Markets mixed with Dow reaching its eighth straight win

Dow rose 125, advancers over decliners over advancers 4-3& NAZ was off 5.  The MLP index declined 3+ to 280 & the REIT index dipped 1+ to the 369s.  Junk bond funds remain mixed & Treasuries continued to be sold, raising yields.  Oil was off 1 to the 78s & gold soared 34 to 2375 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Consumer sentiment slumped as inflation expectations rose, despite otherwise strong signals in the economy, according to a closely watched survey.  The University of Michigan Survey of Consumers sentiment index for May posted an initial reading of 67.4 for the month, down from 77.2 in Apr & well off the forecast for 76.  The move represented a one-month decline of 12.7% but a year-over-year gain of 14.2%.  Along with the downbeat sentiment measure, the outlook for inflation across the 1-5 year horizons increased.  The one-year outlook jumped to 3.5%, up 0.3 percentage point from a month ago to the highest level since Nov.  Also, the 5-year outlook rose to 3.1%, an increase of just 0.1 percentage point but reversing a trend of lower readings in the past few months, also to the highest since Nov.  “While consumers had been reserving judgment for the past few months, they now perceive negative developments on a number of dimensions,” said Joanne Hsu, the survey's director.  “They expressed worries that inflation, unemployment and interest rates may all be moving in an unfavorable direction in the year ahead.”  Other indices in the survey also posted substantial declines.  The current conditions index fell to 68.8, down more than 10 points, while the expectations measure fell to 66.5, down 9.5 points.  Both pointed to monthly drops of more than 12%, though they were higher from a year ago.  The report comes despite the stock market riding a strong rally & gasoline prices nudging lower, though still at elevated levels.  Most labor market signals remain solid, though jobless claims last week hit their highest level since late Aug.

Consumer sentiment tumbles as inflation fears surge

The number of household staples Americans can buy for a $100 bill has been eroded by nearly a 3rd over the past 5 years, according to data pointing to the pressure consumers are facing due to the compounding effects of high inflation.   NielsenIQ's 2024 Consumer Outlook shows the cost of fast-moving consumer goods (FMCG) including groceries & other necessities like toiletries has soared by 31% since 2019, & indicates the problem will get worse, as wage growth is expected to lag behind the consumer price index (CPI) this year.  To put it in perspective, the Daily Mail, which first reported on the data, noted that in 2019, a shopper with $100 to spend could purchase a 32-item cart full of items like milk, bathroom tissue & cereal.  But today, a customer with the same amount would have to put 10 of those items back on the shelf to stay on budget.  Calculations from Moody's 'Analytics chief economist Mark Zandi show Americans are paying on average $784 more each month compared with the same time 2 years ago, & $1069 more compared with 3 years ago, before the inflation crisis began.  Inflation has remained above the Federal Reserve's 2% target rate for years, ravaging household budgets.  The CPI ballooned from 1.4% in Jan 2021 to a peak of 9.1% in Jun 2022, & the last reading in Mar came in at 3.5%.  The price hikes over the past handful of years are adding up, not just on consumer goods but on other necessities.  From Jan 2021 to Mar 2024, overall inflation (seasonally adjusted) increased 18.9%.  During the same period, all food costs rose 21%, while shelter costs were up 20.5% & energy costs went up 36.9%.

Inflation reduces buying power as $100 goes a lot less far these days

Moderna (MRNA) said the Food & Drug Administration (FDA) as delayed the approval of its vaccine for respiratory syncytial virus to the end of May due to “administrative constraints” at the agency.  The FDA was expected to make a decision on the RSV shot on Sun.  The agency has not informed MRNA of any issues related to the vaccine's safety, efficacy or quality that would prevent its approval.  Investors are watching the upcoming approval closely as MRNA tries to rebound from the rapid decline of its Covid business last year.  If cleared, the RSV shot would become the company's 2nd product to launch in the US after its once-blockbuster Covid vaccine.  It would also be the 3rd RSV vaccine to enter the market last year.  MRNA said its RSV vaccine is still on track to be reviewed by an advisory panel to the Centers for Disease Control & Prevention during a meeting on Jun 26-27.  That panel will vote on recommendations for the shot’s use and intended population, which is necessary before it enters the market.  MRNA has been testing the shot in older adults, who are more vulnerable to severe cases of RSV.  The virus kills 6-10K seniors every year & results in 60-120K hospitalizations, according to CDC data.  “Moderna is very grateful to the FDA for their continued efforts and diligence,” said Dr Stephen Hoge, pres of MRNA, said.  “We look forward to helping the agency complete the review of our application, and to the June [advisory] meeting.”  The approval would demonstrate the versatility of its messenger RNA platform beyond treating Covid.  The biotech company is using that technology to tackle a range of diseases.  Those include RSV, cancer & a highly contagious stomach bug known as norovirus.  The stock

Moderna says FDA delayed RSV vaccine approval to end of May

Gold traded higher for a 2nd day, regaining ground lost to a price correction after the precious metal set a record high last month.  Gold for Jun was last seen up $34 per ounce to $2374 per ounce, still below the Apr 19 record of $2413 but recovering from the month low of $2302 on Apr 30.  The rise comes on hopes the Federal Reserve will begin cutting interest rates this year, lowering the carrying cost of owning gold.  Higher than expected US initial jobless-claims data released yesterday raised hopes the central bank will soon be able to turn dovish, though inflation has yet to return to its 2% target.  The $ edged higher, making gold more expensive for intl buyers.  The ICE dollar index was last seen up 0.04 points to 105.27.  However treasury yields also rose, bearish for gold since it offers no interest.  The 2-year note was last seen paying 4.87%, up 4.4 basis points, while the yield on the 10-year note was up 4.2 basis points to 4.502%.

Gold Higher Midafternoon, Regaining Lost Ground as Weak U.S. Data Raises Rate-Cut Hopes

West Texas Intermediate (WTI) crude oil closed lower, giving up early gains that came on signs of improving demand from China as the prospect of US interest-rate cuts diminish.  WTI crude oil for Jun delivery closed down $1 to settle at $78.26 per barrel after falling off a session high of $79.96, while Jul Brent crude, the global benchmark, was last seen down 90¢ to $82.98.  Demand concerns took hold during the session amid expectations the Federal Reserve will delay introducing the stimulus of rate cuts until at least Decr, according to the CME Fedwatch tool, as comments from members of the central bank's policy committee turn hawkish on the prospect of cuts.  The drop came even as China, the #1 oil importer, yesterday released bullish economic data, showing imports & exports rose by 1.5% in the first qtr, though much of the growth came in the first 2 months of the period & slowed in Mar.  OPEC+ will stage a ministerial meeting on Jun 1 to decide whether to extend into the summer 2.2M barrels per day of voluntary production cuts that are set to expire at the end of the qtr.  An extension would squeeze inventories & keep prices high during the high-demand summer season.

Gold Higher Midafternoon, Regaining Lost Ground as Weak U.S. Data Raises Rate-Cut Hopes

Stocks lost some steam after consumer sentiment hit a 6-month low.  Also, Federal Reserve Governor Michelle Bowman said she believes interest rates need to stay where they are "for a bit longer," echoing similar sentiments made by other Fed officials in recent weeks.  Dow finished up 837 this week, closing near its recent record high while safe haven gold is also close to its record made 3 weeks ago.

Dow Jones Industrials 

Markets stumble after 7 straight advances for the Dow

Dow rose 75, decliners over advancers about 3-2 & NAZ slid back 22.  The MLP index was off 3+ to 280 & the REIT index drifted back 1+ to 370 following recent strength.  Junk bond funds hardly budged & Treasuries saw selling which increased yields.  Oil added pennies in the 79s & gold jumped 26 to 2366.

AMJ (Alerian MLP Index tracking fund)

Hong Kong led Asia-Pacific stocks higher as markets tracked US gains, with renewed hopes for rate cuts by the Federal Reserve bolstering market sentiment.  The Hang Seng index hit its highest level in 10 months, up 2.3% after a report that regulators were considering a proposal to exempt individual investors from paying taxes on divs earned from Hong Kong stocks bought via Stock Connect.  Mainland China's CSI 300 marginally rose to hit its highest level since Oct 2023, ending at 3666.  Meanwhile, Japan's overall household spending in Mar fell 1.2% year on year, less than the 2.4% expected.  However, on a month-on-month basis, household spending rose 1.2%, compared with estimates of a 0.3% drop.  Japan’s Nikkei 225 rose 0.4% to end at 38,229, while the broad-based Topix gained 0.5% to close at 2728.  South Korea's Kospi closed 0.6% higher at 2727, but the small-cap Kosdaq fell 0.7%, ending at 864.  The Australian S&P/ASX 200 ended up 0.4% at 7749.  Overnight in the US, all 3 major indices climbed as fresh weekly jobless claims data came in at the highest level since Aug, raising expectations that central bankers might cut interest rates at some point this year.  The 30-stock Dow jumped 0.9% to notch its longest win streak since a 9-day run in Dec & the S&P 500 added 0.5%, while NAZ gained 0.3%.

Asia markets track Wall Street gains amid renewed U.S. rate cut hopes; Hong Kong stocks hit 9-month high

A new report finds that the percentage of US mortgages considered to be "seriously underwater" rose in the first qtr of 2024, while the proportion of "equity-rich" mortgages fell for the 3rd consecutive qtr.  The report by property & real estate data firm ATTOM found that the portion of mortgaged homes that were seriously underwater rose slightly in the first qtr of 2024 from 2.6% to 2.7% of all residential mortgages.  It defines "seriously underwater" as mortgages with a loan-to-value ratio of 125% or more, meaning property owners owe at least 25% more than the estimated market value of the property.  The trend of seriously underwater mortgages increasing prevailed in 37 states during the first qtr.  Among 107 metropolitan areas with populations greater than 500K residents, the metros with the largest shares of mortgages that were seriously underwater were Baton Rouge (13.4%) & New Orleans (7.3%) in Louisiana, followed by Jackson, Mississippi, (6.5%), Little Rock, Arkansas, (6%) & Syracuse, New York (5.6%).  The percentage of residential mortgages that were considered "equity-rich" – meaning that owners had a loan-to-value ratio of 50% or lower, so the owner has at least 50% equity – in Q1 2024 slid to 45.8%, a decline from 46.1% in the prior qtr & 47.2% from Q1 2023.  That means the national proportion of equity-rich mortgages hit the lowest level in 2 years.  Equity-rich levels declined in 26 states on a quarterly basis & 25 states from the same qtr a year ago.  "Homeowner balance sheets continue to benefit in a huge way from the boom times in the form of elevated equity that can be used to finance all kinds of things, from home renovations to business startups," ATTOM CEO Rob Barber said.  "Still, the windfalls are starting to erode bit by bit amid mounting signs that the market is no longer so superheated."  "It's too early to make any broad statements about the market direction, especially coming off the typically slower Fall and Winter months. But amid the recent trends, this year's Spring buying season will be of heightened importance in telling us if there is a new long-term market pattern developing," Barber added.

Percentage of US mortgages considered 'seriously underwater' rises

Federal Reserve Bank of Minneapolis Pres Neel Kashkari said that the US has an ongoing home supply issue that was being complicated by the high rates currently being imposed by the central bank.  The Fed needs these rates to lower inflation & “it’s really a timing issue” where the housing sector will do better when the central bank can eventually lower rates, Kashkari said before a meeting of Minnesota's Technology Advisory Council.  But he noted monetary policy isn't the whole story & given issues faced by the housing sector, even lower rates wouldn’t push up home supply “in a reasonable period of time.”

Fed's Kashkari: High Fed rates complicating supply of housing

Stock markets are heavily overbought, signally a correction is overdue.  Wars around the globe along with high interest rates & inflation will be a drag going forward.

Dow Jones Industrials 

Markets surge as data shows the labor market continues to cool

Dow shot up 331 (near session high), advancers over decliners better than 2-1 & NAZ gained only 43.  The MLP index was little changed in the 284s & the REIT index gained 7+ to 371.  Junk bond funds saw limited buying & Treasuries was in demand which lowered yields.  Oil rose chump change in the 79s & gold advanced 22 to 2344 (more on both below).

AMJ (Alerian MLP Index tracking fund)

General Motors (GM) believes it can regain market share in China after hitting a roughly 20-year low last year amid changing market conditions & increased domestic competition, GM Pres Mark Reuss said.  The longtime GM exec said new all-electric & plug-in hybrid electric vehicles, as well as the redesign of its Buick brand, will help the automaker turn around operations in the region.  GM's market share in China, including its joint ventures, has plummeted from roughly 15% as recently as 2015 to 8.6% last year, the first time it has dropped below 9% since 2003.  Earnings from operations hav also fallen, down 78.5% since peaking in 2014.  Reuss also touted the competitiveness of GM's Chinese joint venture partners such as Wuling Motors.  GM first established operations in China in 1997.  “You can look at it any way you want from a larger geopolitical standpoint, but for us in China, this has been a great advantage for us to be partnered so deeply for so many years with our JV partners there,” Reuss said.  “We have an advantage there with Buick and Wuling, and it goes both ways.”  GM's market share declines in China are the result of growing competition from gov-backed domestic automakers fueled by nationalism & a generational shift in consumer perceptions of the automotive industry and electric vehicles.  The company, along with other American-based automakers, is managing geopolitical tensions between China & the US.  GM's US-based brands such as Buick & Chevrolet have seen Chinese sales drop more than those of its joint venture.  The joint venture models accounted for about 60% of GM's 2.1M vehicles sold last year in China.  The stock went up 26¢.

GM can regain market share in China after hitting 20-year low, executive says

Mortgage rates dipped slightly this week for the first time since Mar, but remain above 7% as a home affordability crisis maintains its grip on the housing market.  Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate on the benchmark 30-year fixed mortgage declined to 7.09% this week from 7.22% last week.  The average rate on a 30-year loan was 6.35% a year ago.  The average rate on the 15-year fixed mortgage dropped to 6.38% from 6.47% last week.  One year ago, the rate on the 15-year fixed note averaged 5.75%.

Mortgage rates tick down to 7.09%

Warner Bros Discovery (WBD) reported first-qtr results, missing expectations on both the top & bottom lines despite strength in its streaming unit.  WBD — which owns streaming service Max, a portfolio of cable TV networks including TNT & Discovery & a film studio — said revenue fell 7% to $9.96B compared with the same qtr last year.  WBD posted a net loss attributable to the company of $966M, 40¢ per share, an improvement from the year-ago qtr when it reported a loss of $1.07B, 44¢ per share.  The company said total adjusted earnings before interest, taxes, depreciation & amortization were down roughly 20% during the first qtr to $2.1B, noting its Suicide Squad: Kill the Justice League video game generated significantly lower revenue.  WBD said that it added 2M direct-to-consumer streaming subscribers during the qtr, bringing its total to 99.6M.  That segment earned an adjusted $86M during the qtr, an improvement of $36M from the prior-year qtr.  It also saw revenue increase “modestly” to $2.46B from the prior-year qtr.  Advertising revenue for streaming proved to be a bright spot, increasing 70%, boosted by higher engagement on Max in the US due in part to subscriber growth in the streaming service's ad-lite tier & the launch of sports on the app.  WBD has been working to reduce its debt load, which now stands at $43.2, stemming from the merger of Warner Bros & Discovery in 2022.  Yesterday the company said it repaid $1.1B in debt during the qtr & also announced a $1.75B cash tender aimed at further reducing its debt.  The stock gained 11¢.

Warner Bros. Discovery misses first-quarter estimates despite streaming growth

Gold advanced after the latest jobless claims pointed to more signs of a cooling labor market, boosting convictions that the Federal Reserve will be able to start cutting interest rates this year.  Initial claims increased by 22K to 231K last week according to Labor Dept data, the highest level since Aug.  The forecast called for 212K applications.  Treasury yields & the $ pushed lower after the print, sending bullion higher by as much as 0.9% before paring some of the gains.  Bullion prices have held in a narrow range for the last couple of weeks as traders weigh the outlook for US monetary policy & tensions in the Middle East.  While the metal has eased from a record high set in mid-Apr, it's still up about 12% this year.  Inflation data due next week will offer further insight into the US economy.  Fed Bank of Boston Pres Susan Collins signaled yesterday that rates will likely need to stay at a 2-decade high for longer than previously thought to reduce price pressures.  Investors are also monitoring developments in the Middle East, with any further escalation potentially bolstering gold's appeal as a haven.  Pres Biden said he would halt additional shipments of offensive weapons to Israel if the country launched a ground invasion of the Gazan city of Rafah.  While gold prices have climbed this year, holdings in global exchange-traded funds have fallen to the lowest since 2019.  Last month, ETF inflows registered in Asia & North America were offset by outflows in Europe, according to the World Gold Council.  Spot gold was up 0.5% at $2319 an ounce.

Gold Edges Higher as US Data Paves Way for Fed Rate Cuts

West Texas Intermediate (WTI) crude oil closed higher, moving up on tight supply amid solid demand as a day-prior report showed a drop in US oil inventories.  WTI oil for Jun closed up 27¢ to settle at $79.26 per barrel, while Jul Brent crude, the global benchmark, was last seen up 10¢ to $83.68.  The rise comes after the Energy Information Administration yesterday said US oil inventories fell by 1.4M barrel per day last week, easing concerns over light demand ahead of the start of the US driving season that begins over the Memorial Day holiday.  The close is within the range Canadian oil execs expect WTI to average over the next 3-5 years, according to an ATB Financial poll reported by Canadian Press.  The poll says the group expects WTI to average above $75.99 over that period.  Geopolitical concerns remain a focus after pres Biden said the US will pause supplying bombs & artillery shells to Israel to prevent the country continuing to push into the city of Rafah in Gaza in order to limit civilian casualties in the crowded city.  Ceasefire talks are continuing in Egypt with little progress reported.  A weaker $ also supported prices, as the US reported initial jobless claims rose by 231K last week, above expectations for a rise of 214K claims & the highest since Aug.  The ICE dollar index fell following the report, last seen down 0.27 points to 105.27.

WTI Closes Higher on Signs of Higher Demand and a Weaker Dollar

At the opening stocks were higher & never looked back.  Then there was additional buying in the PM, making for a special day for stocks.  After a dreary month in Apr, Dow is up over 1500 so far in May.  A possible slowdown in the economy & a few more months of very high interest rates are not deterring investors from buying stocks.

Dow Jones Industrials 

Markets climb following weekly jobless-claims data

Dow rose 189, advancers over decliners 5-2 & NAZ rose 26.  The MLP index added 1+ to the 285s & the REIT index went up 5 to the 368s.  Junk bond funds inched higher & Treasuries were pretty much flat (more below).  Oil crawled up pennies in the 89s & gold gained 13 to 2336. 

AMJ (Alerian MLP Index tracking fund)

Initial filings for unemployment benefits have hit their highest level since late Aug 2023, a potential sign that an otherwise robust labor market is changing.  Jobless claims totaled a seasonally adjusted 231K last week, up 22K from the previous period & higher than the estimate for 214K, the Labor Dept reported.  The increase in claims follows a string of mostly strong hiring reports, though hiring in Apr was light compared with expectations.  Also, job openings have been declining amid expectations that the labor market is likely to slow thru the year.  The report also showed that continuing claims, which run a week behind, increased to 1.78M, up 17K from the previous week.  The 4-week moving average of claims, which helps smooth out weekly volatility in numbers, increased to 215K, up 4750 from the previous week.  Excluding seasonal adjustments, claims totaled 209K, up 10.4% from the previous week.  New York alone saw an increase of more than 10K, accounting for more than ½ the total rise.  “A low number of claims had become almost monotonous, and while this surprising spike could well be a blip, we should expect more volatility and a trend toward higher claims as the labor market normalizes,” said Robert Frick, corp economist at Navy Federal Credit Union.

Weekly jobless claims jump to 231,000, the highest since August

McDonald's (MCD),  a Dow stock & Dividend Aristocrat, US franchisees will start paying into a digital marketing fund next year as the fast-food giant looks to expand its booming digital business.  The change is meant to modernize the company's marketing strategy & widen its competitive advantage, according to the memo, which was written by US Customer Experience Officer Tariq Hassan & Chief Information Officer Whitney McGinnis.  The memo also said that MCD's plans to invest hundreds of Ms of $s over the next couple of years to improve its loyalty program & add ordering channels, including placing web orders without downloading an app, which should also bolster its digital business.  Loyalty program members accounted for more than $6B in system-wide sales globally during MCD's first qtr.  In Dec, MCD's said it aims to reach 100M loyalty program members by 2027.  For now, the franchisor is recommending that franchisees pay for the new fund using their existing marketing contribution, which requires that they spend at least 4% of gross sales, according to the memo.  As a result, the new approach will likely lead MCD's to cut back on legacy marketing tools, such as TV commercials, & focus on areas that tangibly lead to higher sales.  The stock fell 65¢.

McDonald’s is betting on its mobile business with new franchisee digital marketing fund

Treasury yields were mostly higher as investors considered remarks from Federal Reserve officials, scanning them for hints about the interest rate outlook.  The yield on the 10-year Treasury was up nearly 2 basis points at 4.502% & the 2-year Treasury yield was last at 4.83% after losing more than 1 basis point.  Yields & prices move in opposite directions & 1 basis point is equivalent to 0.01%.  Investors looked to a series of remarks from Federal Reserve officials as they considered what the path ahead for monetary policy could look like.  Uncertainty about when, if & how often, rates will be cut this year has been persistent in recent weeks.  Boston Fed Pres Susan Collins yesterday became the latest central bank policymaker to indicate that interest rates will likely be steady until inflation is clearly moving toward the Fed's 2% target range.  Collins' comments echoed those made by Minneapolis Fed Pres Neel Kashkari & Richmond Fed Pres Tom Barkin earlier in the week.  They were also all broadly in line with the guidance issued by the Fed after its latest meeting earlier this month.

10-year Treasury yield rises as investors consider remarks from Fed officials

Dow began the day trading around even, then the bulls arrived & gave it a nice gain.  It's about 600 under its record highs in late Mar.  However while rising jobless claims data is good for rate cut prospects, it also suggests economic growth is slowing.  That could make for choppy times in the stock market going forward.

Dow Jones Industrials 

Markets edge higher as Dow records its 6th straight daily gain

Dow went up 172, but decliners over advancers 5-4 & NAZ retreated 29.  The MLP index fluctuated in the 283s & the REIT index was off 3 to the 363s.  Junk bond funds continued to be weak & Treasuries had selling which lifted yields.  Oil was fractionally higher to the 79s & gold lost 3 to 2303 (more on both below).

AMJ (Alerian MLP Index tracking fund)

The pharmaceutical giant AstraZeneca (AZN) said it is withdrawing its COVID-19 vaccine worldwide citing low demand & a "surplus of available updated vaccines" since the pandemic.  The vaccine, Vaxzevria, was one of a number of shots released onto catching COVID-19.  The company said it would proceed to withdraw Vaxzevria's marketing authorizations within Europe.  The vaccine was never approved in the US by the FDA.  "As multiple, variant COVID-19 vaccines have since been developed there is a surplus of available updated vaccines," the company said, adding that this had led to a decline in demand for Vaxzevria, which is no longer being manufactured or supplied.  AZN said that more than 3B doses were supplied globally & that "over 6.5 million lives were saved in the first year of use alone."  "Our efforts have been recognized by governments around the world and are widely regarded as being a critical component of ending the global pandemic," the statement said.  "We will now work with regulators and our partners to align on a clear path forward to conclude this chapter and significant contribution to the COVID-19 pandemic."  AZN admitted for the first time in court documents that its COVID-19 vaccine can cause rare side effects such as blood clots & low blood platelet counts.  The admission came via a UK class action lawsuit that sought $125M for almost 50 victims of AZN vaccine side effects.  The European Medicines Agency listed Guillain-Barré syndrome as a very rare side effect of Vaxzevria in 2021 & added a warning in the product information.  The firm's application to withdraw the vaccine was made on Mar 5 & came into effect yesterday.  Many countries had already stopped supplying the vaccine before the announcement.  The stock went up 65¢.

AstraZeneca to withdraw its COVID-19 vaccine globally as demand dips, rare side effects revealed

Google’s (GOOG) business is growing at its fastest rate in 2 years, & a blowout earnings report in Apr sparked the biggest rally in its shares since 2015, pushing the company's market cap past $2T.  But at an all-hands meeting last week with CEO Sundar Pichai& CFO Ruth Porat, employees were more focused on why that performance isn't translating into higher pay, & how long the company's cost-cutting measures are going to be in place.  “We’ve noticed a significant decline in morale, increased distrust and a disconnect between leadership and the workforce,” a comment posted on an internal forum read.  “How does leadership plan to address these concerns and regain the trust, morale and cohesion that have been foundational to our company’s success?”  GOOG is using artificial intelligence to summarize employee comments & questions for the forum.  The top leadership have been on the defensive for the past few years, as vocal staffers have railed about post-pandemic return-to-office mandates, the company's cloud contracts with the military & an extended stretch of layoffs, totaling more than 12K last year, along with other cost cuts that began when the economy turned in 2022.  The internal strife continues despite GOOG's better-than-expected first-qtr earnings report, in which the company also announced its first div as well as a $70B buyback billion.  “Despite the company’s stellar performance and record earnings, many Googlers have not received meaningful compensation increases” a top-rated employee question read.  “When will employee compensation fairly reflect the company’s success and is there a conscious decision to keep wages lower due to a cooling employment market?”  Another highly-rated comment centered around the company’s priorities, including its hefty investments in artificial intelligence.  “To many people, there’s a clear disconnect between spending billions on stock buybacks and dividends and re-investing in AI and retraining critical Googlers,” the post said.  “Our priority is to invest in growth,” Porat said.  “Revenue should be growing faster than expenses.”  She also took the rare step of admitting to leadership's mistakes in its prior handling of investments.  “The problem is a couple of years ago — two years ago, to be precise — we actually got that upside down and expenses started growing faster than revenues,” said Porat, who announced nearly a year ago that she would be stepping down from the CFO position but hasn't yet vacated the office.  “The problem with that is it’s not sustainable.”  GOOG execs have been hammering this theme of late.  GOOG stock fell 1.82.

Google employees question execs over ‘decline in morale’ after blowout earnings

Aside from ramen & sausages, South Korea's convenience stores have a new popular item on the menu, gold bars.  The country's largest convenience store chain, CU, has been collaborating with the Korea Minting & Security Printing Corporation (KOMSCO) to offer customers mini gold bars, & they're selling like hot cakes.  A variety of finger-nail sized gold bars weighing between 0.1 gram & 1.87 gram have been up for sale at CU outlets since April.  A 1.87 gram bar sells for 225K won ($166) & a 0.5 gram bar sells for 77K won.  Priced at 113K won each, 1 gram bars were sold out within 2 days.  The bars come with congratulatory messages, birthday wishes & even designs for personality types.  People in their 30s were most active in purchasing these gold bars, accounting for over 41% of the total sales since their launch, according to CU’s commerce phone app Pocket CU.  Those in their 40s make up 35% of the sales, followed by people in their 50s at 16%.  People in their 20s accounted for 6.8% of all sales.  Demand for bars & coins in South Korea rose 27% year on year to 5 tons in the first qtr of this year amid rising prices of the yellow metal, the World Gold Council  (WGC) said.  This was the sharpest quarterly increase in gold purchases in South Korea in more than 2 years, WGC noted.  Other convenience stores are also riding the bullion wave.  In South Korea’s GS25 convenience store chain, customers can buy small gold wafers from vending machines.  According to the Korea Gold Exchange, prices of gold have surged to a record 456K won ($335) per 3.75 grams, or 0.13 an ounce.  Conversely, the Korean won has weakened over 5% against the greenback so far this year, currently trading at 1358 against the $.

Gold bars are selling like hot cakes in Korea’s convenience stores and vending machines

Gold steadied while investors awaited US data for clues on potential interest rate cuts by the Federal Reserve, though a slight uptick in the $ limited any upside.  Spot gold was mostly flat at $2312 per ounce.  US gold futures for Jun settled $2 lower at $2322 per ounce.  The $ edged up 0.1% on renewed bets of rate cuts this year.  A stronger $ makes gold less attractive for foreign currency holders.  Federal Reserve Bank of Boston Pres Susan Collins expressed confidence that the current setting of monetary policy will slow the economy in the way she believes will be necessary to get inflation back to the Fed's 2% target.  Meanwhile, the European Central Bank has all but promised a rate cut on Jun 6 & worries that a delay in monetary policy easing by the Fed could also force it to take its time.

Gold holds ground as investors await US data for rate cut clues

West Texas Intermediate (WTI) crude oil closed higher, rising off early losses after the Energy Information Administration reported US oil inventories fell last week.  WTI crude oil for Jun closed up 61¢ to settle at $78.99 per barrel, after earlier touching $76.89, while Jul Brent crude, the global benchmark, was last seen up 45¢ to $83.61.  The rise came after the EIA's weekly survey showed US oil inventories fell by 1.4M barrels last week, near expectations, while gasoline & distillate inventories rose.  The survey contradicted the weekly report from the American Petroleum Institute released Tues that showed a rise in oil inventories of 0.5M barrels last week.  Geopolitical worries are continuing to offer support for oil prices, as ceasefire talks between Israel and Hamas continue, though a report said an Israel official saw no signs of a breakthrough in the negotiations.

WTI Crude Oil Closes Higher as the EIA Reported US Inventories Fell Last Week

The stock markets wavered, not knowing where to go next.  Rate cuts are the biggest driver for the bulls but the first one is still a few months away.  Until then, the economy will probably just limp along.

Dow Jones Industrials 

Markets wobble as stock buyers hesitate

Dow was up 71, but decliners over advancers 4-3 & NAZ lost 10.  The MLP index slid back 1 to 282 & the REIT index fell 2+ to the 364s.  Junk bond funds drifted lower & Treasuries had limited selling, so yields rose a little.  Oil added pennies in the 78s & gold held steady at 2324.

AMJ (Alerian MLP Index tracking fund)

Minneapolis Federal Reserve President Neel Kashkari said that the central bank will need to hold interest rates steady for an "extended period" that may last thru the rest of the year.  Kashkari made the remarks at a Milken Institute conference where he outlined what he would need to see in the inflation data before he can support interest rate cuts.  "I would need to see multiple positive inflation readings suggesting that the disinflation process is on track," Kashkari said.  His remarks come as decreases in inflation have largely stalled in recent months, with year-over-year inflation at 2.7% in the most recent reading.  That level is well above the Fed's 2% target rate and leaves policymakers in limbo with inflation elevated, but not to such a degree that further rate hikes are clearly needed.  Kashkari also said that he will be monitoring developments in the labor market where a "marked" shift to weaker job creation could also justify an interest rate cut.  He added that in Mar that he thought the Fed would need to deliver 2 interest rate cuts in 2024, but that he may mark that down to just one cut or even no cuts, depending on the data, when the central bank meets next month when fresh projections will be released by policymakers.  The Fed raised the benchmark federal funds rate to a 23-year high of 5.25%- 5.5% in an effort to tamp down inflation, which peaked at a 40-year high of 9.1% in Jun 2022.  While recent progress in reducing inflation has slowed & some data has indicated that inflation could be on the verge of reaccelerating, Kashkari echoed Fed Chair Jerome Powell in signaling that further interest rate hikes are unlikely.  He explained that the bar for a rate hike is "quite high, but it's not infinite" & that keeping rates elevated until inflation ebbs may be the ultimate course of action. "There is a limit when we say, 'OK, we need to do more.' I think it's much more likely we would just sit here for longer than we expect, or the public expects right now, until we see what effect our monetary policies have," Kashkari said.

Federal reserve president makes grim prediction about rate cuts in 2024

Mortgage rates are significantly higher than they were at the start of this year, but they pulled back slightly last week after several weeks of straight increases.  That was enough to spark some new demand, especially for refinances.  The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766K or less) decreased to 7.18% from 7.29%, with points unchanged at 0.65 (including the origination fee) for loans with a 20% down payment.  “Treasury rates and mortgage rates fell last week on the news of a slowing job market, with wage growth at the slowest pace since 2021, and the Federal Reserve's announced plans to ease quantitative tightening in June and to maintain its view that another rate hike is unlikely,” said Mike Fratantoni, MBA's senior VP & chief economist.  The rate for Federal Housing Administration loans fell below 7% for the first time in 3 weeks, which is a welcome sign for first-time buyers, who tend to use FHA loans.  “First-time homebuyers account for roughly half of purchase loans, and the government lending programs are an important source of financing for these homebuyers. The gain in FHA activity is a sign that this segment of the market is active,” Fratantoni added.  The dip in rates caused refinance demand to increase 5% for the week, although it was still 6% lower than the year-earlier week.  Rates are 70 basis points higher than they were a year ago, so there are very few borrowers who can benefit from a refinance.  A basis point is one-hundredth of a percentage point.  Applications for a mortgage to purchase a home rose 2% for the week but were still 17% lower than the same week a year earlier.  Affordability is hitting potential buyers hard, as home prices continue to climb.  Tight supply is keeping the competition high, resulting in very few bargains.

Weekly mortgage refinance demand rose 5% after a slight dip in mortgage rates

Uber (UBER) results came in slightly above estimates for revenue, but the ride-hailing company posted an unexpected net loss.  Revenue grew 15% in its first qtr from $8.8B a year prior.  The company reported $37.6B in gross bookings for the period, which is short of the $37.9B expected.  Its net loss widened to $654M for a 32¢ loss per share, from a loss of $157M, for an 8¢ loss per share, in the same qtr last year.  UBER said its net loss includes a $721M net headwind from unrealized losses related to the reevaluation of its equity investments.  CEO Dara Khosrowshahi said the company's move to a loss had “nothing to do with the operating business.”  “We did have to mark down those equity stakes that resulted in a loss,” he said. “We don’t expect that to keep happening going forward.”  However, UBER cannot predict the markets, Khosrowshahi added.  UBER reported adjusted EBITDA of $1.38B, up 82% year over year & slightly above the $1.31B expected.  For its 2nd qtr, UBER expects to report gross bookings of $38.75 - $40.25B, compared with estimates of $40B.  UBER anticipates adjusted EBITDA of $1.45 - $1.53B, compared with the $1.49B expected.  The number of monthly active platform consumers reached 149M in its first qtr, up 15% year over year from 130M.  There were 2.6B trips completed on the platform during the period, up 21% year over year.  “Demand for Uber remains robust across our platform, supported by our improving marketplace experience, the continued shift of consumer spending from goods to services, and the secular trend towards on-demand transportation and delivery,” Khosrowshahi added.  The stock dropped 5.85 (8%).

Uber reports first-quarter results that beat expectations for revenue, but posts net loss

Kashkari's comments (above) did not warm the hearts of stock buyers.  Interest rates, starting with mortgage rates, continue at very high levels.  Earnings reports keep coming, & these tend to be the weaker ones.  As shown in the chart below, Dow is where it was 3 months ago.  Not good!

Dow Jones Industrials 

Markets rise cautiously while traders still hope for rate cuts fairly soon

Dow edged up 54 (below early highs), advancers over decliners 4-3 & NAZ was down 10.  The MLP index crawled up to 282 & the REIT index went up 3+ to the 366s.  Junk bond funds fluctuated & Treasuries had limited buying which reduced yields.  Oil was up pennies in the 78s & gold fell 7 to 2323 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Citigroup (C) CEO Jane Fraser said that consumer behavior has diverged as inflation for goods & services makes life harder for many Americans.  Fraser, who leads one of the largest US credit card issuers, said she is seeing a “K-shaped consumer.”  That means the affluent continue to spend, while lower-income Americans have become more cautious with their consumption.  “A lot of the growth in spending has been in the last few quarters with the affluent customer,” Fraser added.  “We’re seeing a much more cautious low-income consumer,” Fraser continued.  “They’re feeling more of the pressure of the cost of living, which has been high and increased for them. So while there is employment for them, debt servicing levels are higher than they were before.”  The stock market has hinged on a single question this year: When will the Federal Reserve begin to ease interest rates after a run of 11 hikes?  Strong employment figures & persistent inflation in some categories have complicated the picture, pushing back expectations for when easing will begin.  That means Americans must live with higher rates for credit card debt, auto loans & mortgages for longer.  “I think, like everyone here, we’re hoping to see the economic conditions that will allow rates to come down sooner rather than later,” Fraser said.  “It’s hard to get a soft landing,” the CEO added, using a term for when higher rates reduce inflation without triggering an economic recession.  “We’re hopeful, but it is always hard to get one.”  The stock fell 81¢.

Citigroup CEO says low-income consumers are being more cautious with spending

Apple (AAPL)), a Dow stock, announced new versions of its iPad Air & iPad Pro tablets.  “This is the biggest day for iPad since its introduction,”  CEO Tim Cook  said in a short video posted on the company's website.  The new iPad models are the first AAPL has released since Oct 2022, marking the longest stretch between updates since the device launched in 2011.  The iPad Pro, AAPL's most expensive & advanced tablet, will come in 2 sizes, an 11-inch model & a 13-inch model.  The company called the product its thinnest ever, coming in at 5.1 millimeters thick.  The smaller iPad Pro starts at $999 & the larger 13-inch model starts at $1299 with 256GB of storage, a slight price increase from its predecessor.  The iPad Pro will snap into a new case that AAPL calls Magic Keyboard, which is made out of aluminum & pairs the tablet with a keyboard & trackpad.  Using the case will make using an iPad Pro feel similar to a laptop experience, i.e., “just like a MacBook.”  The Magic Keyboard will cost $249 or $299, depending on size.  ASPL also announced an updated stylus called the Apple Pencil Pro for $129.  The fresh iPad models use a new AAPL chip called the M4, an update from the M3 chips that currently power its laptops.  The M4 chip is an “outrageously powerful chip for AI,” noting, as an example, its ability to help power software that isolates subjects from their backgrounds in videos.  “This stunning design and breakthrough display required we make the leap to the next generation of Apple silicon,” John Ternus, an AAPL hardware exec, said.  The stock rose 69¢.

Apple announces new iPad Pro with M4, iPad Air tablets

When it comes to America's oil use & production, one major producer signaled that market uncertainty can't pump the pipeline brakes.  "Markets are relatively balanced. Demand growth is strong. Last year was all-time record demand. We'll see demand grow again this year," Chevron (CVX), a Dow stock & Dividend Aristocrat, CEO Mike Wirth said.  "So, the end of the oil age is not yet upon us."  AT the annual Milken Institute Global Conference, he detailed expectations for positive financial performance & increased oil production thru the rest of the year.  Gas prices have risen by a few cents, on average, in recent weeks.  AAA reported the national average price for last week was $3.67 per gallon, 14¢ higher than this time last month & 8¢ more than last year.  That same week, gas demand rose from 8.42M barrels per day to 8.62M barrels per day, data from the Energy Information Administration found.  "It's important that we continue to meet that with new production, which is certainly what we've been doing," Wirth added.  "In the short term, these risks due to geopolitical events," like the Russia-Ukraine, Israel-Hamas & Red Sea conflicts, respectively, "are things to pay attention to because they could impact markets."  "We did see some impact on our supply of natural gas into Israel during the early days of the conflict," he expanded.  "We now have both platforms online and are meeting all the needs not only for Israel's domestic market, but also for Jordan and Egypt, where the gas goes as well… the risks in a situation like this are that, through some sort of an escalation [or] miscalculation, you could see impacts on physical supply in an area that supplies so much of the world's oil. And that's a real concern."  By preparing for this "volatility" with a balance sheet that can withstand an extended period of "very low prices," he noted that the company predicts it will deliver 10% compound annual growth in free cash flow over the next several years.  "Driven by the Permian, driven by some other shale assets in our portfolio, projects in the deepwater Gulf of Mexico,"  Wirth pointed out, "we've got a number of other assets that are delivering growth. And the combination with Hess only strengthens our cash flow longer into the future, not only to the end of this decade, but well into the next."  The stock was up 32¢.

Chevron CEO reveals when US will see the 'end of the oil age'

Gold traded lower despite falling treasury yields amid an uncertain geopolitical outlook as Israel & Hamas continue indirect talks for a ceasefire deal.  Gold for Jun was last seen down $5 to $2325 per ounce.  The drop comes on growing expectations for a deal in the war between Israel & the Hamas militant group rise after Israel rejected an Egyptian ceasefire proposal accepted by Hamas yesterday, but said it will send a representative to further indirect negotiations in Cairo, even as it stepped up attacks in the crowded city of Rafah in southern Gaza.  The $ rose, with the ICE dollar index last seen up 0.24 points to 105.29.  Treasury yields were lower as weak economic data released last week renewed hopes the Federal Reserve will lower interest rates this year, lowering the carrying cost of owning gold.  The 2-year note was last seen paying 4.824%, down 1.3 basis points, while the yield on the 10-year note was down 4.3 basis points to 4.447%.

Gold Edges Down Despite Weakening Yields and Uncertain Geopolitical Outlook

West Texas Intermediate (WTI) crude oil closed lower amid hopes for a ceasefire deal in the war between Israel & the Hamas militant group while weak demand concerns continue to check prices.  WTI crude for Jun closed down 10¢ to $78.38 per barrel, while Jul Brent crude, the global benchmark, was last seen up 6¢ to $83.39.  Israel rejected an Egyptian ceasefire proposal accepted by Hamas yesterday, though it said it will send a representative to Cairo for further talks.  Despite the promise of further negotiations, Israel is stepping up attacks on the city of Rafah in Gaza despite intl pressure from the US & other countries concerned about a yet higher toll on civilians crowded into the city.  Demand concerns are tempering geopolitical risks after last week's inventory report from the Energy Information Administration showed a large & unexpected 7.3M barrel rise in US oil inventories.

WTI Crude Oil Closes Lower on Ceasefire Hopes and Weak Demand

The bulls gave another strong gain in the AM, but that did not last when the sellers took the averages down to around breakeven.  Realization of high interest rates lasting for several months, at a minimum, limits enthusiasm for buying stocks.

Dow Jones Industrials 

Markets edge higher as investors digest the latest Fed comments

Dow was up 105, advancers over decliners about 3-1 & NAZ added 33.  The MLP index remained in the 281s & the REIT index rose 3+ to the 367s.  Junk bond funds drifted lower & Treasuries had more buying which lowered yields.  Oil slid back fractionally to 78 & gold was off 5 to 2325.

AMJ (Alerian MLP Index tracking fund)

Federal Reserve Bank of New York Pres John Williams said that the central bank's next move will likely be to lower interest rates, though he didn't specify a timeline for when that will occur.  "Eventually we'll have rate cuts," but monetary policy is in a "very good place" for the time being, Williams added.  His comments come after last week's meeting of the Federal Open Market Committee (FOMC), which sets monetary policy.  Fed officials maintained the benchmark federal funds rate at 5.25 - 5.50% & signaled it's likely to remain there for some undefined period while they look for additional evidence inflation is falling toward the central bank's 2% target.  Williams, a voting member of the FOMC, didn't offer a timeline for reducing interest rates from the highest level in 23 years, given that the Fed's favored metric shows that inflation is running at a 2.7% pace, well above the target rate.  When excluding food & energy, underlying core inflation came in even hotter at 2.8%.  He said that he expects that US GDP will rise 2-2.5% this year after the economy expanded more rapidly last year.  Williams also said the Fed's efforts to shrink the size of its balance sheet have gone well & haven't rattled financial markets.  The FOMC post-meeting statement last week said they will need "greater confidence" that inflation is coming down before easing monetary policy.  It added, "In recent months, there has been a lack of further progress toward the committee's 2 percent inflation objective."  Federal Reserve Chair Jerome Powell said that despite signs that inflation isn't coming down as quickly as hoped or may even be heating back up, the Fed isn't likely to raise interest rates in response.  "I think it's unlikely that the next policy rate move will be a hike," Powell said after the meeting.  "We don't see evidence that policy isn't restrictive."

Fed president says next move likely to lower rates, but timing uncertain

Disney (DIS), a Dow stock, 2nd-qtr earnings beat analyst estimates after narrowing streaming losses & revenue was in line with expectations.  Total segment operating income jumped 17% as the entertainment streaming applications, Disney+ & Hulu, turned a profit in the qtr for the first time.  When combined with ESPN+, the streaming businesses lost $18M, much narrower than the $659M loss the division reported a year earlier.  Entertainment streaming revenue (excluding ESPN+) rose 13% to $5.64B & operating income was $47M after a loss of $587M a year prior.  DIS credited increased Disney+ subscribers & higher average revenue per user for the gains.  Disney+ Core subscribers increased by more than 6M in the 2nd qtr to 117.6M global customers.  Total Hulu subscribers grew 1% to 50.2M & ESPN+ subscribers fell 2% to 24.8M.  EPS was $1.21 adjusted vs $1.10 expected & revenue was $22.08B vs $22.11B expected.  “Our results were driven in large part by our Experiences segment as well as our streaming business,” CEO Bob Iger said. “Importantly, entertainment streaming was profitable for the quarter, and we remain on track to achieve profitability in our combined streaming businesses in Q4.”  DIS reported a loss attributable to the company of 1¢ per share, compared with EPS of 69¢ in the year-earlier period.  Adjusting for restructuring & impairment charges, among other things, EPS was $1.21 & revenue rose to $22.08B, up 1% from a year earlier.  The stock sank 11.36 (10%) after the company said it expects weaker results in that segment for the current qtr.

Disney earnings top analyst estimates as streaming nearly breaks even in the quarter

After years of inflation under Pres Biden, Americans have lost faith in his ability to save the economy, according to a new poll.  In a Gallup poll, only 38% of Americans said they still had confidence in Biden to lead the country and do the right thing for America’s economy.  This figure is among the lowest Gallup has measured for any president since George W Bush took office in 2001, Gallup reported.  "With Americans less optimistic about the state of the U.S. economy than they have been in recent months and concern about inflation persisting, their confidence in President Biden to recommend or do the right thing for the economy is among the lowest Gallup has measured for any president since 2001," Gallup reported.  The current low for Biden continues a substantial fall from when he first took office.  As recently as 2022, the same poll found Biden's confidence ratings were at 57%.  It swiftly fell to 40% & has remained below that mark since.  While Biden faces a skeptical public & abysmal approval numbers, confidence scores for Federal Reserve Chair Jerome Powell, as well as Rep & Dem leaders in Congress, were among those who garnered confidence ratings below 50%.  Presumptive Rep presidential nominee former Pres Trump barely missed the 50% mark, as 46% of US adults say they have "a great deal" or "a fair amount" of confidence in him to do or recommend the right action to boost the economy.  This rating is essentially tied with the support he had during his last year in office.  In 2009, over 70% of those polled expressed enthusiasm for Obama (71).  That support dropped to 42% by 2014, before gaining back a few points & ending at 50% during his last year in office.  Biden's first 3 years in office followed a similar pattern.  Tasked with helping lift the US economy during the COVID-19 pandemic years, a whopping 57% said they were confident in Biden’s ability to do the job.  Now, just 38% say the same.  "Only Bush earned lower confidence from Americans than Biden has since last year – by the end of his second term, amid the last recession, when just 34% of Americans expressed confidence in his economic abilities," Gallup reported.  The poll also found that confidence in lawmakers from both parties is down in recent years.  Dems garnered 38% support, an uptick from 34% in 2023.  Reps continued a slight slump, from 40% in 2022 to 36% in this poll.

Confidence in Biden's ability do the right thing for America’s economy sinks to historical low

The stock market is meandering, looking for direction.  So far, Dow has recovered 1100 in May after last month's selloff.  Meanwhile the economy is growing at a mediocre rate while interest rates remain elevated.

Dow Jones Industrials