Markets hesitate after a record setting post election rally

Dow dropped 382, decliners over advancers better than 3-1 & NAZ was off 17.  The MLP index declined 3 to the 285s & the REIT index retreated 4+ to the 421s.  Junk bond funds slid lower & Treasuries saw heavy selling which raised yields after the holiday break.  Oil inched up pennies in the 68s & gold fell 11 to 2605 (more on both below).

Dow Jones Industrials 

Boeing's (BA), a Dow stock, more than 32K machinists who were on strike are required to return to their factories no later than tomorrow, but getting factories humming again will take weeks, the manufacturer said.  BA machinists approved a new contract last week that included 38% pay raises over 4 years & other improvements, ending a more than 7-week strike that halted output of most of BS's aircraft production.  They first walked off the job on Sep 13, turning down a proposal with 25% raises.  The company said that it handed over 14 jetliners in Oct, the fewest since Nov 2020, during the depths of the pandemic & the tail end of the worldwide grounding of BS's 737 Max in the wake of 2 fatal crashes.  9 of the deliveries last month were 737 Maxes.  A spokesman said workers unaffected by the strike performed the delivery procedures.  BA's troubles have put it further behind Airbus this year. The US manufacturer handed over 305 airplanes so far this year compared with its European rival’'s 559 aircraft.  As the workers return, BA has to assess potential hazards, restate machinist duties & safety requirements & ensure that all training qualifications are current.  “It’s much harder to turn this on than it is to turn it off,” CEO Kelly Ortberg said last month.  “So it’s absolutely critial that we do this right.”  The company is resuming production in Washington state & Oregon for the 737 Max, 767 & 777 programs, as well as military versions of its aircraft.  BA's 787 Dreamliner production continued during the strike because those planes are made in a nonunion factory in South Carolina.  Despite the strike pause, BA continued to sell dozens of aircraft in Oct, with 63 gross orders, 2 shy of Sep's total.  The stock fell 3.76.

Boeing delivers fewest planes since 2020, warns factory restart after strike will take weeks

Home Depot (HD), a Dow stock quarterly sales rose more than 6% year over year, as it folded in a newly acquired business & hurricane-related repairs & better weather in many parts of the country boosted demand for home improvement supplies.  The retailer also raised its full-year outlook to reflect its better-than-expected 3rd-qtr results & some increased hurricane-related demand in the current qtr.  It now projects total sales to increase about 4%, including the impact of acquiring SRS Distribution.  It previously expected total sales to rise 2.5-3.5% for the year.  Both of those outlooks include a lift from a 53rd week in the fiscal year & an approximately $6.4B contribution from SRS, which sells supplies to professionals in the roofing, landscaping & pool businesses.  The company expects comparable sales to decline about 2.5% for the 52-week period.  HD previously projected that industry metric, which includes the company's website & stores open for more than a year, would drop 3-4% compared with the prior fiscal year.  CFO Richard McPhail said consumers are still deferring purchases as they wait for lower mortgage rates & borrowing costs & expressed caution about the economy.  “There is pent-up demand for projects,” he said.  “Our customers tell us that their lives are changing. Their families are growing. They’re upsizing, they’re downsizing. They need to move for a job. There is demand for remodeling, and they are putting it on hold until they see a more favorable financing environment. And so the demand is there, the question is, when it’s unlocked.”  Customers have continued to put off projects, even though they're in good financial shape.  About 90% of the do-it-yourself customers own their homes.  EPS for the fiscal 3rd qtr dropped to $3.67 from $3.81 in the year-ago period.  Revenue climbed 6.6% from $37.7B in the year-ago period.  Comparable sales fell 1.3% in the qtr across the business.  That's better than the 3.3% drop that was expected.  The metric fell by 1.2% in the US.   The stock dropped 5.18.

Home Depot’s sales are improving, but it says consumers are still cautious about spending

Netflix's (NFLX) cheaper, ad-supported tier has reached 70M global monthly active users 2 years after it was launched.  More than 50% of its new sign-ups are for ad-supported plans in countries that offer the option & it continues “to see positive momentum and growth across all areas of the business,” adding it has seen “steady progress across all countries’ member bases.”  NFLX launched the option in Nov 2022 as 1 of its responses to a slowdown in subscriber growth.  Recently, subscriber growth hasn't been an issue.  Last month NFLX reported it added 5.1M subscribers during the 3rd qtr, beating the estimates.  In total, NFLX counts 283M memberships across all of its pricing tiers.  Beginning next year, it will no longer update investors on its subscriber numbers as it shifts focus toward revenue & other financial metrics as performance indicators.  NFLX in May announced it would air 2 National Football League games on Christmas Day this year as part of a 3-year deal & today said it sold out of its ad inventory for the 2 live games.  The stock rose 14.06.

Netflix ad-supported tier has 70 million monthly users two years after launch

Gold futures slipped 0.2% to $2612 a troy ounce.  US $-denominated commodities like gold have been pressured in the wake of Trump's victory in the US election.  Market expectations for fewer interest-rate cuts & a resurgence in inflationary pressures given Trump's planned tax & tariff laws have started to play against the precious metal.  In the short term, investor attitude toward gold has turned bearish, but gold isn't a hard sell just because the market expects fewer rate cuts. There is still plenty for investors to be concerned about.  Political & military conflicts, alongside weakening consumer demand in China & Europe will support gold.  Trump's tenure could also cause further frictions in intl relations, adding to safe-haven demand.

Gold Futures Slip But Long-Term Safe-Haven Demand Looks Intact

WTI crude oil prices edged higher by 0.1% to $68.10 per barrel, after a 5% decline over 2 sessions.  Investors reacted to OPEC's 4th consecutive cut to its 2024 global oil demand forecast & China's economic concerns.  China's Oct data showed the slowest consumer price growth in 4 months & deeper producer price deflation, raising deflation risks & disappointing investors due to a lack of significant stimulus.  Analysts said China's 10T-yuan ($1.4T) debt plan fell short of growth expectations.  Meanwhile, US policy may shift towards increased domestic shale production, as pro-oil North Dakota Governor Doug Burgum is considered for Energy Secretary under Trump.  The $ remained strong, near 4-month highs, as Trump's anticipated policies could keep interest rates elevated longer.  In a flat market, supply & demand concerns are magnified, which has affected oil sentiment.

Oil Settles Slightly Higher on Tuesday

The post-election surge in stocks sputtered.  The roaring rally in US stocks was paused after lifting the major gauges to record highs.  Investors have raised their exposure to stocks to an 11-year high & are weighing whether the Trump rally has been overdone.  Meanwhile yields have risen & Trump is hiring assistants to push his agenda forward.

Markets slump as postelection rally takes a pause

Dow retreated 180, decliners over advancers about 3-1 & NAZ slid back 19.  The MLP index was off 2+ to the 286s & the REIT index fell 3+ to the 422s while interest rates rose.  Junk bond funds were little changed & Treasuries saw significant selling which raised yields (more below).  Oil was steady just under 68 & gold fell 9 to 2608.

Dow Jones Industrials

Mass deportations of illegal immigrants working in the US would likely disrupt the labor supply at some businesses, but it's uncertain what impact it would have on inflation & the economy at large, Minneapolis Federal Reserve Pres Neel Kashkari said.  Kashkari outlined his views on the impact of Pres-elect Trump's campaign pledge to deport illegal immigrants.  "If you just assume people are working – either working in farms or working in factories – and those businesses now lose employees, that would probably cause some disruption," Kashkari added.  "The implications are not entirely clear to me," he explained.  "Ultimately, it is going to be between the business community and Congress and the executive branch to figure out how they would adjust."  His comments come after there was a report that Trump's plan to conduct the largest mass deportation in US history could cost $88B a year or $968B over more than a decade, according to a liberal immigration group known as the American Immigration Council.  Trump said last week that, "It's not a question of a price tag," when it comes to the immigration plan & that the country has "no choice" because "when people have killed and murdered, when drug lords have destroyed countries, and now they're going to go back to those countries because they're not staying here."  Kashkari also discussed Trump's plan to impose broad tariffs on imported goods as well as tax cuts & explained that the impact of those policies on inflation would depend on how they are implemented.  He said that a tariff, which is a tax assessed on an imported good when it enters the country, could prompt a 1-time increase in prices but have no significant impact on long-run inflation.  However, Kashkari explained that "the challenge becomes if there is a tit-for-tat," &, "If it is one country imposing tariffs, and then responses, and it is escalating… we will have to wait and see what gets implemented and then how other countries might respond. Right now we are just all guessing."

Fed's Kashkari warns mass deportations could disrupt labor at some businesses

The Federal Reserve could carry out fewer interest rate cuts than previously expected next year should Pres-elect Donald Trump's proposed global tariffs take hold, former Fed policymaker Loretta Mester said.  Mester indicated that the Fed's outlook was set to change under the incoming Rep administration's fiscal plans & that markets may be right in forecasting fewer than the 4 reductions previously forecast.  “Next year, the pace of the cuts will be affected by where they’re seeing fiscal policy,” she said.  “My own view is the market is right, they’re probably not going to have as many cuts next year as was assumed or expected in September,” added Mester, who was pres of the Cleveland Federal Reserve until her retirement earlier this year.  Markets trimmed their forecasts for rate cuts following Trump's election victory last week, with speculation growing around his tariff proposals & their implications for the world economy.  Mester also expects fewer than 4 reductions next year, though she said she still sees potential for the bank to cut at its next meeting in Dec.  At that point, policymakers could be expected to provide a “first look” at how the Trump administration's fiscal proposals will affect their forecasts.  However, further details of the full fiscal package, & its implications for monetary policy, are not expected until early next year.  “It’s not just going to be tariffs. There’s things going on on immigration, there’s probably going to be things going on on the tax side, and there’ll be spending also,” Mester continued.  “All of those together are going to have to inform — ‘has the outlook for the U.S. economy changed?’” she added.  It comes as concern is growing among global policymakers about the implications of Trump's fiscal plans, particularly on tariffs.

‘The market is right’: Former Fed policymaker sees fewer rate cuts in 2025 after Trump win

Treasury yields jumped as investors continued to digest what Pres-elect Trump's election win could mean for interest rates, & awaited key economic data, including inflation, later this week.  The 10-year Treasury yield rose by more than 8 basis points to 4.39% & the yield on the 2-year Treasury rose by more than 8 basis points to 4.334%.  1 basis point equals 0.01% & yields & prices move in opposite directions.  It comes after the Federal Reserve cut interest rates for a 2nd consecutive time last week, by 25 basis points to a target range of 4.50-4.75%.  Traders are pricing in a 65% chance of another qtr-point cut in the Fed's next Dec meeting, per the CME Group’s FedWatch tool.  Looking further ahead, however, investors are digesting what Trump's economic pledges on taxes & trade could mean for interest rates & whether rates could remain higher for longer than previously expected.

U.S. Treasury yields move higher as traders digest Trump win, await key data

The roaring rally in stocks lost steam as investors assessed whether buying has been overdone & what Trump's Cabinet picks mean for policy.  The breather in equities came as Treasury yields ticked higher.  The prospect of tougher tariffs give weight to worries that Trump's economic plans could spur inflation.

Markets struggle as the Trump rally loses steam

Dow jumped 304, advancers over decliners 4-3 & NAZ  inched up 11.  The MLP index was steady in the 285s & the REIT index slipped 2+ to the 425s.  Junk bond funds wavered & the Treasury market was closed today for the holiday.  Oil remained lower, down 2+ to 68 on China stimulus disappointment, & gold plunged 69 to 2625 (more on both below).

Dow Jones Industrials 

Toyota Motor (TM) sounded the alarm that California-led electric vehicle mandates that are set to start next year are “impossible” to meet &, if they're not changed, will lead to less customer choice in several states.  Current requirements under the California Air Resources Board’s “Advanced Clean Cars II” regulations call for 35% of 2026 model-year vehicles, which will begin to be introduced next year, to be zero-emission vehicles, or ZEV. Battery-electric, fuel cell &, to an extent, plug-in hybrid electric vehicles qualify as zero emission under the regulations.  “I have not seen a forecast by anyone … government or private, anywhere that has told us that that number is achievable. At this point, it looks impossible,” Jack Hollis, COO of TM North America, said.  “Demand isn’t there. It’s going to limit a customer’s choice of the vehicles they want.”  The California Air Resources Board reports 12 states & DC, have adopted the rules.  Roughly ½ of them did so starting with the 2027 model year.  The EV mandates are part of CARB's Advanced Clean Cars regulations that require 100% of new vehicle sales in the state of California to be zero-emission models by 2035.  JD Power said no states are in accordance with the EV mandate as of this year.  Only California (27%), Colorado (22%) & Washington (20%) have seen at least 20% of retail sales being EVs or PHEVs this year.  Other states such as New York (12%), New Mexico (5%) & Rhode Island (9%) are far from compliant.  The national average of EV/PHEV adoption for retail sales is only 9% thru Oct JD Power said.  Hollis said if the mandates are unchanged, it will lead to “unnatural acts” in the automotive industry that have already begun at some automakers, where companies are supplying states which have agreed to the rules with a disproportionate amount of electrified models.  “It’s going to distort the industry. It’s going to distort the business.  Why?  Because it's unnatural to regulate what the current demand in the marketplace is,” Hollis, a longtime automotive exec, said.  Several automotive insiders said that the EV mandate issue needed to be addressed regardless of who won election this year.  TM stock rose 2.07.

Toyota warns California-led EV mandates ‘impossible’ regardless of election

Amazon (AMZN) is developing smart eyeglasses for its delivery drivers to guide them to, around & within buildings, as it tries to smooth the final stretch of an order's journey to a customer's home, 5 people familiar with the matter said.  If successful, the glasses would provide drivers with turn-by-turn navigation on a small embedded screen, along their routes & at each stop, according to the people.  Such directions could shave valuable seconds off each delivery by providing left or right directions off elevators & around obstacles such as gates or aggressive dogs.  With Ms of packages delivered daily, seconds add up.  The glasses would also free drivers from using handheld Global Positioning System devices, allowing them to carry more packages.  The project underscores the online seller's efforts to reduce delivery costs per package & support margins as it fights increased competition which has stepped up e-commerce efforts & cut prices.  Its delivery glasses, the people warned, could be shelved or delayed indefinitely if they do not work as envisioned, or for financial or other reasons.  The sources said they may take years to perfect.  “We are continuously innovating to create an even safer and better delivery experience for drivers,” an AMZN spokesperson said, when asked about the driver eyeglasses.  “We otherwise don’t comment on our product roadmap.”  AMZN has worked for years to develop an in-house delivery network, including its own airline, long-haul trucking & sprawling suburban warehouses.  In doing so, it hopes to speed deliveries & pare expenses by reducing its reliance on other couriers.  AMZN's shipping costs rose 8% in the 3rd qtr to $23.5B.  The stock fell 1.34.

Amazon developing driver eyeglasses to shave seconds off deliveries

The House of Representatives is highly likely to be under GOP rule next year, cementing Reps' unified control of power across DC.  The party currently needs just 4 seats to maintain its lower chamber majority, & current vote totals show Reps ahead in 8 of the 18 still undecided contests.  With the drama slowly fading away, party leaders have turned to openly planning their agenda in recent days in expectation of what some observers have termed a GOP trifecta, alongside already established party control of the Senate & White House, or, more bluntly, a "full Trump" scenario.  "The American people have spoken and given us a mandate," House Speaker Mike Johnson recently posted.  "We will be prepared to deliver on day one."  But it will also be an exceedingly narrow House majority when the final tallies are in, likely less than 5 seats in the 435-seat chamber even as leaders lay out plans to push thru an aggressive 2nd Trump economic agenda quickly.  "Next year is really an inflection point on fiscal policy," Bipartisan Policy Center exec director of economic policy Shai Akabas said.  It could be an opportunity to begin to correct the US gov's fiscal imbalance, Akabas added, "but there's also a chance that things go south and we keep digging the hole deeper."

The GOP is closing in on the House. Here's what it'll do first

Gold fell to a near 2-month low as the $ continued to rally following Donald Trump's win in the US presidential election.  Gold for Dec was last seen down $74 to $2619 per ounce, the lowest since Sep 19.  The drop comes as the $ rose to the highest since Jul, with the ICE dollar index last seen up 0.58 points to 105.58.  The currency's rally began after Trump defeated VP Kamala Harris in the Nov 5 election & comes despite a 2nd cut to US interest rates on Thurs by the Federal Reserve.  An eventful week saw precious & industrial metals trade lower due to a stronger USD & higher yields.

Gold Falls to Lowest in Nearly Two Months as Dollar Rises to the Highest Since July

Oil extended declines as a soft outlook for demand in China, the world's largest crude importer, continued to plague the market.  West Texas Intermediate (WTI) retreated 3.3% to settle near $68 a barrel, while Brent settled below $72.  Data over the weekend showed anemic Chinese consumer inflation in Oct & another decline in factory-gate prices.  The $ climbed further, making commodities priced in the currency less appealing.  The retreat in crude prices comes alongside weakness in key market indicators.  The nearest WTI futures contract traded at its smallest premium to the following month since Jun on an intraday basis, indicating that short-term tightness in the physical oil market is easing.  That signals a marked shift in sentiment from the days leading up to the US election, when hedge funds raised their bullish position on WTI crude by the most since Mar.  An OPEC+ decision to push back an anticipated output hike & a flare-up in the Middle East conflict fostered a risk-on mood that has since dissipated.  The cartel's move to delay the production increase provided only a temporary boost to the supply risk baked into crude oil prices, but the decomposition of energy market returns suggest that another delay just won't cut it.  Without a resurgence in geopolitical risk tied to oil supplies, the set-up would favor continued downside in prices.  WTI for Dec plummeted 3.3% to settle at $68.04 a barrel & Brent for Jan declined 2.8% to settle at $71.83 a barrel.

Oil Retreats on Weak Outlook for Chinese Demand, Stronger Dollar

Doubts about the stock market rally's staying power are starting to emerge. Traders are waiting for Oct consumer inflation data on Wed for pointers to the path of rates.  Last week, Chair Jerome Powell stayed mum on the Fed's thinking in the face of Trump policies, like promised tariffs — that could keep price pressures in play.  And a low number for the advance decliner ratio is not encouraging.

Markets jump as Trump enthusiasm continues

Dow shot up 333, advancers over decliners better than 3-2 but NAZ inched up only 3.  The MLP index stayed in the 288s & the REIT index added 2 to 430.  Junk bond funds hardly budged & Treasuries were flattish, leaving yields pretty much unchanged.  Oil declined 2+ to 68 & gold plummeted 72 to 2622.

Dow Jones Industrials

General Motors (GM) is proving it’s a standout among automakers this year as it continues to consistently outperform earnings expectations & its competitors.  GM has done so with the assistance of $12.4B in stock buybacks since last Nov, which the automaker said will continue for the foreseeable future.  But it's also proving itself to be operationally better than its rivals.  CEO & Chair Mary Barra has touted that kind of differentiation for years, but it has largely fallen upon deaf ears.  GM, unlike many competitors, has not lowered its 2024 guidance or underperformed quarterly earnings expectations.  Instead, it's actually raised key financial targets despite facing ongoing market challenges in the US & its Chinese operations losing hundreds of Ms of $s amid increased competition.  While GM has said it’s cutting costs, it has not had to be as aggressive as other automakers this year.  Others are conducting massive business restructurings that include layoffs, production cuts & other cost-saving measures.  Barra, when discussing quarterly earnings Oct 22, reiterated her stance that GM will continue to “build on our competitive strength and deliver the performance that differentiates us from others in the industry.”  “We’re going to be disciplined and we’ll be resilient, and we’ll make adjustments to the extent that we can to continue to drive growth and profitability,” Barra said.  “In the weeks and months ahead, you’ll see more clearly than ever how we intend to leverage the tailwinds that are within our control to deliver strong results in 2025 that are in a similar range to 2024.”  GM stock went up 1.70.

GM’s Wall Street vindication is happening as it outperforms its peers in 2024

Pres-elect Donald Trump's immigration plan will be a "cost savings" for the American people, former acting ICE Director Tom Homan said, responding to a warning that carrying out the largest mass deportation effort in history could bear a hefty price tag.  "[The Biden administration] is paying for free airline tickets around the country, free hotel rooms at $500 bucks a night, free education, free medical care, and that's in perpetuity," he said.  "President Trump's plan over time is going to save the taxpayers money… They're [the Biden administration] paying $500 bucks a night for hotel rooms in New York City. Meanwhile, there's empty ICE beds at $127 a night, so President Trump's plans will save taxpayers money over time."  Homan & other top voices on the immigration issue have been critical of the Biden-Harris administration over the last 4 years, as illegal migrants have crossed in record numbers & strained resources in communities across the US.  Under their tenure, areas like New York City, Boston & Chicago have become hotbeds for migrants.  In New York City, for instance, the once-iconic Roosevelt Hotel became synonymous with the 2nd Ellis Island, as it transitioned into a migrant processing hub & housed illegal immigrants to the brim.  Trump made immigration an issue integral to his campaign, reemphasizing his push for a border wall & mass deportation as he urged during his previous campaigns.  It is believed Trump's plan, which could involve an emergency declaration over the border, wall construction & deportation.  A critical near-term priority is finding the money to pay for it.  An estimate by the American Immigration Council, a liberal immigration group, estimated that an operation to deport the total number of people living in the US illegally could cost $968B over more than a decade, or roughly $88B a year.  Any deportation effort requires enormous resources to hire more federal agents to identify & arrest immigrants, contract out space to detain them & procure airplanes to fly them to other countries.

Trump’s plan for key election issue that’s expected to save money in American pockets

Donald Trump's election win has left Europe scrabbling to work out how it will be able to contain or counter highly probable tariffs on its exports to the US once the pres-elect enters the White House.  Ahead of his decisive election win last week, Trump had already threatened to revive a trade war that began during his first term in office, stating in his election campaign that he would raise tariffs on Chinese goods by 60-100% & would impose a blanket 10-20% tariff on all US imports.  Trump sees the protectionist move as a way to boost US jobs & growth, but the policy would undoubtedly open up a new front in trade tensions with 2 of the country's largest trading partners, the EU & China.  Critics of the proposed tariffs say the policy could lead to higher prices for US consumers.  While Trump has a reputation for unpredictability, meaning his rhetoric sometimes fails to materialize in terms of policy, analysts agree that the pres-elect appears undeterred when it comes to trade tariffs, having opined on how the term itself is “the most beautiful word in the dictionary.”  That leaves Asia & Europe having to quickly consider ways to mitigate the future impact of export tariffs, & whether to retaliate or to try to negotiate a get-out deal . Economists caution that it’s uncertain whether Trump's tariffs on Europe will be “as damaging as feared,” as ING economists stated in a note Fri, or whether they will simply be “a bargaining chip designed to unlock wider foreign policy deals.”  Nonetheless, there have been calls in Europe for the bloc to prepare retaliatory measures now, with the director of Germany's Ifo Center for Intl Economics calling on Germany, which relies heavily on trade with the US, particularly in terms of vehicle exports, & the EU to “strengthen their position through measures of their own.”  “These include deeper integration of the EU services market and credible retaliatory measures against the U.S.,” Ifo's Lisandra Flach said last week.  The proposed measures include the potential use of the EU's new “Anti-Coercion Instrument” that gives the gives the region a wide range of possible countermeasures when, it says, “a country refuses to remove the coercion.” The countermeasures include the imposition of tariffs, restrictions on trade in services & trade-related aspects of intellectual property rights & restrictions on access to foreign direct investment & public procurement.  Germany & the EU could also strengthen cooperation with individual US states, Flach suggested.

Europe could try to stop — or get around — damaging Trump tariffs`

The Dow surged to build on the roaring post-election rally, but NAZ struggled as the "Trump trade" took the spotlight in markets.  Markets opened with stocks at all-time highs thanks in large part to expectations for lower corp taxes & deregulation from Pres-elect Trump.  The Federal Reserve's latest interest rate cut also buoyed the mood.  However the advance decline ratio has not been impressive as many stocks are not participating in the rally.

Markets rise in week of market milestones after Trump election win

Dow surge 259, advancers over decliners about 3-2 & NAZ added 17.  The MLP index was off 4+ to the 288s & the REIT index gained 5+ to the 427s.  Junk bond funds continued slightly higher & Treasuries remained in demanded which lowered yields.  Oil dropped almost to 2 to finish slightly above 70 & gold was off 11 to 2694 (more on both below).

Dow Jones Industrials 

Investors poured $20B into US equity funds on Wed after Pres-elect Donald Trump was declared the winner of the presidential election, according to Bank of America.  The bank's strategists, led by Michael Hartnett, reported that it was the biggest daily stock inflow since Jun & the $2.9B that flooded into financials was the highest on record.  The note said the biggest picture is that "Trump won big, as US voters cared more about inflation, inequality…immigration than low unemployment," & the Reps' "big sweep" equates to "big policies," with the potential for $8T in tax cuts, $3T in tariff revenues & $1T in spending cuts.  Trump's victory over VP Kamala Harris was decisive, with the pre-elect winning both the Electoral College & the popular vote.  The GOP also won control of the Senate & is within striking distance of maintaining a majority in the House, but control of the lower chamber was still up in the air as key races remained too close to call.  The Dow, S&P 500 & NAZ all hit fresh records after Trump's win.

US stocks saw biggest inflow since June on day of Trump's election win: Bank of America

Federal Reserve Chair Jerome Powell said that he will remain in his role through the duration of his term even if incoming Pres-elect Trump decides to call for his resignation.  The Fed announced a 25 basis point interest rate cut  during the press conference following the central bank's announcement, Powell was pressed on whether he would resign from his role if Trump pressured him to do so.  "No," Powell said in response.  A follow-up question was posed about whether Powell thinks he would be required to step down in response to such a request & again responded with a succinct, "No."  Powell was also asked whether he believes the pres has the power to fire or demote him & whether the Fed has determined the legality of demoting other Fed governors in leadership positions.  "Not permitted under the law," Powell responded.  In Feb, Trump said of Powell, "I think he's political. I think he's going to do something to probably help the Democrats, I think, if he lowers interest rates."  Trump went on to warn about the potential for a resurgence of "massive inflation" because the conflict in the Middle East "could drive up the price of energy" & that Powell is "not going to be able to do anything.  But it looks to me like he's trying to lower interest rates for the sake of maybe getting people elected."  Trump also said that he wouldn't reappoint Powell & explained, "He did miss [on inflation], he did miss… I would have a couple of choices. I can't tell you now."  In Jun, Trump said that he wouldn't fire Powell if he were to win the 2024 election & would allow him to serve out his term.  "I would let him serve it out, especially if I thought he was doing the right thing," Trump said at the time.

Fed's Powell staying put even if Trump has another idea

Americans are feeling increasingly better about the short-term path for inflation.  The latest consumer sentiment survey from the University of Michigan revealed that consumers expect inflation to sit at 2.6% in a year, a decrease from last month's expectation of 2.7%.  Nov's reading is the lowest since Dec 2020 & within the 2.3-3.0% range seen in the 2 years before the pandemic.  Expectations for long-run inflation did tick higher, though, rising to 3.1% from 3% the month prior.  The overall consumer sentiment index popped to a reading of 73, up from 71 in Oct.  Interviews for the survey concluded on Mon & therefore don't capture any reactions to election results.  The responses come as inflation has continued to trend lower throughout 2024.  In Sep the Consumer Price Index (CPI), a popularly cited inflation reading, increased 2.4% over the prior year.  This marked its lowest annual increase in prices since Feb 2021.

Inflation expectations fall to lowest level since December 2020

Gold fell about ½ a % to trade around $2680, extending a short-term bearish trend that has been in place since it ended on Halloween.  The decline came amid market expectations that Pres-elect Donald Trump's economic policies will be positive for the US Dollar, as higher tariffs & tax cuts could keep interest rates high, supporting foreign capital inflows into the US currency.  This, in turn, is expected to pressure gold lower as it is mostly priced & traded in the $.  Gold also won a bid as there was no mention at all of how the US presidential election results could impact the US economy in the Fed's accompanying statement. The wording was also largely unchanged from the previous meeting, except to state that "labor market conditions have generally eased" since the last meeting in Sep.  During his press conference, Fed Chairman Jerome Powell brushed off questions about Trump's policies, saying it was premature to pass judgment as he did not know "the timing, (or) the substance of any policy changes."  Powell also said he did not think the rise in Treasury yields was due to higher inflation expectations, possibly signaling a gloomier assessment that could benefit safe-haven gold.

Gold Weakens on Continued Post-Election Impact

Oil prices fell 3% on easing fears of prolonged supply disruptions from a hurricane in the Gulf of Mexico, while China's latest economic-stimulus packages failed to impress some oil traders.  US West Texas Intermediate futures led the decline & were down 2.9% ($2.07) at 70.29 per barrel.  Global benchmark Brent crude futures fell 2.5% ($1.86) to $73.77 per barrel.  Energy producers shut in more than 22% of oil output in the Gulf of Mexico as a precautionary measure to brace against Hurricane Rafael, helping lift oil prices by more than 1% in the prior session.  However, the latest forecasts on Rafael’s trajectory & intensity reduced the risk to oil production from the US Gulf.  The storm, which left a trail of destruction in Cuba this week, had weakened to a Category 2 hurricane, according to the National Hurricane Center's latest advisory.  Meanwhile, top oil importer China's latest round of fiscal support disappointed oil investors.  Chinese authorities announced a package easing debt-repayment strains for local govs, but those measures do little to directly target demand.  Expectations of tighter sanctions on Iran & Venezuela by Pres-elect Donald Trump, which could cut oil supply to global markets, limited oil’s losses.  The Federal Reserve's decision to cut interest rates by a qtr percentage point also helped keep both benchmarks on course for about 1% week-over-week gains, despite today's slump.

Oil prices fall 3% as US hurricane risk recedes, China's stimulus disappoints

had their best week of the year as the S&P 500 hit 6K for the first time ever to round out gains spurred by Donald TrumStocks p's White House victory followed by the Federal Reserve's latest rate cut.  The initial "Trump trade" rush was volatile today as & Treasury yields gave up a good chunk of their post-election gains.  Disappointment over Cto hina's new fiscal stimulus drew investor attention, putting pressure on Chinese stocks.  Even so, major gauges had strong weekly wins after racking up more records yesterday as the Federal Reserve delivered the expected interest rate cut.  The Dow finished the week up an impressive 1336 to a new record.

Markets climb as stocks head for the best week in a year

Dow jumped 306 taking it over 44K, advancers over decliners better than 3-2 & NAZ slid back 10.  The MLP index retreated 3+ to the 288s & the REIT index rose 6 to the 428s as yields fall.  Junk bond funds crawled higher & Treasuries had more buying which reduced yields (more below).  Oil dropped 2+ to just above 70 after China stimulus disappoints & gold lost 11 to 2694.

Dow Jones Industrials

If inflation resurfaces, the Fed's likely to stay its hand in lowering rates.  That concern might be dampening investors' excitement in the stock market for now.  Powell, in yesterday's press conference, maintained that “the election will have no effect on our policy decisions.”  Still, the Fed would be impacted by the decisions of the next administration.  “Just in principle, it’s possible that any administration’s policies or policies put in place by Congress could have economic effects over time,” he said.  “Forecasts of those economic effects would be included in our models of the economy.”  Data from the CME FedWatch Tool suggests some prudence is filtering into the market.  According to the futures market, just 30.4% of traders think the Fed will cut rates again in Jan.  By contrast, 53% expect the Fed to keep rates steady.  Those percentages are contingent on the central bank lowering rates to 4.25%-4.50% in Dec.  Of course, that’s all prognostication, everybody knows how inaccurate polls & bets can be.  “By December, we’ll have more data, I guess one more employer report, two more inflation reports and lots of other data,” Powell said.  The Fed prefers hard numbers.

Powell maintains that elections won’t sway Fed’s policy

The 10-year Treasury yield fell for a 2nd day, set to finish the week lower even after a big pop triggered by Donald Trump's presidential win.  The benchmark 10-year rate dipped 3 basis points to 4.31% after falling about 11 basis points in the previous session.  The yields is now lower than last Fri's level of 4.37% & the 2-year Treasury yield traded slightly lower at 4.18%.  Yields & prices have an inverted relationship & 1 basis point is equivalent to 0.01%.  Bond yields got a boost Wed with the 10-year yield popping 15 basis points after Trump defeated VP Kamala Harris as traders believe his pro-business policies including tax cuts could spark economic growth.  Investors also digested the Federal Reserve's widely anticipated move to cut interest rates by a qtr point to a target range of 4.50%-4.75%.  Looking ahead, Powell said that policymakers would make their decisions on a meeting by meeting basis & that there was no “preset course” for monetary policy.  Powell also noted that he was “feeling good” about the economy overall.  One Fed meeting remains on the agenda for this year on Dec 17-18, for which traders were last pricing in an around 75% chance of another rate cut, CME Group's FedWatch tool showed.  On the data front, the University of Michigan's consumer sentiment gauge came in at 73 in Nov, rising to the highest level since Apr & the reading was also better than the expectation of 71 & up from 70.5 in Oct.

10-year Treasury yield ending week lower despite postelection pop

China announced a 5-year package totaling 10T yuan ($1.4T) to tackle local gov debt problems, while signaling more economic support would come next year.  Minister of Finance Lan Fo'an said that authorities planned to “actively use” the available deficit space that can be expanded next year.  He called back to Oct, when he had said that the space to take this step was “rather large.”  His comments came after the standing committee for China's parliament, the National People's Congress, wrapped up a 5-day meeting that approved a proposal to allocate an additional 6T yuan to increase the debt limit for local govs.  The program takes effect this year & will run thru the end of 2026 for around 2T yuan a year.  He added that, starting this year, central authorities would issue an annual 800B yuan in local gov special bonds over a 5-year stretch, for a total of 4T yuan.  The policies would contribute to local govs' efforts to reduce their “hidden debt,” which Lan estimates could drop from 14.3T yuan as of the end of 2023 to 2.3T yuan by 2028.  He noted how the new measures would alleviate pressure on local authorities & free up funds for supporting economic growth.  “The local government’s hidden debt resolution measures introduced by China today are a concrete manifestation of the central government’s economic policy shift, with a total debt amount beating market expectations, to a certain extent,” said Haizhong Chang, exec director for corporates at Fitch Bohua.  “Compared with the amount of debt resolution in recent years, the scale is significantly larger this time,” he said.  The debt swap program, however, fell short of many investors' expectations for more direct fiscal support.  Authorities here have ramped up stimulus announcements since late Sep, fueling a stock rally.  On Sep 26, Pres Xi Jinping led a meeting that called for strengthening fiscal & monetary support & stopping the real estate market slump.

China announces $1.4T package to tackle local governments’ ‘hidden’ debt

Stocks hovered near record highs, with NAZ lagging as post-election euphoria drifted & China's latest stimulus plan fell flat.  Stocks edged higher to end a stellar week of gains driven by optimism that Pres-elect Donald Trump's policies will boost the economy.  Disappointment over China's new fiscal stimulus drew investor attention, putting pressure on Chinese stocks & oil prices.  The $1.4T plan to refinance local gov debt left investors unconvinced of its potential to spur a faltering economy.

Markets rise after Fed cuts rates again, this time by a quarter point

Dow was down all of 1, advancers over decliners 3-2 & NAZ went up 300.  The MLP index was steady in the 292s & the REIT index added 3+ to the 422s after yesterday's selling.  Junk bond funds saw limited interest & Treasuries had more buying which lowered yields after recent strength.  Oil was fractionally higher to the 72s & gold recovered 20 to 2697 (more on both below).

Dow Jones Industrials 

The Federal Reserve approved its 2nd consecutive interest rate cut, moving at a less aggressive pace than before but continuing its efforts to rightsize monetary policy.  In a follow-up to Sep's big ½ percentage point reduction, the Federal Open Market Committee lowered its benchmark overnight borrowing rate by a quarter percentage point, or 25 basis points, to 4.50%-4.75%.  The rate sets what banks charge each other for overnight lending but often influences consumer debt instruments such as mortgages, credit cards & auto loans.  Markets had widely expected the move, which was telegraphed both at the Sep meeting and in follow-up remarks from policymakers since then.  The vote was unanimous, unlike the previous move that saw the first "no" vote from a Fed governor since 2005.  This time, Governor Michelle Bowman went along with the decision.  On the labor market, the statement said “conditions have generally eased, and the unemployment rate has moved up but remains low.”  The committee again said the economy “has continued to expand at a solid pace.”  There is uncertainty over how far the Fed will need to go with cuts as the macro economy continues to post solid growth & inflation remains a stifling problem for US households.  The post-meeting statement reflected a few tweaks in how the Fed views the economy.  Among them was an altered view in how it assesses the effort to bring down inflation while supporting the labor market.  "The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance," the document stated, a change from Sep when it noted "greater confidence" in the process.

Federal Reserve cuts interest rates by a quarter point

Mortgage rates marched higher for the 6th straight week while purchase demand continues to decline in the stagnant housing market.  Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate on the benchmark 30-year fixed mortgage surged to 6.79% from last week's reading of 6.72% & the average rate on a 30-year loan was 7.50% a year ago.  "It is clear purchase demand is very sensitive to mortgage rates in the current market environment," said Sam Khater, Freddie Mac's chief economist.  "As soon as rates began to rise in early October, purchase applications fell and over the last month have declined 10 percent."  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 also rose to 6% from 5.99% last week.  One year ago, the rate on the 15-year fixed note averaged 6.81%.

Mortgage rates climb again, hurting demand further

Gilead Sciences (GILD) increased its growth forecast for the year on strong 3rd qtr results, marking a shift away from its COVID revenues & spurring investor anticipation for new products in the near future.  The company increased its 2024 guidance, bucking the opposite trend by large pharma peers this qt, & beat on both top- & bottom-line results.  CEO Daniel O'Day said the company's 3rd qtr was the its best this year.  "This has been the strongest quarter of the year for us. It really shows the strength of our business model ... and that's true for both ... our legacy business, our HIV business, our virology business, but also for the new business areas of oncology and also inflammation," he added.  CFO Andrew Dickinson said the company's beat was due to surprise increased sales of the COVID-19 antibody drug Veklury, as well as the legacy HIV portfolio sales.  "We ... expect full‐year 2024 total product sales in the range of $27.8 to $28.1 billion, an increase of $650 million at the midpoint compared to the prior range," Dickinson said.  The company reported revenue of $7.5B, up 7% year over year, beating estimates by about 7%.  In addition, GILD reported adjusted EPS of $2.02, beating expectations by nearly 30%.  The stock rose 6.21 (7%).

Gilead increases 2024 outlook, expects new drug filing by end of year

Gold prices rose more than 1%, helped by a retreat in the $, while the Federal Reserve cut interest rates by a qtr of a percentage point as widely expected.  Spot gold was up 1.2% at $2691 per ounce, after dropping to a 3-week low yesterday.  US gold futures settled 1.1% higher at $2705.  At the end of a 2-day policy meeting, the central bank lowered the benchmark overnight interest rate to 4.50-4.75% range, with policymakers taking note of a job market that has "generally eased."  The dollar index was down 0.6% against its rivals after rising to a 4-month high after Pres Donald Trump's win in the presidential election.  Traders are currently pricing in another 25 basis point cut by the Fed in Dec.

Gold holds firm after US Fed rate cut, softer dollar

Crude futures reverse course & settled higher as the market continues to debate implications for oil of a 2nd Trump administration, from facilitating more US output to settling geopolitical conflicts that have added a premium to prices, or tightening sanctions against producers such as Iran & Venezuela.  While Hurricane Rafael is seen tracking well south of the US Gulf coast, platform evacuations had shut in around 22% of offshore production versus 17% yesterday, according to the Bureau of Safety & Environmental Enforcement.  Earth Science Associates estimates overall output losses due to the storm of 1.5 - 2.4M barrels of oil.  WTI settles up 0.9% at $72.36 a barrel & Brent roses 0.9% to $75.63 a barrel.

Oil Futures Settle Higher After Shaky Start

Stocks held onto gains as investors digested a fresh interest rate cut from the Federal Reserve & Donald Trump's electoral victory.  As expected, the Fed cut interest rates by 25 basis points, lowering its benchmark rate to 4.50-4.75%. Tech-heavy NAZ moved up more than 1.5% as shares of chip heavyweight Nvidia (NVDA) & e-commerce giant Amazon (AMZN) rose to new highs.

Markets are mixed while waiting for the Fed's decision

Dow was off 21 following yesterday's extraordinary rally, advancers over decliners 3-2 & NAZ rose 247.  The MLP index slid back 1+ to 291 & the REIT index went up 3+ to the 421s.  Junk bond funds were a little higher & Treasuries saw buying which reduced yields (more below).  Oil crawled up pennies in the 71s & gold rebounded 22 to 2698.

Dow Jones Industrials

Pres-elect Donald Trump likely will return to cornerstones of his previous economic platform such as tariffs, lower taxes & sanctions when he assumes office in Jan, his former Treasury secretary said.  Steven Mnuchin, who held the post throughout Trump's first term from 2017-21,said that he sees those items as critical to the Rep's agenda.  Tax cuts are “a signature part of his program,” Mnuchin added.  “I think that should be easy to pass in Congress, particularly if the Republicans control the House as well, which it looks like it will be.”  Also on the agenda would be tariffs, which Trump implemented on multiple items during his first term & promised to do again.  “I think that tariffs do need to be used to get counterparties back to the table, especially China, which is not living up to all of the agreements they made,” Mnuchin continued.  Finally, he indicated that nations such as Iran & Russia can expect to see sanctions again.  The Trump administration levied measures against petroleum producers in Iran in 2019 because they were owned by the Revolutionary Guard.  “The sanctions on Iran and Russia were very impactful. In the case of Iran, they’re now selling millions of barrels of oil, which needs to be stopped,” Mnuchin said.  Outside of those issues, Mnuchin, who said he likely would not take an official role in the Trump administration but would “be happy to serve from the outside,” expects Trump to take on other issues such as steep deficit spending.  “I think he’s in a position now, particularly with this overwhelming result, to take on difficult issues, and I think that’s got to be part of government spending,” he said.

Mnuchin says Trump’s top priorities will be tax cuts, Iran sanctions and tariffs

Treasury yields dipped as investors reacted to Donald Trump's sweeping election victory & awaited the Federal Reserve's decision on interest rates.  The 10-year Treasury yield fell 4 basis points to 4.39% after jumping over 14 basis points in the previous session & the yield on the 2-year Treasury fell 5 basis point to 4.19%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  The central bank is widely expected to deliver another interest rate cut, with financial markets pricing in the prospect of a qtr-point move lower as a near certainty.  The fed funds rate, which sets what banks charge each other for overnight lending but often influences consumer debt as well, is currently targeted at 4.75-5.00%.  Market pricing currently favors another qtr-point cut in Dec, followed by a Jan pause, then multiple reductions thru 2025.

Treasury yields dip as investors await Fed decision

Moderna (MRNA) posted a surprise profit for the 3rd qtr, smashing estimates, as its cost-cutting efforts took hold while sales of its Covid vaccine came in higher than expected.  The company posted EPS of 3¢ which compares with a net loss of $9.53 per share reported for the year-ago period.  MRNA is slashing expenses, with a recently announced goal of achieving $1.1B in savings by 2027, as it tries to recover from the rapid decline of its Covid business.  It is the first qtr that includes sales of its vaccine against respiratory syncytial virus, RSV, its 2nd-ever commercially available product.  Before year-end, the company plans to file for approval of its experimental “next-generation” Covid vaccine & combination shot targeting Covid & the flu.  MRNA this year also expects to apply for expanded approval of its RSV vaccine, targeting high-risk adults ages 18-59.  Its newest Covid vaccine saw benefits after winning approval in the US 3 weeks earlier than the last iteration of the shot did in 2023, which allowed the biotech company to “meet demand more effectively.”  The company was able to ship out doses to pharmacies & health-care providers & reach the arms of more patients sooner.  “I think the earlier launch and a steeper ramp drove a much higher sales number” for the Covid vaccine, CEO Stéphane Bancel said.  During the first week of the vaccine's launch, the company shipped twice as many products globally than it did in 2023.  He added that “this was a big cost reduction quarter, and we’re going to continue to do that.”  EPS of 3¢ compares with an expected loss of $1.90.  MRNA booked 3rd-qtr sales of $1.86B, only slightly higher than the $1.83B in revenue it recorded during the same period a year ago.  The vast majority of that total came from its Covid shot, including $1.2B in US sales & roughly $600M from intl markets.  The company reiterated its full-year 2024 product sales guidance of roughly $3-3.5.  Last qtr, MRNA slashed its outlook on lower expected sales in Europe, a “competitive environment” for respiratory vaccines in the US & the potential for deferred intl revenue into 2025.  The stock slid back 6¢.

Moderna posts surprise profit as Covid vaccine impresses, cost cuts take hold

Stocks extended gains as investors continued to digest Donald Trump's electoral victory & awaited the Federal Reserve's policy decision in the afternoon.  Spirits still appeared buoyant after Trump's presidential election win, which sent all 3 major stock gauges soaring to fresh record highs yesterday.  His plans for core tax cuts & deregulation have fueled optimism for a boost to the economy that will feed into stocks.