saying jobs are plentiful continued to decline, falling to 30.9% from 32.7% in Aug, while the jobs “hard to get” measure rose to 18.3%, up from 16.8%.  On inflation, the 12-month outlook rose to 5.2%, with concerns over price increases topping the list of economic concerns.  “The proportion of consumers anticipating a recession over the next 12 months remained low but there was a slight uptick in the percentage of consumers believing the economy was already in recession,” Peterson continued.

September consumer confidence falls the most in three years

Stocks flounder as investors digest China's launch of aggressive stimulus lifted market spirits & then came a weaker than expected reading on consumer confidence.  Gold continues to be in demand.

Markets pause with Fed speakers and inflation in focus

Dow edged up 61, advancers over decliners 4-3 & NAZ added 25.  The MLP index advanced 3 to the 288s & the REIT index was 3+ higher to the 441s.  Junk bond funds hardly budged & Treasuries had limited selling which took yields slightly higher.  Oil slid under 71 & gold gained 5 to 2652, but below early highs (more on both below).

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Boeing (BA), a Dow stock, sweetened a contract offer & said it was its “best and final” proposal for its more than 30K machinists as their strike, which has halted most of the aerospace giant's aircraft production, entered its 2nd week.  The new offer raised pay, reinstated annual bonuses & increased a bonus that would be given upon the contract’s ratification, among other changes, BA said.  The new offer would raise general wages by 30% over 4 years, up from a previously proposed 25%, doubled the ratification bonus to $6K & reinstated an annual bonus.  The labor union, the Intl Association of Machinists & Aerospace Workers, didn't immediately comment on the offer.  BS said the offer is contingent upon ratification by Fri at 11:59PM PT.  The new offer is BA's latest attempt to reach a deal with its machinists & end a costly strike, the unionized work group’s first since 2008.  Machinists on picket lines in Renton, Washington, said last week that they rejected the first contract with higher pay because they wanted their wages to keep up with the sharp increase in the cost of living in the Seattle area.  The stock went up 2.93.

Boeing sweetens labor proposal in ‘best and final’ offer as strike enters second week

Foot Locker (FL) turned 50 while on a bit of an upswing 2 years into Dillon's tenure as CEO.  Last month, it released fiscal 2nd-qtr results & full-year guidance that beat expectations, as comparable sales grew for the first time in 6 qtrs.  As FL revamps its sprawling store footprint, & perhaps benefits from some good timing, it's making strides in winning back its critical brand partners.  “Our last qtr was a really good indication that the hard work that we've been putting into the Lace Up plan is working, and that makes me feel really, really great, because I really see the next 50 years of growth for Foot Locker and our future,” Dillon said, referencing the company's turnaround plan.  “I really think that there’s layers of category growth that we can drive by just making sneakers that much more inclusive, that much more fun, that much more easy to access.”  But as FL stares down the next 50 years, the company is still at a crossroads & must answer some fundamental questions: can it once again be the market leader in sneakers, & can it not just survive, but thrive, as brands rely less and less on wholesalers?  While its fiscal 2023 turned out worse than it originally anticipated, the company is seeing some of its turnaround efforts start to take hold.  Online sales are growing.  FL plans to relaunch its mobile app at the end of the year & recently unveiled its revamped loyalty program FLX, which allows customers to earn discounts, access to product launches & perks like free returns.  “We know that we only capture a fraction of this annual sneaker spend that our existing customers spend on sneakers,” said Kim Waldmann, FL's chief customer officer.  ”[FLX] isn’t necessarily about getting you to buy 10 more sneakers per year, it’s an opportunity for us to drive share of wallet consolidation by the fact that you’re getting value back in shopping with us.”  The stock fell 93¢.

How Foot Locker is waging a comeback after its breakup with Nike

The threat of port strikes on the East Coast & Gulf of Mexico is sending shockwaves thru the supply chain & raising concerns that there will be an uptick in inflation.  "Goods trans-shipped across the country are not only going to be late but they will cost more, e.g., apparel meant for early winter and the holidays," George Kochanowski, CEO of logistics company Staxxon said.   Kochanowski continued, "If the goods were containerized, where will all those empties go and who will pay to have them stored, accounted for, and repositioned? All these costs will be factored in the price of the goods sold."  The Intl Longshoremen's Association (ILA) is negotiating on behalf of 45K dockworkers at 3 dozen US ports from Maine to Texas that collectively handle about ½ of the country's seaborne imports.  It warned its members are prepared to stop work if they don't have a new contract by the Oct 1 deadline.  The issue is that this comes during the most critical time of year for retailers, which said that if a new labor deal isn't negotiated by the end of the month, it could have a "devastating impact" on the overall US economy.  Jim Gillis, Pacific region pres of IMC, a nationwide trucking company that operates at ports, said he's seeing a "litany of issues related to cargo surges – mainly port congestion & pool chassis shortages."  It was something they hadn't seen in the previous months.

Holiday goods at risk as port strikes pose ‘devastating impact’ on economy

Increasing turmoil around the world, including the escalating fighting between Israel & Hezbollah, has gold prices pushing up to a fresh record, with front-month gold futures settling up 0.3% to $2626 an ounce and SPDR Gold shares up 0.3% looking for a new record close as well.  The global volatility along with the Federal Reserve's shift in its inflation-fighting campaign has bolstered gold & there may be more room to travel up.  With geopolitical tensions worsening & the official monetary authorities getting towards full swing over the rate cycle the tailwinds for gold continue to exceed the headwinds & there is plenty of upside scope.

Gold Finds New Record Amid Geopolitical Turmoil

WTI crude oil futures fell 0.9%, closing at $70.40 per barrel, as concerns over sluggish demand from China & a surprise slowdown in European manufacturing dampened market sentiment.  The eurozone reported an unexpected contraction in business activity, with services stagnating & manufacturing output deteriorating further.  At the same time, market participants awaited potential stimulus measures from the Chinese gov, which could reignite fuel demand in the world's top oil importer, especially after a significant decline in refined oil imports this year due to its struggling manufacturing sector.  On the supply side, geopolitical tensions added to market uncertainty as Hezbollah fired over 100 rockets into northern Israel, including areas near Haifa, raising fears of a broader conflict in the key oil-producing region.  Additionally, a tropical disturbance in the Gulf of Mexico prompted Shell to shut down production at several of its facilities as a precautionary measure.

Oil Settles Lower on Demand Concerns

Markets are taking a breather after the latest rally.  The bulls are optimistic about the future while nervous investors keep buying gold.  As shown today, there is still a fair amount of turmoil in the US economy.