Commodities
Dow Jones and S&P 500 are down 0.3-0.5%. Nasdaq is on the weak side
The U.S. stock indexes Dow Jones Industrial Average and S&P 500 ended Thursday trading lower but well above intraday lows, while the Nasdaq Composite came out with a small plus.
Traders were assessing the prospects of the Federal Reserve (Fed) raising the benchmark interest rate at its July meeting, as well as U.S. bank reports for the past quarter.
U.S. Labor Department data published on Wednesday, which showed an increase in inflation in the country to a maximum of nearly 41 years, 9.1%, led investors to revise their forecasts about the pace of the Fed’s rate hike. At first, the rate futures quotes showed that traders were 85% confident in the likelihood of the U.S. Central Bank rate hike by 100 basis points (bps) in July.
However, Fed Board of Governors member Christopher Waller said that the market may be “getting a little ahead of itself” by expecting a 100bp rate hike. He noted that he still favors a 75-bp rate hike in July, but acknowledged that economic data to be released shortly could change his mind in favor of a sharper hike.
“If this data turns out to be substantially stronger than expected, I might lean toward a larger rate hike in July because it would mean that demand in the economy is not weakening fast enough to contain inflation,” he said.
Following Waller’s statements, the futures market’s estimate of the chances of a rate hike of 100 bps in July dropped to 42%; Market Watch notes. On Friday, the University of Michigan will release the preliminary value of its consumer confidence index for July. The index fell to a record low of 50 points in June.
The University of Michigan data also includes trends in Americans’ inflation expectations, which last month stood at 5.3 percent for the medium term (next year) and 3.1 percent for the long term (five years). “We’re waiting on this data to see if inflation expectations in the U.S. have strengthened,” notes LPL Financial analyst Quincy Crosby. – If they rise, the Fed will probably discuss a 100-bp rate hike. Or the central bank will have to hike the rate at a 75-bp pace longer than it anticipated.”
Data released Thursday showed an acceleration in U.S. producer price growth in June to 11.3 percent annualized from 10.9 percent a month earlier. The rate of increase in producer prices reached a record 11.6% in March of this year. Negative for the market Thursday were weak financial reports from banks JPMorgan Chase & Co. and Morgan Stanley for the past quarter.
“High inflation, weakening consumer confidence, uncertainty about how high rates will be raised and unprecedented quantitative tightening and its impact on global liquidity are very likely to have a negative impact on the global economy,” said JPMorgan Chief Executive James Dimon. – We’re prepared for whatever happens.”
- The Dow Jones Industrial Average index fell 142.62 points (0.46%) to 30630.17 points in trading Thursday.
- Standard & Poor’s 500 fell 11.4 points (0.3%) to 3,790.38 points.
- The Nasdaq Composite rose 3.6 points (0.03%) to 11251.19 points.
The decline in net income at JPMorgan, the largest U.S. bank, by assets, exceeded analysts’ forecasts. In addition, the financial institution said it was suspending its share buybacks. Morgan Stanley also reported weaker-than-expected quarterly adjusted earnings and revenue. JPMorgan’s shares fell 3.5% in trading on Thursday, while Morgan Stanley’s fell 0.4%.
Conagra Brands, a prepared foods maker, fell 7.3 percent. The company nearly halved its net income in the fourth quarter of fiscal 2022, and its revenue was worse than market forecasts.
Shares of Cisco Systems Inc. fell 0.9 percent after experts at JPMorgan cut recommendations for the securities of the U.S. network equipment maker to “neutral” from “above market. The bank also lowered its outlook on Cisco shares to $51 from $62.
The value of Tesla Inc. securities rose by 0.5%. The day before, it became known that Andrei Karpaty, director of artificial intelligence and head of the development group for autopilot in cars, Tesla, left the company.
Citigroup Inc. and Wells Fargo & Co. will publish their results for the past quarter on Friday. The consensus forecast by analysts surveyed by FactSet suggests that S&P 500 index companies’ overall earnings rose an average of 4.3% in the past quarter, the slowest pace since late 2020.
By Robert Harvey and Deep Kaushik Vakil
LONDON (Reuters) -Oil prices rose on Thursday, rebounding from three days of losses that took prices to their lowest since mid-March.
futures for July gained 58 cents, or 0.7%, to $84.02 a barrel by 1130 GMT. U.S. West Texas Intermediate (WTI) crude for June was up 47 cents, or 0.6%, at $79.47.
Prices fell more than 3% to a seven-week low on Wednesday after the U.S. Federal Reserve kept interest rates steady and warned of stubborn inflation, which could curtail economic growth this year and limit oil demand increases.
Crude was also pressured by an unexpected increase in inventories in data from the Energy Information Administration (EIA). Inventories were shown at their highest since June. [EIA/S]
Crude inventories rose by 7.3 million barrels to 460.9 million barrels in the week ended April 26, compared with the 1.1 million barrel draw expected by analysts in a Reuters poll.
While OPEC and its allies have yet to begin formal talks on extending voluntary oil output cuts beyond June, three sources from OPEC+ producers said such an extension could be agreed if demand fails to pick up.
“However, with 2025 oil balances looking in greater surplus due to non-OPEC+ supply growing faster than demand, we think OPEC+ should feel increasing pressure to unwind cuts going into next year,” Citi analysts said in a note late on Wednesday.
Supporting the price recovery was the potential for lower prices to spur U.S. government buying for strategic reserves.
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“The oil market was supported by speculation that if WTI falls below $79, the U.S. will move to build up its strategic reserves,” said Hiroyuki Kikukawa, president of NS Trading.
The U.S. has previously said it aims to replenish the Strategic Petroleum Reserve (SPR) after a historic sale from the emergency stockpile in 2022 and wants to buy back oil at $79 a barrel or less.
In the Middle East, meanwhile, expectations grew that a ceasefire agreement between Israel and Hamas could be in sight after a renewed push led by Egypt.
A deal on that front could take out some of the geopolitical risk premium that has buoyed oil prices in recent months, though Israeli Prime Minister Benjamin Netanyahu has vowed to proceed with a long-promised assault on the southern Gaza city of Rafah.
“The geopolitical temperature might have dropped a notch or two, but the climate remains hot,” said PVM analyst Tamas Varga.
By Alex Lawler and Olesya Astakhova
LONDON/MOSCOW (Reuters) – OPEC and its allies have yet to begin formal talks on extending voluntary oil output cuts of 2.2 million barrels per day beyond June, but three sources from OPEC+ producers said they could keep their cuts if demand fails to pick up.
OPEC+ has implemented a series of output cuts since late 2022 amid rising output from the United States and other non-member producers, and worries over demand as major economies grapple with high interest rates.
OPEC+, which includes the Organization of the Petroleum Exporting Countries, Russia and other non-OPEC producers, next meets on June 1 in Vienna to set output policy. OPEC did not respond to a request for comment.
The OPEC+ group is currently cutting output by 5.86 million bpd, equal to about 5.7% of global demand. The cuts include 3.66 million bpd by OPEC+ members valid through to the end of 2024, and 2.2 million bpd of voluntary cuts by some members expiring at the end of June.
Oil prices have found support this year from the conflict in the Middle East, although concern about economic growth and high interest rates has weighed. hit a seven-week low on Wednesday and settled at $83.44 a barrel.
The three sources from countries which have made voluntary supply cuts said an extension was likely.
The cuts could be extended until year-end, said one source, while another said it would take a surprise jump in demand for OPEC+ to make any changes.
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Two other OPEC+ sources said formal talks had yet to take place, and one of those said OPEC+ was not yet leaning one way or the other on extending cuts.
The countries which have made voluntary cuts that are deeper than those agreed with the wider group are Algeria, Iraq, Kazakhstan, Kuwait, Oman, Russia, Saudi Arabia and the United Arab Emirates.
“We think there’s a good chance that OPEC+ will extend beyond June – but we aren’t yet putting a firm view because we don’t think they’ve actually got into the real period of discussion and decision-making,” said Richard Bronze of Energy Aspects.
Another option would be for some or all of the 2.2 million bpd of cuts to be unwound after June, analysts say.
OPEC has said it expects another year of relatively strong oil demand growth of 2.25 million bpd, while the International Energy Agency expects much slower growth of 1.2 million bpd.
Investing.com– Oil prices rose Thursday, recovering from near two-month lows, helped by talk of an extension of OPEC+ supply cuts.
At 08:20 ET (12:20 GMT), rose 1% to $84.28 a barrel, after hitting a seven-week low on Wednesday, while rose 0.9% to $79.73 a barrel.
OPEC+ to extend cuts?
OPEC and its allies could yet extend their voluntary oil output cuts of 2.2 million barrels per day beyond June, but Reuters reported Thursday, citing sources.
OPEC+, which includes the Organization of the Petroleum Exporting Countries, Russia and other non-OPEC producers, next meets at the start of June 1, and has yet to start formal talks, the news agency said, but the spurces indicated they could keep their cuts if demand fails to pick up.
The group has implemented a series of output cuts since late 2022 amid rising output from the United States and other non-member producers, and worries over demand as major economies grapple with high interest rates.
It is currently cutting output by 5.86 million barrels per day, equal to about 5.7% of global demand, but just over 2 million barrels per day of voluntary cuts by some members expire at the end of June.
Dollar drops as Fed downplays rate hike speculation
Oil prices were helped earlier Thursday by a drop in the dollar, with the greenback falling back from near six-month highs on Wednesday after Federal Reserve Chair Jerome Powell said the central bank’s next rate move will likely be a cut, although the timing of such a move remained uncertain.
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Crude, like many commodities, is priced in dollars, and thus a weaker greenback benefits crude demand by making oil cheaper for international buyers.
Oil prices battered by US inventories, production spike
Crude markets are on course for hefty losses this week, after official data on Wednesday showed U.S. grew a substantially bigger-than-expected 7.3 million barrels in the week to April 26. Gasoline stockpiles also grew, while distillates had a minimal draw.
The inventory reading, which was preceded by data showing U.S. production surged past 13 million barrels per day in March, ramped up bets that oil markets were not as tight as initially thought.
Such a scenario bodes poorly for oil prices.
Middling purchasing managers index readings from top importer China also weighed on oil prices this week.
Focus was also on ceasefire talks between Israel and Hamas, with any progress on that front lowering the risk premium attached to oil markets.
(Ambar Warrick contributed to this article.)
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