Category: Uncategorized

Published: 1/18/2024 2:06 PM ET | 

Gold futures settled higher on Thursday as the dollar stayed a bit subdued and Treasury yields dipped after climbing up on Wednesday on rate outlook jitters.

The dollar recovered after trading weak during Asian and European sessions. After rising to 103.63, the dollar index eased a bit to 103.56, up nearly 0.1% from the previous close.

Gold futures for February ended higher by $15.10 at $2,021.60 an ounce, rebounding after posting losses in the previous two sessions.

Silver futures for March ended up $0.138 at $22.807 an ounce, while Copper futures for March settled at $3.7450 per pound, gaining $0.0120.

“Traders have slightly pared back expectations for rate cuts this year compared with the end of 2023 which has weighed on the yellow metal and could continue to do so if the data doesn’t perform,” says Craig Erland, Senior Market Analyst at OANDA, UK & EMEA. He adds that a move below $2,000 could be a significant psychological blow but as things stand, the trend and momentum aren’t looking particularly favorable.

A report from the Labor Department said initial jobless claims fell to 187,000 in the week ended January 13th, a decrease of 16,000 from the previous week’s revised level of 203,000. Economists had expected jobless claims to inch up to 207,000 from the 202,000 originally reported for the previous week.

With the unexpected decline, jobless claims dropped to their lowest level since hitting 182,000 in the week ended September 24, 2022.

A report released by the Federal Reserve Bank of Philadelphia showed regional manufacturing activity contracted at a slightly slower rate in the month of January.

The Philly Fed said its diffusion index for current general activity rose to a negative 10.6 in January from a revised reading of negative 12.8 in December. Economists had expected the index to rise to a negative 7.0 from the negative 10.5 originally reported for the previous month.

Data from the Commerce Department showed housing starts slumped by 4.3% to an annual rate of 1.460 million in December.

Published: 1/18/2024 3:11 PM ET | 

Oil prices climbed higher on Thursday, lifted by data showing a drop in U.S. crude inventories in the week ended January 12th, and on higher forecasts for global oil demand.

Recent strong U.S. economic data also point to a likely jump in oil demand. Meanwhile, tensions in the Middle East continue to disrupt global shipping and trade.

Data from U.S. Energy Information Administration (EIA) showed crude inventories dropped by 2.5 million barrels last week, as against expectations for a declined of 313,000 barrels.

Gasoline inventories increased by 3.1 million barrels last week, higher than an expected increase of 2.2 million barrels, while distillate stocks were up 2.4 million barrels in the week, more than 2.5 times the expected increase.

West Texas Intermediate Crude oil futures for February ended higher by $1.52 at $74.08 a barrel.

Brent crude futures were up $1.20 or 1.53% at $79.08 a barrel a little while ago.

The International Energy Agency (IEA) and the Organization of the Petroleum Exporting Countries (OPEC), both said in their reports that global oil demand will see a significant growth this year.

The IEA said in its montly report that oil demand will likely grow by 1.24 million barrels per day in 2024, up 180,000 barrels per day from its earlier projection.

The OPEC said in its report on Wednesday that it expects demand to rise by 2.25 million barrels per day this year, and by 1.85 million barrels per day to 106.21 millon barrels per day in 2025.

The number of Americans filing new claims for unemployment benefits fell last week to the lowest level in nearly 1-1/2 years, suggesting job growth likely remained solid in January.

The unexpected decline in initial claims reported by the Labor Department on Thursday added to strong retail sales growth in December in painting an upbeat picture of the economy, and could make it difficult for the Federal Reserve to start cutting interest rates in March as financial markets anticipate.

“The labor market remains strong and reinforces our view that the Fed is likely to hold rates at current levels until the middle of 2024,” said Eugenio Aleman, chief economist at Raymond James.

Initial claims for state unemployment benefits dropped 16,000 to a seasonally adjusted 187,000 for the week ended Jan. 13, the lowest level since September 2022. Economists polled by Reuters had forecast 207,000 claims for the latest week.

Claims data tend to be volatile at the turn of the year. Some of the volatility relates to fewer layoffs after the holidays than is normal.

While that could have contributed to some of the drop in claims, economists said the data was consistent with a fairly tight labor market. They noted that companies generally remained reluctant to lay off workers following difficulties finding labor during and after the COVID-19 pandemic.

Unadjusted claims decreased 29,543 to 289,228 last week, with filings plunging by 17,176 in New York.

There were also significant declines in Michigan, Pennsylvania, Wisconsin, South Carolina, Georgia and Minnesota, which more than offset notable increases in California, Iowa, Kansas and Texas.

“Seasonal layoffs after the holiday season have been milder than usual, leading to a decline in the published seasonally adjusted level of claims,” said Lou Crandall, chief economist at Wrightson ICAP. “This is not an example of a seasonal ‘distortion’ because the labor market tightness that is making employers wary of laying workers off temporarily is real.”

Stocks on Wall Street were mixed while the dollar rose against a basket of currencies. U.S. Treasury prices fell.

Financial markets have lowered their bets for a rate cut at the U.S. central bank’s March 19-20 policy meeting to below 60 per cent, according to CME Group’s FedWatch Tool.

Fed Governor Christopher Waller said this week that the economy was “doing well” and giving the U.S. central bank “the flexibility to move carefully and methodically.”

The Fed has hiked its policy rate by 525 basis points to the current 5.25 per cent-5.50 per cent range since March 2022.

The claims data covered the period during which the government surveyed employers for the nonfarm payrolls component of January’s employment report.

Claims fell between the December and January survey period, suggesting that strong job growth persisted this month. The economy added 216,000 jobs in December.

Data next week on the number of people receiving benefits after an initial week of aid, a proxy for hiring, will offer more clues on the state of the labor market in January.

The so-called continuing claims decreased 26,000 to 1.806 million during the week ending Jan. 6, the lowest since October, the claims report showed.

Homebuilding paused in December after strong gains in the prior three months.

Single-family housing starts, which account for the bulk of homebuilding, fell 8.6 per cent to a seasonally adjusted annual rate of 1.027 million units last month, the Commerce Department’s Census Bureau said in a separate report. Wet weather last month likely contributed to the plunge in homebuilding.

Single-family starts increased 15.8 per cent on a year-on-year basis as a shortage of previously owned houses for sale fuels demand for new construction. Permits for future construction of single-family homes increased 1.7 per cent to a pace of 994,000 units last month, the highest level since May 2022.

That aligns with a recent sharp improvement in homebuilder sentiment and reflects declining mortgage rates.

The perennial inventory shortage has combined with still high mortgage rates to weigh on sales of previously owned homes. But new construction demand is boosting residential investment, which rebounded in the third quarter after nine straight quarterly decreases, supporting the economy.

Starts for housing projects with five units or more increased 7.5 per cent to a rate of 417,000 units in December.

Overall housing starts fell 4.3 per cent to a rate of 1.460 million units in December. Starts declined 9.0 per cent to 1.413 million units in 2023. Multi-family building permits rose 1.4 per cent to a rate of 449,000 units last month. Building permits as a whole increased 1.9 per cent to a rate of 1.495 million units. They dropped 11.7 per cent to 1.470 million units in 2023.

The single-family homebuilding backlog rose 0.7 per cent to 140,000 units last month, while the rate for completions jumped 8.4 per cent to 1.056 million units, the highest level since November 2022. The inventory of single-family housing under construction decreased 1.2 per cent to a rate of 671,000 units.

Housing completions increased 4.5 per cent to 1.453 million units in 2023. According to the National Association of Realtors, the inventory of previously owned homes on the market is just above 1 million units, well below nearly 2 million units before the COVID-19 pandemic. Realtors estimate housing starts and completion rates need to be in a range of 1.5 million to 1.6 million units per month to bridge the inventory gap.

“More supply is still needed,” said Orphe Divounguy, a senior economist at Zillow. “Due to more than a decade of underbuilding, a significant shortage of housing options is fueling America’s housing affordability crisis.”

• Restaurant Brands International will spend about $1 billion to buy the largest U.S. franchisee of Burger King.
• The acquisition comes more than a year after Restaurant Brands unveiled its turnaround strategy for Burger King U.S.
• Restaurant Brands plans to remodel 600 of Carrols’ Burger King locations rapidly over the next five years and then sell them back to franchisees.

https://www.cnbc.com/2024/01/16/burger-king-owner-restaurant-brands-buys-carrols-largest-us-franchisee.html

• “It’s a very serious situation and seems to be getting worse,” Chevron CEO Michael Wirth said of the crisis in the Red Sea.
• Wirth said he was surprised that U.S. crude oil was trading below $73 a barrel because the “risks are very real.”
• Chevron has continued transporting crude through the region as the company works closely with the U.S. Navy’s Fifth Fleet, Wirth said.

https://www.cnbc.com/2024/01/16/red-sea-crisis-poses-very-real-risk-to-oil-chevron-ceo-says.html

U.S. stocks ended lower on Tuesday after mixed earnings from Morgan Stanley and Goldman Sachs pressured banks, and as sell-offs in Boeing and Apple weighed on the S&P 500. The TSX also gave back some recent gains, as a drop in commodity prices pressured resource shares and domestic inflation data tempered hopes for an early interest rate cut by the Bank of Canada.

Morgan Stanley tumbled 4.2% to a more than one-month low after it posted a lower quarterly profit, while Goldman Sachs’ stock ended 0.7% higher after it reported a 51% rise in profit.

The S&P 500 banks index dipped 1.2% to an over one-month low after other major U.S. banks reported lower profits on Friday.

Spirit Airlines slumped 47% after a federal judge blocked JetBlue Airways’ planned US$3.8 billion acquisition of the ultra-low cost carrier, agreeing with the U.S. Department of Justice the deal would hurt consumers.

Apple dropped 1.2% after offering rare discounts on its iPhones in China in response to stiff competition there, days after being overtaken by Microsoft as the world’s most valuable firm.

Boeing slumped almost 8% to a two-month low after the Federal Aviation Administration extended the grounding of its 737 MAX 9 airplanes indefinitely and Wells Fargo downgraded the stock to “equal weight” from “overweight.”

Federal Reserve Governor Christopher Waller dampened sentiment by saying there should be no rush to cut interest rates even though he was more confident of inflation being on track to meet the Fed’s 2% target.

Traders pared expectations that the Fed might begin its rate cuts in March, with U.S. Treasury yields also rising. Fed funds futures traders were pricing for over 150 basis points in rate cuts this year, but assigned about a 60% chance of a rate cut in March after Waller’s speech, down from about 70% earlier. Two-year U.S. yields, which generally tend to more closely reflect monetary policy expectations, were at about 4.228%, up from 4.138% on Friday.

“Certainly valuations are extended, but I think what is happening today is more of a broader consolidation of markets around that idea that investors had gotten a little too optimistic about how willing the Fed would be to ease rates,” said Ross Mayfield, an investment strategy analyst at Baird.

The Toronto Stock Exchange’s S&P/TSX composite index ended down 113.79 points, or 0.5%, to 20,948.09. Last week, it notched a 20-month high at 21,074.91.

Canada’s annual inflation rate rose to 3.4% in December. That was expected but an acceleration in underlying price pressures spooked some investors.

Money markets see a one-in-three chance that the Bank of Canada will shift to rate cuts in March, down from nearly 50% before the data, but stuck with bets for the first cut in April.

The TSX energy sector fell 3.1% as the price of oil settled 0.4% lower at US$72.40 a barrel.

The price of gold also declined, falling 1.3%, while the materials group, which includes precious and base metals miners and fertilizer companies, lost 2.3%.

The move lower for commodity prices came as the U.S. dollar jumped to its highest level in a month against a basket of major currencies.

Barrick Gold slumped 8.8% after the company reported preliminary gold output of 4.05 million ounces in the financial year 2023, below its forecast and analysts’ estimates of 4.16 million ounces.

The TSX consumer staples sector provided some ballast, gaining 0.5%.

Following strong December gains, the S&P 500 has been near its January 2022 record high close for the past several sessions. It is now down about 1% from that record high.

Wall Street rose last week as investors continued to bet on an early start to the Fed’s monetary-policy-easing cycle, despite a lack of supporting voices among policymakers and mixed inflation data.

UBS Global Research boosted its 2024 year-end target for the S&P 500 to 5,150 points, representing a more than 8% upside from current levels.

Of the 11 S&P 500 sector indexes, 10 declined, led by a 2.4% drop in energy, followed by a 1.2% loss in materials. The technology index rose 0.4%.

The S&P 500 declined 0.37% to end the session at 4,765.98 points.

The Nasdaq declined 0.19% to 14,944.35 points, while Dow Jones Industrial Average declined 0.62% to 37,361.12 points.

Advanced Micro Devices jumped 8.3% after Barclays analysts raised their price targets for AMD and several other chipmakers, saying they would benefit from growth in artificial intelligence. Larger rival Nvidia climbed about 3% and hit a record high.

Declining stocks outnumbered rising ones within the S&P 500 by a 2.6-to-one ratio. The S&P 500 posted 23 new highs and two new lows; the Nasdaq recorded 63 new highs and 182 new lows.

Volume on U.S. exchanges was relatively heavy, with 13.0 billion shares traded, compared to an average of 12.1 billion shares over the previous 20 sessions.

Reuters, Globe staff

Canada’s annual inflation rate rose to 3.4 per cent in December, up from 3.1 per cent in November, Statistics Canada said Tuesday – matching financial analysts’ expectations.

The Bank of Canada is broadly expected to continue to hold its key interest rate at five per cent at its next decision on Jan. 24. However, the timing of the first interest rate cut is expected to be driven by how fast inflation falls and how sharply the economy softens this year.

The January 2024 inflation report will be released on February 20.

Markets react to the latest inflation data

Markets were taken a little off guard with the higher-than-expected core readings of inflation, with the Canadian dollar immediately rising to 74.30 cents US, up about a tenth of a cent and the two-year government of Canada bond yield bumping up an additional couple basis points. At 8:42 a.m. ET, Canada’s two-year bond yield was fetching 3.873 per cent, up about 9 basis points for the session and widening its spread against the equivalent U.S. note. Implied interest-rate probabilities in swaps markets saw modest moves as well, but nothing that meaningfully changes what traders see ahead for moves this year in the Bank of Canada overnight rate. Markets are pricing in about a 30 per cent chance of a cut in the BoC overnight rate at its March meeting, rising to 73 per cent odds by April. Prior to today’s inflation release, those probabilities stood at 40 per cent and 87 per cent, respectively.

Regardless, money markets remain convinced we’ll see the bank start cutting rates in the first half of this year, with 99 per cent odds of at least a quarter point cut by June. Nearly 125 basis points of cuts are currently priced into markets by the end of this year.

Canada’s main stock index fell on Tuesday, led by losses in the resource sectors, while investors were disappointed that core inflation rose more than expected in December ahead of next week’s interest rate decision by the Bank of Canada.

At 10:39 a.m. ET, the TSX/S&P composite index was down 82.00 points, or 0.39%, at 20,979.45 after falling as low as 20,842.98 earlier in the trading day.

Energy shares were the top losers on the index, falling 1.7%, while materials were down 1.4% as prices of most base metals dropped on a stronger U.S. dollar and concerns over future demand after top consumer China skipped an expected rate cut.

Data on Tuesday showed Canada’s annual inflation rate rose to 3.4% in Dec. from 3.1% in Nov., driven mainly by higher gasoline prices last month.

While the headline numbers were in line with expectations, the sticky core measures show that overall inflation is likely to come down slowly.

“CPI has come down quite a bit from the peaks. It’s going to get a little bit more difficult to get it back to the 2% range. But my forecast is that the Bank of Canada is still likely to cut interest rates”, Mike Archibald, vice president and portfolio manager at AGF Investments, told Reuters.

“My assumption is that it will happen, likely sometime in the second quarter, but we have to continue to watch the data.”

Money markets now see a 34% chance that the BoC would start cutting interest rates in March, down from nearly 50% before the figures were released, but still see a high chance of a 25-basis-point reduction in April.

Among individual stocks, Barrick Gold slumped 4.6% after the company reported preliminary gold output of 4.05 million ounces in the financial year 2023, below its forecast and analysts’ estimates of 4.16 mln ounces.

First Quantum Minerals fell 3.4% after the Canadian miner said it plans to conserve capital after it was forced to halt production at its Cobre Panama copper mine.

Wall Street’s main indexes fell on Tuesday, as banks came under pressure after mixed earnings from Goldman Sachs and Morgan Stanley kept investors cautious about the health of capital markets and dealmaking, while declines in Tesla and Apple also weighed.

Tesla shed 2.2%, steering a 1% drop in the S&P 500 consumer discretionary sector, after CEO Elon Musk said he would be uncomfortable growing the automaker to be a leader in artificial intelligence and robotics without having at least 25% voting control of the company.

Apple fell 2.4% after offering rare discounts on its iPhones in China on competition pressures, just days after it was overtaken by Microsoft as the world’s most valuable firm.

On the fourth-quarter earnings front, Goldman Sachs reported a 51% rise in profit, as its traders capitalized on a nascent market recovery and its asset and wealth business revenue rose. However, Morgan Stanley’s profit declined, while revenue surpassed expectations on a rebound in dealmaking activity. Their shares were down 0.8% and 3.4%, respectively.

“Morgan Stanley, Goldman Sachs tend to service the wealthier high-net-worth clients, and have much less loan loss reserves,” said Paul Nolte, senior wealth adviser and market strategist at Murphy & Sylvest.

“Overall, I think the banks (results) came in pretty good shape and the banking sector is pretty well-capitalized at this point.”

Wells Fargo, Bank of America, Citigroup and JPMorgan Chase dropped between 1.6% and 2.7% after reporting lower profits on Friday.

The broader banks index slid to an over one-month low on Tuesday.

Wall Street finished the previous week higher as investors continue to price in an around 70% chance of the Federal Reserve delivering a 25-basis-point rate cut in March – despite mixed inflation data and a lack of supporting voices among policymakers for a quick start to monetary policy easing.

UBS Global Research boosted its 2024 year-end target for the S&P 500 on Tuesday to 5,150, representing a nearly 8% upside from current levels.

Despite briefly surpassing its previous record closing high last week, the benchmark index has faced resistance to breaching its highest intra-day level, hit in January 2022.

Investors will parse Fed Board Governor Christopher Waller’s remarks during the day, after Atlanta Fed President Raphael Bostic warned about cutting rates too soon.

The Dow Jones Industrial Average was down 226.52 points, or 0.60%, at 37,366.46, the S&P 500 was down 26.82 points, or 0.56%, at 4,757.01, and the Nasdaq Composite was down 89.39 points, or 0.60%, at 14,883.37.

Dow-component Boeing declined 4.7%, as the Federal Aviation Administration extended the grounding of its 737 MAX 9 airplanes indefinitely and brokerage Wells Fargo downgraded the stock to “equal weight” from “overweight.”

Applied Digital slumped 22.3% after the data-center services provider posted downbeat second-quarter revenue.

Reuters

 Published: 1/15/2024 5:16 AM ET | 

Oil prices traded lower on Monday after surging more than 2 percent in the previous week to touch their highest intraday levels this year after the United States and Britain carried out the strikes on the Houthi forces in Yemen in retaliation for attacks by the Iran-backed group on shipping in the Red Sea.

Benchmark Brent crude futures slipped 0.7 percent $77.76 a barrel, while WTI crude futures were down 0.7 percent at $72.22.

Investors are not seeing any impact on supply despite increased tensions in the Middle East.

In the Southern Red Sea on Sunday, a U.S. fighter aircraft skilfully thwarted an anti-ship missile directed at an American Navy vessel in the Southern Red Sea on Sunday.

The Houthi group threatened a “strong and effective response”, potentially escalating the situation which has seen several shipping operators suspend routes through the Red Sea.

It’s a busy week for markets, with a slew of U.S. and Chinese data and corporate earnings likely to garner investor attention.

After officials last week attempted to temper any expectation of a looming rate cut, investors now look ahead to U.S. reports on retail sales, industrial production, import and export prices, housing starts and consumer sentiment along with a speech by Federal Reserve Governor Christopher Waller this week for further direction.