Dow finished down 190 in a choppy session & not far from session lows, decliners over advancers 2-1 & NAZ rose 34. The MLP index was off 1 to the 249s & the REIT index dropped 2+ to the 322s. Junk bond funds were sold & Treasuries had heavy buying, lowering Treasury yields (more below). Oil fell 2+ profit taking & gold slid back 6 to 1987 (more on both below).
AMJ (Alerian MLP Index tracking fund)
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United Auto Workers strike: Cost to US economy tops $9 billion
Treasury yields ticked lower today, hovering around multiyear highs as investors continue to assess the prospect of higher-for-longer interest rates from the Federal Reserve. The yield on the benchmark 10-year Treasury note fell by 6 basis points to 4.86%, while the yield on the 30-year Treasury bond slipped around 6.8 basis points to 5.02%. Yields move inversely to prices. The 10-year yield is pulling back from the 5% level, which it hit for the first time since 2007 on Thurs. Yields fell after Pershing Square's Bill Ackman today disclosed he covered his bond short position. Ackman asserted that “there is too much risk in the world to remain short bonds at current long-term rates” in a post. Ackman tied the move to a view that bonds could soon see safe haven interest as equities remain volatile & troubled by geopolitical risk. Markets are also contending with comments by Federal Reserve Chair Jerome Powell from last week. Powell said the central bank would remain “resolute” in its commitment to bring inflation down sustainably to 2% & that lower economic growth was likely needed to achieve this goal. Fed fund futures pricing reflects a 98% probability that the central bank keeps its main interest rate unchanged at the current target range of 5.25-5.50% at its next monetary policy meeting.
Memory chips are at the center of all devices, helping store &
access data in smartphones, computers & the servers training
generative artificial intelligence models. Just 3 companies make more than 90% of the world’s dynamic random-access memory, or DRAM, chips. With Samsung & SK Hynix both headquartered in South Korea, Idaho-based Micron (MU) is the only manufacturer in the US, that has made it the latest target of China's bans on US technologies. About
a qtr of MU's revenue comes from China & “about half that
revenue is at risk,” CEO Sanjay Mehrotra said. Meanwhile, MU is doubling down on US
manufacturing. Its current leading-edge chips are made in Japan &
Taiwan, but MU is aiming to bring advanced memory production to the
US starting in 2026 with a new $15B chip fabrication plant in
Boise, Idaho. MU celebrated its 45th anniversary in Oct by
pouring the first cement at the new fab. The facility is located next to MU's huge research & development facility. “Memory is very cost-sensitive and we have to get economies of scale to
mass produce our chips on a level that meets the market demands,” said
Scott Gatzemeier, corp VP of front end US
expansion. Mehrotra said that MU's goal is to vastly increase the US
share of DRAM production, which he said currently sits at just 2%. That
production comes from its fab in Manassas, Virginia. The company is
getting assistance from the federal CHIPS & Science Act, which offers Bs of $ to incentivize domestic production. “With
Micron’s investments through CHIPS support in Boise, Idaho, as well as
in Syracuse, New York, that 2% over the course of nearly 20 years will
be changing to about 15% of the worldwide production coming from the
U.S.,” Mehrotra added. The stock fell 34¢.
If you would like to learn more about MU, click on this link:
How Micron is building the biggest chip fab in U.S. history despite a China ban and smartphone slump
Gold Edges Down as Investors Take Profits After Last Week's Safe-Haven Gains
WTI Oil Closes Down as Israel Holds Back on a Ground Invasion of Gaza as Diplomatic Efforts ContinueWith 2 wars, high interest rates which have the potential to last & an auto strike (among other things), investors have a lot of negative news to deal with. Dow closed below 33K, a key support level. The chart below looks ugly over the last 3 months.
Dow Jones Industrials