Markets wobble while looking for direction

Dow was off 22, decliners slightly ahead of advancers & NAZ declined 81.  The MLP index edge up 1+ to the 276s & the REIT index stayed in the 351s.  Junk bond funds remained a little higher & Treasuries continued to see selling which raised yields.  Oil stayed about even in the 82s & gold added 6 to 2395 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Google (GOOG) terminated 28 employees, according to an internal memo, after a series of protests against labor conditions & the company's contract to provide the Israeli gov & military with cloud computing & artificial intelligence services.  The news comes one day after 9 of its workers were arrested on trespassing charges Tues night after staging a sit-in at the company's offices in New York & Sunnyvale, California, including a protest in CEO Thomas Kurian's office.  Some of the arrested workers in New York & Sunnyvale said that during the protest they were locked out of their work accounts & offices, placed on administrative leave & told to wait to return to work until being contacted by human resources.  Yesterday evening, a memo sent by Chris Rackow, GOOG's VP of global security, said that “following investigation, today we terminated the employment of twenty-eight employees found to be involved. We will continue to investigate and take action as needed.”  The protests were led by the “No Tech For Apartheid” organization, focused on Project Nimbus — GOOG & Amazon's joint $1.2B contract to provide the Israeli gov & military with cloud computing services, including AI tools, data centers & other cloud infrastructure.  “This evening, Google indiscriminately fired over two dozen workers, including those among us who did not directly participate in yesterday’s historic, bicoastal 10-hour sit-in protests,” No Tech For Apartheid said, adding, “In the three years that we have been organizing against Project Nimbus, we have yet to hear from a single executive about our concerns. Google workers have the right to peacefully protest about terms and conditions of our labor. These firings were clearly retaliatory.”  GOOG stock rose 58¢.

Google terminates 28 employees after multicity protests

The number of Americans filing new claims for unemployment benefits was unchanged at a low level last week, pointing to continued labor market strength that is driving the economy.  Labor market resilience, together with elevated inflation have led financial markets & some economists to expect that the Federal Reserve could delay cutting interest rates until Sep.  A few economists doubt that the central bank will lower borrowing costs this year.  Initial claims for state unemployment benefits were unchanged at a seasonally adjusted 212K for last week.  Economists had forecast 215K claims in the latest week.  Claims have been bouncing around in a 194K-225K range this year.  Unadjusted claims declined 6756 to 208K last week.  Filings in California jumped by 3K & there were also notable increases in claims in Connecticut, Georgia & Oregon.  These were more than offset by a decline of 4551 in filings in New Jersey. 

US weekly jobless claims unchanged at low levels

Alaska Airlines (ALK) forecast 2nd-qtr & full-year earnings well ahead of estimates with execs predicting a strong peak travel season, despite a first-qtr loss stemming from a midair blowout of a door plug on a nearly new Boeing 737 Max 9 in Jan.  ALK received $162M from Boeing (BA) for the Jan 5 accident, which caused the Federal Aviation Administration to briefly ground the planes.  ALK expects additional compensation from the manufacturer.  The carrier lost $1.05 a share in the first qtr, down from a net loss of $1.11 a share a year earlier.  ALK CEO Ben Minicucci stood by BA on it's earnings call but reiterated that he expects BA to fall short on its airplane delivery plan to the carrier this year.  “We remain committed partners but we will hold Boeing to the highest bar for quality out of the factory and to that end we have enhanced our in-person oversight of our 737 production line,” Minicucci said.  “Alaska [Airlines] needs Boeing, our industry needs Boeing and our country needs Boeing to be a leader in airplane manufacturing,” he said.  ALK forecast adjusted EPS of $2.20 - $2.40, above the $2.12 analysts expected.  For 2024, the carrier expects EPS of $3.25 - $5.25, well above the average of $4.36.  Revenue was $2.2B for the first qtr, slightly above the estimated $2.19B forecast expected & 2% above last year.  Adjusting for one-time items, EPS posted a net loss of 62¢ a share in the 2nd qtr, less than the $1.05 per-share loss analysts were expecting.  ALK stock rose 1.72.

Alaska Airlines forecast tops estimates after loss from Boeing Max grounding

Safe-haven gold gained as persistent tensions in the Middle East added to the metal's appeal despite robust economic data from the US that raised prospects of fewer interest rate cuts.  Spot gold firmed 1% at $2384 per ounce.  Prices touched an all-time high of $2431 last Fri.  US gold futures settled 0.4% higher at $2398.  In the Middle East, Israel has signaled it will retaliate to a volley of attacks from Iran despite calls for restrain from Western countries but has not said how.  Bullion's upside came despite data showing US weekly jobless claims were unchanged at low levels last week.  Strong US economic data & hawkish rhetoric from Fed officials have prompted investors to drastically rethink the chances of the Federal Reserve cutting rates any time soon.  Higher interest rates reduce the appeal of holding non-yielding gold.  Bullion's upside came despite data showing US weekly jobless claims were unchanged at low levels last week.  Higher interest rates reduce the appeal of holding non-yielding gold.

Gold Surges as Escalating Middle East Tensions Boster Demand

West Texas Intermediate (WTI) crude oil closed higher, posting a small gain following three losing sessions that came as the geopolitical risk premium eased while rising US inventories are seen as a signal of weak demand.  WTI crude oil for May delivery closed up 4¢ to $82.73 per barrel, while Jun Brent crude, the global benchmark, was last seen down 35¢ to $86.94.  The commodity is shedding a risk premium accorded since the start of Apr, when Israel launched an attack on Iran's embassy in Syria that killed senior military leaders.  Iran's response over the weekend, launching hundreds of drones & missile to attack Israel that were mostly shot down, caused minor damage & Israel has so far not retaliated, easing fears of a spreading Middle East war.  A larger than expected 2.7M barrel rise in US oil inventories reported yesterday by the Energy Information Administration added concerns over flagging demand.

WTI Crude Oil Closes with a Small Gain Even as Concerns Over a Wider Middle Easy War

Traders are getting used to the idea that rate cuts will be slower than previously expected.  That's the price of a strong economy, although strength remains unclear with a number of weak readings.  Meanwhile safe haven gold continues to be in record territory.

Dow Jones Industrials 

Markets struggle to recover after a 4-day losing streak

Dow rebounded 266, advancers over decliners 3-1 & NAZ went up 68.  The MLP index gained 2+ to the 276s & the REIT index rebounded 1+ to the 356s.  Junk bond funds crawled higher & Treasuries ran into selling which raised yields.  Oil was off pennies in the 82s (more below) & gold went up 5 to 2393.

AMJ (Alerian MLP Index tracking fund)

Sales of previously-owned homes dropped 4.3% in Mar compared with Feb, to a seasonally adjusted, annualized rate of 4.19M units, according to the National Association of Realtors (NAR).  Sales were 3.7% lower than in Mar 2023 & this came after a big jump in sales in Feb.  Rising mortgage rates are likely the cause of the slowdown.  This sales count is based on closings from contracts likely signed in Jan & Feb.  Mortgage rates stayed lower in Jan, in the mid 6%-range on the popular 30-year fixed loan, but then they then shot higher in Feb.  “Though rebounding from cyclical lows, home sales are stuck because interest rates have not made any major moves,” said Lawrence Yun, NAR's chief economist said.  “There are nearly six million more jobs now compared to pre-COVID highs, which suggests more aspiring home buyers exist in the market.”  Inventory did improve slightly, rising 4.7% month-to-month to 1.11M homes for sale at the end of Mar. That's a 3.2-month supply at the current sales pace.  Inventory is now up 14.4% higher than Mar of last year.  More supply did not cool home prices, however.  The median price of an existing home sold in March was $393K, up 4.8% from the year before.  It's also the highest price ever for the month of Mar.  The annual comparison was, however, slightly lower than the month before.  The spring housing market is getting more competitive, & moving faster.  The typical home sat on the market for just 33 days compared with 38 days in Feb.  Investors pulled back a bit, making up 15% of sales, compared with 21% in Feb & 17% in Mar of last year.  First-time buyers did make a comeback though, accounting for 32% of sales, up from 26% in Feb & 28% the year before.  All-cash purchases accounted for 28% of sales, down from 33% in Feb but up from 27% one year ago.  Pre-pandemic, that share was generally around 20%.  Mortgage rates have moved even higher this month, with the average rate on the 30-year fixed hovering around 7.5%, according to Mortgage News Daily.

March homes sales dropped despite a surge in supply

Crude oil futures fell for a 4th day, as Israel has refrained from immediately striking back against Iran after the unprecedented air assault last weekend, easing fears that the Middle East is on the brink of a major war.  The West Texas Intermediate contract for May fell 36¢ to $82.34 a barrel & Jun Brent futures lost 52¢ to $86.77 a barrel.  Oil has sold off 4% this week as traders unwind the geopolitical risk premium built into prices over the last 2 weeks.  US crude oil & the global benchmark have fallen below the prices reached after Israeli's airstrike against Iran’s diplomatic compound in Damascus, Syria at the start of the month, the event that triggered the current round of hostilities. Tamas Varga, analyst with oil broker PVM, said it appears intl pressure on Israel will compel the country to respond in a “measured and moderate” way to Iran’s weekend attack.   Ukraine's drone attacks on Russian oil infrastructure have also receded, Varga added.  “Those with bullish propensity are sinking into apathy as the risk premium that is rooted from Russia and the Near East keeps eroding,” he said.  In addition to the fading geopolitical risk premium, prices are also falling on a 10M barrel build in US petroleum inventories last week, said Giovanni Staunovo, strategist with UBS.

U.S. oil falls below $83 as war fears ease after Israel refrains from immediate Iran counterattack

The commercial real estate market is starting to buckle under the weight of higher interest rates & remote work.  There were 625 commercial real estate foreclosures in Mar, up 6% from Feb & 117% from the same time last year, according to a new report published by real estate data provider ATTOM.  The figure is calculated based on commercial properties with at least 1 foreclosure filing, including default notices, scheduled auctions & bank repossessions, entered into the ATTOM Data Warehouse during the month.  California had the highest number of commercial foreclosures in Mar, with 187 properties.  While that marked an 8% decrease from the previous month, it is a stunning 405% jump from the previous year.   "California began experiencing a notable rise in commercial foreclosures in November 2023, surpassing 100 cases and continuing to escalate thereafter," the report said.  New York, Florida, Texas & New Jersey also saw notable increases in commercial foreclosures last month.  Foreclosures have steadily risen since May 2020, when they hit a record low of just 141 properties.  At that time, the US economy was still in the throes of the COVID-19 pandemic, & many lenders offered commercial loan forbearance to borrowers to help them stay afloat.  However, those agreements have largely expired & now, the commercial real estate market is struggling with a number of challenges, including higher interest rates & waning demand for office space as more companies allow employees to work from home.

Commercial real estate foreclosures jumped 117% in March as trouble looms

Stocks have struggled amid concerns inflation is no longer cooling & the Federal Reserve could ease back on interest rate cuts.  That has put corp earnings center stage as investors watch closely how well reports match up with high expectations.  Dow is still down 1800 in Apr.

Dow Jones Industrials 

Markets extend decline on mixed earnings & rate cuts worries

Dow fell 46, advancers modestly ahead of decliners & NAZ dropped 181.  The MLP index went up 3+ to the 274s & the REIT index was off 1+ to the 352s.  Junk bond funds remained in demand & Treasuries had buying which reduced Treasury yields.  Oil tumbled 2+ to the 82s & gold dropped 17 to 2389 (more on both below).

AMJ (Alerian MLP Index tracking fund)

European Central Bank (ECB) policymaker Joachim Nagel said that a rate cut for the organization looks increasingly likely for Jun, but added that certain parts of the incoming inflation data still looks higher than desired.  ″Talking about the June meeting, I think the probability is increasing that we will see a rate cut in June but there are still some caveats,” the chief of Germany's Bundesbank said at the IMF Spring Meetings taking place in DC.  ″Core inflation is still high, service inflation is high. For the June meeting we will get our projections, so we will get our news forecasts and if there is a confirmation that inflation is really going down and we will achieve our target in 2025, as I said, the probability is becoming higher that this rate cut is here for the June meeting,” Nagel added.  When asked about wage price pressures still lingering in the euro area, he said that in Germany there is still some wage momentum but was that it was broadly still on a downward trajectory.  On energy prices, he said a recent uptick in oil prices, compared to last year, was an “uncertainty” in what he described as a volatile environment.  “I think we learned a lesson in 2022, we are exposed to all this,” he said regarding an crisis in Europe that was particularly acute for the industrial sector in his homeland.  “We are more resilient than maybe we were two years ago. But nevertheless if oil prices, energy prices, are going up this is not only something for Germany — this is for all of us.”  Several ECB officials have made remarks about their expectations for interest rates in recent days.

ECB June cut looks increasingly likely — but ‘still some caveats,’ German central bank chief says

Britain's inflation rate slowed by less than expected in Mar, according to official figures, adding to signs that a first interest rate cut by the Bank of England (BoE) could be further off than previously thought.  British consumer prices rose by an annual 3.2%, down from a 3.4% increase in Feb & its lowest in 2½ years, the Office for National Statistics said.  But the BoE, which has an inflation target of 2%, & economists had forecast 3.1%.  Investors reduced their bets on BoE rate cuts & the £ rose.  The slowdown in the fall in Britain's inflation rate follows an acceleration of headline price growth in the US which rose for a2nd month in a row to 3.5% in Mar, according to data published last week.  BoE Governor Andrew Bailey, who last month said British inflation was "moving in the right direction" for a rate cut, said on yesterday that different inflation dynamics in the US & Europe could lead to different paths for interest rates.  But analysts said today's data served as a reminder that Britain's fight against inflation was not yet won.  Ruth Gregory, deputy chief UK economist at Capital Economics, said there was a risk that Britain will follow the trend in the US & see inflation stall.  "The chances of interest rates being cut for the first time in June are now a bit slimmer," she said.  The BoE is still expected to cut interest rates later this year, but investors today trimmed their bets on the scale of its moves, fully pricing in only one qtr-point cut by the end of 2024, possibly as late as Nov.  Federal Reserve Chair Jerome Powell said on yesterday that recent data on inflation had not given US policymakers the confidence needed for them to pivot to rate cuts soon.

Slowdown of UK inflation rate disappoints in March, economists say fight against inflation far from over

Most doses of Eli Lilly's (LLY) highly popular weight loss drug Zepbound & diabetes counterpart Mounjaro will be in short supply thru the 2nd qtr of this year as demand jumps, according to an update on the Food & Drug Administration's drug shortage database today.  All doses of Zepbound & Mounjaro besides the 2.5-milligram versions of both treatments are in a shortage.  A previous update said some doses of both drugs would have limited availability thru Apr.  The new update suggests that the insatiable demand for a buzzy class of weight loss & diabetes drugs is still trouncing supply, even as LLY & its main rival, Novo Nordisk (NOVO), work to increase production of those treatments.  Many patients injectable treatments, which have soared in demand for helping them shed significant pounds over time.  Those treatments are sometimes known as incretin drugs, which mimic gut hormones to suppress appetite & regulate blood sugar.  “We recognize this situation may cause a disruption in peoples’ treatment regimens and are working with purpose and urgency to help meet the surge in demand,” a LLY spokesperson said.  The company expects its investments in manufacturing & supply capacity “to progressively increase production of our medicines throughout 2024 and beyond,” they added.  LLY stock rose 3.78.

Most doses of Lilly’s Zepbound, Mounjaro in short supply through June, FDA says

Gold prices edged down, but traded near their record high levels hit last week, as pressure from fading US rate cut hopes overshadowed gains from safe haven demand arising out of geopolitical turmoil in the Middle East.  Spot gold eased marginally to $2376 per ounce, & was below hitting an all-time high of $2431 on Fri.  US gold futures settled 0.8% lower at $2388.  Iran said its military was ready to confront any attack by Israel.  Iran carried out its first-ever direct attack on Israel last weekend in retaliation for a suspected Israeli strike on an Iranian diplomatic compound in Damascus on Apr 1.  Top US central bank officials including Federal Reserve Chair Jerome Powell backed away yesterday from providing any guidance on when interest rates may be cut, saying instead that monetary policy needs to be restrictive for longer.  The market is pricing in a 71% chance of a rate cut by Sep.  Higher interest rates reduce the appeal of holding non-yielding gold.

Gold Retreats as Dimming Rate Cut Expectations Overshadow Safe Haven Demand

West Texas Intermediate (WTI) crude oil fell for a 3rd-straight day as a report showed an larger than expected rise in US inventories last week, while geopolitical worries continue to moderate.  WTI crude oil for May closed down $2.67 to settle at $82.69 per barrel, the lowest since Mar 27, while Jun Brent crude, the global benchmark, was last seen down $2.49 to $87.53.  Oil is ceding some of the risk premium awarded the commodity following the failed weekend attack on Israel from Iran, which saw the Persian Gulf country send hundreds of drones & missile towards Israel, with nearly all shot down by aircraft & air defense systems.  Israel has promised to retaliate for the attack but has so far restrained from a response amid pressure from the US & other countries even as it continues with its war in Gaza.  Oil prices are unwinding some of the war premium that has been priced-in due to the continuing tensions surrounding the Gaza conflict & the subsequent Iranian missile onslaught on Israel.  Thus far Israel has adhered to the intl calls of showing restraint.  In its weekly survey, the Energy Information Administration said US oil inventories rose by 2.7M barrels last week, well ahead of the estimate for a 1.4M barrel rise.

WTI Crude Oil Falls Again on Easing International Tensions and a Larger than Expected Rise in US Inventories

Rate cuts by central banks are getting a lot of attention around the globe.  Their leaders tend to be giving similar messages & are keeping cautious.  Gold & Treasury yields remain at elevated levels & investors continue to be very nervous about the future. 

Dow Jones Industrials 

Markets hesitate on interest rate worries

Dow slid 23, advancers over decliners about 2-1 & NAZ was off 24.  The MLP index added 1+ to 273 & the REIT index fell another 2 to the 352s on rising interest rates.  Junk bond funds crawled higher & Treasuries saw more selling which raised rates (more below).  Oil was fractionally lower to the 84s & gold was steady at 2408 (still in record territory).

AMJ (Alerian MLP Index tracking fund)

United Airlines (UAL) forecast 2nd-qtr earnings well ahead estimates despite ongoing delivery delays from Boeing (BA), a Dow stock.  The airline expects to post EPS of $3.75 - $4.25 in the 2nd qtr, ahead of estimates for about $3.76.  Airlines make the bulk of their profits in the 2nd & 3rd qtrs, during peak travel season.  The carrier also reiterated its full-year EPS forecast of $9 - $11 a share.   It also lowered its annual capital expenditure estimate to $6.5B from about $9B.  UAL is also facing a Federal Aviation Administration safety review, which has prevented some of its planned growth.  A spokeswoman said earlier this month that the carrier will have to postpone its planned service from Newark, New Jersey, to Faro, Portugal, & service between Tokyo & Cebu, Philippines.  The airline said it would have reported a profit for the qtr if not for a $200M hit from the temporary grounding of the Boeing 737 Max 9 in Jan.  The airline posted a net loss of $124M (38¢ a share) in the first qtr compared with a $194M loss, or 59¢ a year earlier.  Revenue rose nearly 10% in the first qtr compared with the year-earlier period to $12.5B, with capacity up more than 9% on the year.  UAL cut its aircraft-delivery expectations for the year.  It expects it will receive just 61 new narrow-body planes this year, down from 101 it said it had anticipated at the beginning of the year & contracts for as many as 183 planes in 2024.  “We’ve adjusted our fleet plan to better reflect the reality of what the manufacturers are able to deliver,” CEO Scott Kirby said.  “And, we’ll use those planes to capitalize on an opportunity that only United has: profitably grow our mid-continent hubs and expand our highly profitable international network from our best in the industry coastal hubs.”  The stock jumped 4.98 (12%).

United Airlines jumps more than 10% on strong earnings forecast, cuts 2024 fleet plan on Boeing delays

US job growth has repeatedly blown past expectations since the start of the new year, but there has been a consistent factor underpinning those surprisingly strong figures.  The most recent data from the Labor Dept shows that employers added 303K jobs in Mar, easily topping the 200K gain forecast.  The unemployment rate inched lower to 3.8%, from 3.9% in Feb.  But digging deeper into the report reveals that the American gov has been a major contributor of jobs since the beginning of the year, something that economists say is belying a strong labor market.  Public sector jobs at the federal, state & local level rose by 194K during the first 3 months of 2024.  That accounts for about ¼ of all jobs created in Jan, Feb & Mar.  By comparison, during that same time period in 2019 before the pandemic began, gov hiring represented just 11% of all jobs created.  State & local govs are hiring teachers & police officers, while the federal gov is onboarding TSA agents amid a post-pandemic surge in travel.  The gov experienced a severe drop in employment during the pandemic, when state & local govs, anticipating budget shortfalls, furloughed & laid off thousands of employees.  Many workers also left their jobs for more competitive pay in the private sector, leaving the gov to grapple with a labor shortage.  While the private sector job growth slowed sharply from 4.3% in 2022 to 2.3% in 2023, the gov has seen a much more rapid pace of hiring.  Public sector job growth jumped from a modest 1% in 2022 to 2.7% in 2023, the highest year-over-year growth rate since 1990, according to Fitch Ratings.  That divergence suggests hiring is slowing down in the private sector, which includes jobs like manufacturing, research & development & construction, while it speeds up within the gov.  The trend is likely to continue in 2024.

Government hiring spree propping up the US job market

Treasury yields held steady on Wed as investors digested comments from Federal Reserve policymakers about the state of the economy & monetary policy outlook.  The yield on the 10-year Treasury rose less than 1 basis point to 4.659% & the 2-year Treasury was last at 4.968% after advancing by less than 1 basis point, trading just below the 5% mark it briefly crossed on yesterday.  Yields & prices have an inverted relationship & 1 basis point equals 0.01%.  Investors considered the path ahead for interest rates after comments from Federal Reserve officials, including Chair Jerome Powell.  Yesterday, he said there has been a “lack of further progress” on inflation so far this year.  Recent economic data has also shown growth & strength in the labor market, he added.  The Fed has repeatedly said that it is looking for data to show that inflation is easing sustainably & the overall economy is cooling before starting to cut interest rates.  But Powell yesterday indicated that policymakers had not yet reached this point.  “The recent data have clearly not given us greater confidence, and instead indicate that it’s likely to take longer than expected to achieve that confidence,” he added.  Earlier in the week, San Francisco Federal Reserve Bank Pres Mary Daly said there was “no urgency” for rate cuts to begin.  The comments fueled questions about whether there may be fewer rate cuts than expected this year & whether they may begin later than anticipated.

Treasury yields little changed as investors digest remarks from Fed officials

Dow began trading by advancing 200, then the bulls went home.  Worries over heightened tensions in the Middle East & uncertainty over the timing & depth of rate cuts are nagging thoughts for investors to cope with.  Questions about jobs growth (see above) aren't helping matters.  In Apr, Dow is already down more than 2K & the outlook appears to be gloomy.

Dow Jones Industrials 

Markets wobble after Powell warns rates need to remain higher longer

Dow gained 63 in choppy trading, decliners over advancers 3-2 & NAZ was off 19.  The MLP index lost 1+ to the 271s & the REIT index fell 5+ to the 354s.  Junk bond funds were flattish & Treasuries saw modest selling, raising Treasury yields.  Oil inched up pennies in the 85s & gold finished up 26 to 2409 (more no both below).

AMJ (Alerian MLP Index tracking fund)

Federal Reserve Chair Jerome Powell said that the US economy, while otherwise strong, has not seen inflation come back to the central bank's goal, pointing to the further unlikelihood that interest rate cuts are in the offing anytime soon.  Speaking to a policy forum focused on US-Canada economic relations, Powell said that while inflation continues to make its way lower, it hasn't moved quickly enough & the current state of policy should remain intact.  “More recent data shows solid growth and continued strength in the labor market, but also a lack of further progress so far this year on returning to our 2% inflation goal,” the Fed chief added.  Echoing recent statements by central bank officials, Powell indicated that the current level of policy likely will stay in place until inflation gets closer to target.  Since Jul 2023, the Fed has kept its benchmark interest rate in a target range of 5.25-5.50%, the highest in 23 years.  That was the result of 11 consecutive rate hikes that began in Mar 2022.  “The recent data have clearly not given us greater confidence, and instead indicate that it’s likely to take longer than expected to achieve that confidence,” he continued.  “That said, we think policy is well positioned to handle the risks that we face.”  Powell added that until inflation shows more progress, “We can maintain the current level of restriction for as long as needed.”  The comments follow inflation data through the first 3 months of 2023 that has been higher than expected.  A consumer price index reading for Mar, released last week, showed inflation running at a 3.5% annual rate, well off the peak around 9% in mid-2022 but drifting higher since Oct 2023.  Treasury yields rose as Powell spoke.  The benchmark 2-year note, which is especially sensitive to Fed rate moves, briefly topped 5%, while the benchmark 10-year yield rose 3 basis points.  Powell noted the Fed's preferred inflation gauge, the personal consumption expenditures price index, in Feb showed core inflation at 2.8% in Feb & has been little changed over the past few months.  “We’ve said at the [Federal Open Market Committee] that we’ll need greater confidence that inflation is moving sustainably towards 2% before [it will be] appropriate to ease policy,” he said.  “The recent data have clearly not given us greater confidence and instead indicate that it’s likely to take longer than expected to achieve that confidence.”

Fed Chair Powell says there has been a ‘lack of further progress’ this year on inflation

China's economy grew faster than expected in the first qtr, data showed, offering some relief to officials amid efforts to maintain growth.  The gov released its fiscal & monetary policy measures in an effort to meet its 2024 GDP growth target of around 5%, which have been described as an ambitious goal, noting that last year's growth rate of 5.2% was likely boosted by a rebound from 2022, which faced limitations because of COVID-19.  GDP grew 5.3% in Jan-Mar year over year, according to the National Bureau of Statistics.  This was higher than expectations for a 4.6% increase & slightly faster than the 5.2% expansion in the previous 3 months.  "The result is positive for the economy to hit its target. Momentum appears to be stable for now, evidenced by the March data not surprising on the upside," said Jeff Ng, head of Asia macro strategy at SMBC in Singapore.  "I think sentiments are still leaning bearish. I'm anticipating some reversal, possibly from the last quarter of 2024," he added.  The GDP on a qtr-by-qtr basis grew 1.6% in the first qtr, which is higher than the 1.4% forecast for growth.  The Chinese economy, 2nd largest in the world, has struggled to see a strong & sustainable post-pandemic jump, as it has been hurt by a protracted property downturn, mounting local gov debts & weak private-sector spending.  Fitch knocked its outlook on China's sovereign credit rating to negative last week, pointing to risks to public finances as Beijing allocates more spending toward infrastructure & high-tech manufacturing amid a shift away from the property sector.  The gov is counting on infrastructure work to help boost the economy as consumers are cautious of spending & businesses are lacking the confidence to expand.

China's Q1 GDP growth surpassed expectations, data shows

European Central Bank (ECB) Pres Christine Lagarde said the central bank remains on course to cut interest rates in the near term, subject to any major shocks.  Lagarde said the ECB would monitor oil prices “very closely” amid elevated fears of a spillover conflict in the Middle East.  However, since Iran’s unprecedented air attack on Israel over the weekend, she said the oil price reaction had been “relatively moderate.”  Her comments come shortly after the central bank gave its clearest indication to date that it could start cutting interest rates during its Jun meeting.  “We are observing a disinflationary process that is moving according to our expectations,” Lagarde said.  “We just need to build a bit more confidence in this disinflationary process but if it moves according to our expectations, if we don’t have a major shock in development, we are heading towards a moment where we have to moderate the restrictive monetary policy,” Lagarde added.  “As I said, subject to no development of additional shock, it will be time to moderate the restrictive monetary policy in reasonably short order,” she noted.  The ECB on Thurs held interest rates steady at a record high for the 5th consecutive meeting, but signaled that cooling inflation means it could begin trimming soon.  In a shift from previous language, the ECB said “it would be appropriate” to lower its 4% deposit rate if underlying price pressures & the impact of previous rate hikes were to boost confidence that inflation is falling back toward its 2% target “in a sustained manner.”  Asked whether a Jun rate cut might be followed by subsequent reductions, Lagarde replied, “I have been extremely clear on that and I have said deliberately we are not pre-committing to any rate path.”  “There is huge uncertainty out there. … We have to be attentive to those developments, we have to look at the data, we have to draw conclusions from those data.”

Lagarde says ECB will cut rates soon, barring any major shocks; notes ‘extremely attentive’ to oil

Gold wavered as traders parsed policymaker’s remarks amid bets that the Federal Reserve will be in no rush to cut interest rates.  As investors await Jerome Powell's speech later today, bullion climbed as much as 0.4% after earlier slipping as much as 0.9%.  Treasury yields gained & the $ extended its advance into a 5th straight session.  Traders are betting the Fed will only begin easing in Sep, after wagering on Jul a week ago.   The repricing comes after a string of surprisingly strong US inflation readings that are shaking up the prevailing narrative for markets & stoking volatility.  The precious metal remains in a weeks-long uptrend as investors seek safety amid growing geopolitical tensions, which helped bullion chalk a 1.7% gain yesterday.  The Reserve Bank of India continued its gold purchases in Mar, according to a post from Krishan Gopaul, investment research analyst at the World Gold Council.  YTD purchases of nearly 19 tons now exceed its 2023 net purchases of 16 tons, he added.  Spot gold was little changed at $2383 an ounce.

Gold Fluctuates as Traders Digest Fedspeak and Await Powell

West Texas Intermediate (WTI) crude closed with a small loss on easing fears of a wider war in the Middle East, while China, the #1 importer, said its economy grew more than expected in the first qtr.  WTI crude oil for May delivery closed down 5¢ to settle at $85.36 per barrel, while Jun Brent crude, the global benchmark, was last seen down a penny to $90.09.  China reported its GDP grew by 5.3% in the first qtr of this year, topping the estimate for a 4.6% rise in the period.  The rise comes as the country's gov concentrates on expanding manufacturing even as its key real-estate sector remains mired in a debt crisis.  The Intl Energy Agency last week said it expects China to be the primary source of demand growth in 2024, accounting for 45% of the 1.2M barrels per day of new demand its expects this year.  A geopolitical risk premium for oil is narrowing following the weekend drone & missile attacks on Israel from Iran to retaliate for Israel's Apr 1 strike on Iran's Syrian embassy that killed senior military personnel.  The attack was mostly intercepted by aircraft & air-defense systems, causing little damage, though Israel's response to the attack is awaited amid worries over a wider Middle East war that could impact oil exports from the region.  The current thinking is that the Israeli response will be measured, not least because of intl & US pressure to show restraints.

WTI Crude Oil Closes Lower Despite Better than Expected Q1 GDP Growth in China as Geopolitical Worries Ease

Today Powell said that it will take "longer than expected" to achieve the confidence needed to get inflation down to the central bank's 2% target, signaling that it will also likely take longer to cut rates.  His new stance was a departure from comments just 2 weeks ago, when he offered assurances that the overall outlook had not changed much despite some hotter-than-expected readings at the start of the year.  This is a major change for investors who have become addicted to low interest rates.  Dow had rallied about 7K to almost 40K since the end of Oct.  But since the decline in Apr, about 2K of that advance has been taken away.  This could be a very tough time for stocks going forward.    39807  37856

Dow Jones Industrials 

Markets slide while gold extends its rally to new records

Dow went up 56 but below early highs, decliners over advancers 3-1 & NAZ was off 14.  The MLP index slid 2 to 281 & the REIT index declined 4+ to 355.  Junk bond funds were little changed & Treasuries had limited selling, raising yields slightly.  Oil crawled up pennies in the 85s & gold rose 13 to 2396.

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The International Monetary Fund (IMF) slightly raised its global growth forecast, saying the economy had proven “surprisingly resilient” despite inflationary pressures & monetary policy shifts.  The IMF now expects global growth of 3.2% in 2024, up by a modest 0.1 percentage point from its earlier Jan forecast & in line with the growth projection for 2023.  Growth is then expected to expand at the same pace of 3.2% in 2025.  The IMF's chief economist, Pierre-Olivier Gourinchas, said the findings suggest the global economy is heading for a “soft landing,” following a string of economic crises, & that the risks to the outlook were now broadly balanced.  “Despite gloomy predictions, the global economy remains remarkably resilient, with steady growth and inflation slowing almost as quickly as it rose,” he added.  Growth is set to be led by advanced economies, with the US already exceeding its pre-Covid-19 pandemic trend & with the euro zone showing strong signs of recovery.  But dimmer prospects in China & other large emerging market economies could weigh on global trade partners, the report said.  China, whose economy remains weakened by a downturn in its property market, was cited among a series of potential downside risks facing the global economy.  Also included were price spikes prompted by geopolitical concerns, trade tensions, a divergence in disinflation paths among major economies & prolonged high interest rates.  To the upside, looser fiscal policy, falling inflation & advancements in artificial intelligence were cited as potential growth drivers.  Central banks are now being closely watched for a signal on the future path of inflation, with opinion diverging on either side of the Atlantic as to when the Federal Reserve & the ECB will cut rates.  Some analysts have recently forecast a possible Fed rate hike as stubborn inflation & rising Middle East tensions weigh on economic sentiment.  The IMF said it sees global headline inflation falling from an annual average of 6.8% in 2023 to 5.9% in 2024 & 4.5% in 2025, with advanced economies returning to their inflation targets sooner than emerging market and developing economies.

IMF upgrades global growth forecast as economy proves ‘surprisingly resilient’ despite downside risks

Jjohnson & Johnson (JNJ), a Dow stock & Dividend Aristocrat, first-qtr adjusted earnings that topped  expectations as sales in its medical devices business surged.  Meanwhile, the total revenue for the period was largely in line with estimates.  The medtech division provides devices for surgeries, orthopedics & vision.  The company is benefiting from a rebound in demand for nonurgent surgeries among older adults, who deferred those procedures during the Covid pandemic.  CFO Joseph Wolk said that consumers may be pulling back in other areas but “don’t want to compromise when it comes to their health, their mobility, their ability to live a fulfilling life.”  He added that the company has seen elevated procedure levels after the pandemic, & “we haven’t seen any backtracking of that.”  The company posted $21.4B in total sales for the first 3 months of 2024, up more than 2% from the same qtr in 2023.  EPS was $2.20 during the qtr, that compares with a net loss of 19¢ per share, for the year-earlier period.  At the time, JNJ recorded costs tied to its talc baby powder liabilities & the spinoff of its consumer health unit Kenvue.  Excluding certain items for the first qtr of 2024, adjusted EPS was $2.71.  JNJ also narrowed its full-year guidance for the year.  The company expects sales of $88.0-$88.4B.  That compares with a previous forecast of $87.8-$88.6B.  JNJ expects adjusted EPS of $10.57 - $10.72.  That compares to a previous guidance of $10.55 - $10.75 per share.  JNJ said it will increase its quarterly div to $1.24 per share, up 4.2% from $1.19 per share.  That marks the company's 62nd year of consecutive div increases.  The stock fell 2.74.

Johnson & Johnson tops quarterly profit estimates as medical device sales jump

Bank of America (BAC) reported first-qtr earnings that topped estimates for profit & revenue on better-than-expected interest income & investment banking.  EPS fell 18% to $6.7B (76¢ a share) excluding a $700M FDIC assessment, EPS was 83¢.  Revenue slipped 1.6% to $25.98B as net interest income declined from a year earlier.  Net interest income, or the difference between what the company earns from loans & investments & what it pays customers for their deposits, was $14.2B, topping the $13.9B estimate.  Total deposits of $1.95T climbed roughly 1% from the 4th qtr, while loans were essentially unchanged at $1.05T.  CFO Alastair Borthwick said that NII will likely dip in the 2nd qtr to about $14B on drops in wealth management & markets interest income, & could grow in the 2nd ½ of the year.  NII has been declining in recent qtrs as funding costs have climbed along with the rise in interest rates.  The stock fell 1.64.

Bank of America tops estimates on better-than-expected interest income, advisory

Stocks attempted to extend their gains, but the bulls lacked conviction & markets are back on defense.  Meanwhile yields are at their 2024 highs & gold is roaring ahead.  Dow already has fallen 2000 in Apr while gold is surging to record highs.  This could be a difficult qtr for stocks.

Dow Jones Industrials 

Markets tumble while traders await Israel's response to Iran's attack

Dow sank 248 (650 below opening levels), decliners over advancers a hefty 6-1 & NAZ retreated 290.  The MLP index was off 3 to the 284s & the REIT index sank 6 to the 359 while interest rates rose.  Junk bond funds drifted lower as bond yields rose & Treasuries were heavily sold raising yields sharply.  Oil finished little changed in the mid 86s & gold jumped 20 to 2394 (more on both below).

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Goldman Sachs (GS), a Dow stock, posted first-qtr profit and revenue that topped expectations, fueled by a surge in trading & investment banking revenue.  EPS jumped to $11.58 from the year earlier period, thanks to a rebound in capital markets activities & revenue rose 16% to $14.2B, topping estimates by more than $1B.  Fixed income trading revenue rose 10% to $4.3B, topping the estimate by $680M, thanks to a jump in mortgage, foreign exchange, & credit trading & financing.  Equities trading climbed 10% to $3.3B, about $300M more than expected, on derivatives activity.  Investment banking fees surged 32% to $2.1B, topping the estimate by roughly $300M driven by higher debt & equity underwriting.  “I’ve said before that the historically depressed levels of activity wouldn’t last forever,” CEO David Solomon said.  “CEOs need to make strategic decisions for their firms, companies of all sizes need to raise capital, and financial sponsors need to transact to generate returns for their investors... It’s clear that we’re in the early stages of a reopening of the capital markets.”  The stock rose 11.46 (3%).

Goldman Sachs tops first-quarter estimates fueled by trading, investment banking

Apple (AAPL), a Dow stock, iPhone shipments dropped 10% globally in the first qtr of 2024, pressured by double-digit growth in shipments by Chinese challengers Xiaomi & Transsion, a report from Intl Data Corp (IDC).  AAPL shipped 50.1M units in the first qtr, down 9.6% from the 55.4M shipments in the same period a year earlier, according to the IDC report.  Among the top 5 smartphone brands in the report, AAPL recorded the sharpest decline year on year.  Samsung regained the top spot in the first qtr, after losing the crown to AAPL last year, with a 20.8% market share, shipping nearly the same number of units as last year at 60.1M.  Its market share was 22.5% in the first qtr of 2023.  AAPL, which surpassed Samsung as the largest smartphone maker in 2023, saw its market share drop to 17.3% from 20.7% a year earlier.  “While IDC expects these two companies to maintain their hold on the high end of the market, the resurgence of Huawei in China, as well as notable gains from Xiaomi, Transsion, OPPO/OnePlus, and vivo will likely have both OEMs looking for areas to expand and diversify,” said Ryan Reith, group VP at IDC Worldwide Mobility & Consumer Device Trackers.  AAPL stock fell 3.86.

Apple iPhone first-quarter shipments sink as Chinese challengers rise; Samsung regains top spot

US crude oil futures were lower as traders breathed a sigh of relief after Israel fended off a large-scale air assault by Iran & the US emphasized it wants to avoid a wider war in the Middle East.  The West Texas Intermediate contract for May lost $1.22 (1.4%) to $84.44 a barrel & Jun Brent futures fell $1.24 (1.4%)to $89.21 a barrel.  US crude closed at $85.66 a barrel Fri, while the global benchmark settled at $90.45.  WTI futures began the year around $71 a barrel.  “Market participants have decided that this chapter of this war story is over for now,” Helima Croft, head of commodity strategy at RBC Capital Markets, said.  But Israel's war cabinet is still weighing how it will respond to the attack: “You could still see some significant Israeli retaliation,” Croft said.  Iran launched more than 300 drones & missiles against military targets in Israel on Sat in an attack that Pres Biden described as “unprecedented.”  The US intervened to directly help Israel shoot down nearly all of the incoming munitions, Biden said.  Though significant in scale, the Iranian attack caused little actual damage in Israel.  The Nevatim Air Force Base in southern Israel sustained slight damage & a 10-year-old girl suffered injuries, according Israel Defense Forces spokesman Daniel Hagari.

Oil prices fall more than 1% after Israel fends off large-scale aerial attack by Iran

Gold traded higher midafternoon even as treasury yields rose after the US Census Bureau reported retail sales rose more than expected last month, while the metal's geopolitical premium eased after Iran's weekend attack on Israel caused little damage.  Gold for Jun was last seen up $10 to $2385 per ounce, above Fri's record close of $2374 but below Fri's record intra-day price of $2448.  US retail sales rose by 0.7% in Mar, up from a prior-month rise of 0.6% & well ahead of the estimate for a 0.3% rise.  The report is the latest to show the US economy is running hot. cutting into expectations the Federal Reserve will soon move to lower interest rates.  Iran's weekend attack on Israel was widely telegraphed, coming after Israel's Apr 1 strike on Iran's Syrian embassy that killed senior military leaders.  The weekend attack was met by an intl coalition of fighter jets & Israeli air-defense systems that allowed few of the weapons to reach targets.  The $ was higher following the retail sales report, with the ICE dollar index last seen 0.15 points to 106.19.  Treasury yields rose, bearish for gold since it offers no interest.  The 2-year note was last seen paying 4.948%, up 3.4 basis points, while the yield on the 10-year note was up 10.3 basis points to 4.636%.

Gold Trading Higher Even as Yields Rise After US Retail Sales Rose Above Expectations Last Month

Crude-oil prices settled lower after an Iranian attack on Israel caused little damage.  That helped to diminish expectations about a broader conflict involving the 2 bitter rivals, at least for now.  West Texas Intermediate crude for May shed 25¢ to settle at $85.41 a barrel & Jun Brent crude, the global benchmark, declined by 35¢ to end at $90.10 a barrel after briefly trading north of $90 a barrel.  Oil prices declined, failing to find much support from this weekend's Iranian strike against Israel, which was largely thwarted by Israel’s Defense Force (IDF).

Oil prices end lower, failing to find much support from Iran’s attack on Israel

Stocks opened with strong advance.  Then sellers took command & dragged the Dow much lower on worries about a major conflict in the Mid-East.  Nervous money bought US Treasuries & gold.

Dow Jones Industrials 

Markets rise on retail sales and earnings

Dow was up 81 (but 300 below highs at the opening), decliners over advancers 3-2 & NAZ slid back 8.  The MLP index hardly budged in the 277s & the REIT index declined 3+ to the 361s after the jump in Treasury yields.  Junk bond funds were mixed & Treasuries were heavily sold driving yields substantially higher.  Oil fell fractionally to go below 85 & gold pulled back 10 to 2363 following its recent run.

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Americans picked up the pace on spending in Mar even as they continued to face high interest rates & steeper prices for everyday goods.  Retail sales, a measure of how much consumers spent on a number of everyday goods including cars, food & gasoline, jumped 0.7% in Mar, the Commerce Dept said.  That is much higher than the 0.3% increase forecast.  Excluding the more volatile measurements of gasoline & autos, sales climbed 1% last month.  The Mar advance is not adjusted for inflation, meaning that consumers may be spending the same but getting less bang for their buck.  Consumers continued to spend at gas stations, grocery stores, building material & garden  stores, bars & restaurants & health & personal care stores.  They also continued to open their wallets when online shopping, with spending at non-store retailers jumping 2.7% from the previous month.  However, they pulled back their spending at electronics & appliance stores, miscellaneous retailers, clothing stores, furniture stores & sporting goods, hobby, musical instrument & book stores.  Sales rose in 8 of 13 retail categories.  A solid job market & big wage increases have helped to buoy consumer spending in recent months, despite high inflation.  However, many economists have been predicting that consumers will grow more cautious as student loan payments resume & high interest rates continue to work their way thru the economy.  On top of that, more Americans are relying on their credit cards to cover necessities.  Credit card debt surged to a new record at the end of 2023, while delinquencies are also on the rise.

Retail sales unexpectedly jump even as high inflation stirs back to life

Tesla (TSLA) is preparing to lay off more than 10% of its global workforce following weak first qtr deliveries & increasing competition in the electric vehicle (EV) market.  A leaked internal email from CEO Elon Musk said that the automaker is looking to cut costs & increase productivity after years of rapid growth that have led to duplication in some roles & functions in certain areas of the company, tech publication Electrek reported.  The world's most valuable automaker employs about 140K workers worldwide.  The reported staffing reduction will affect about 15K employees.  The lay-offs come after Electrek reported that TSLA had told managers to identify critical team members, paused some stock rewards, canceled some worker's annual reviews & reduced production at Gigafactory Shanghai.  Earlier this month, it was reported that its quarterly deliveries declined for the first time in nearly 4 years & fell short of estimates.  TSLA announced at the time that it delivered roughly 387K vehicles in the first qtr – well below expectations of 443K & an 8.5% decrease compared to the first qtr of last year.  The automaker has also faced an escalating price war in China, a key market for the EV maker, as low-cost competitors like BYD forced it to reduce prices & cut into its margins.  A report earlier this month said that TSLA was abandoning its long-touted plans to produce a budget-friendly starter car, purportedly called Model 2, that was expected to start at $25K.  The stock dropped 6 to 165.

Tesla to lay off more than 10% of workforce, report says

Treasury yields jumped as investors reacted to a hotter-than-expected retail sales report & rising geopolitical tensions.  The yield on the 10-year Treasury rose by more than 11 basis points at 4.614% & the 2-year Treasury yield last added nearly 7 basis points, sitting at 4.95%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Traders considered the potential market impact of growing tensions in the Middle East after Iran launched several hundred missiles & drones on Israel over the weekend.  Market expectations about when the first rate cut will take place moved back following last week's inflation data, with traders now anticipating the first rate cut to come in Jul or Sep rather than Jun, CME Group's FedWatch tool showed.

10-year Treasury yield jumps above 4.6% after hot retail sales, Iran attack

Treasury yields jumped to fresh highs this year after stronger-than-expected retail sales for Mar.  However optimism is fading while Treasury yields rally after the attack by Iran on Israel this weekend.  Gold had some selling although it is still up an impressive 300 YTD.

Dow Jones Industrials