Friday, December 15, 2017

Markets reach records as more Senators support tax bill

Dow surged 14, advancers over decliners better than 2-1 & NAZ rose 80.  The MLP index lost 2+ to the 272s & the REIT index went up 1+ to 359s.  Junk bond funds fluctuated & Treasuries were slightly lower.  Oil climbed higher in the 57s & gold inched up 1 to 1258.

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Reps are scheduled to reveal final details of their agreed-upon tax-overhaul legislation later today. It's the culmination of a 6-week legislative sprint designed to deliver a major policy victory for their party & Pres Trump before year's end.  Rep Sen Marco Rubio will support a compromise tax-overhaul package, an aide said, giving GOP leaders an increased measure of comfort that they'll score a major legislative victory next week.  Rubio got to “yes” after Senate & House leaders agreed to expand the “refundable” portion of an expanded child tax credit, effectively giving working-class families a larger share of the benefit.  Rep leaders plan to release a report at 5:30 PM on the final tax legislation that they're preparing for votes next week, House Ways & Means Chairman Kevin Brady said.  That report will lay out plans for reconciling differences between the tax bills that passed the House & the Senate on Dec 2.  It's not yet clear how closely the report will resemble actual legislative text.  Some details of the legislation have already emerged; it would set a 21% corp tax rate rate beginning in 2018, down from 35% & would set a top individual income-tax rate of 37%, down from 39.6%

Rubio Says ‘Yes,’ Improving Tax Bill's Prospects

Surveys that query respondents about their political affiliation have generally shown that consumer confidence among Reps has soared since the elections in Nov 2016, whereas Dems have lagged. When the data are broken down by which way a county voted, however, it's the Dem areas that have seen the bigger increase in confidence, according to a stuy published by the Federal Reserve Bank of New York.  That’s because although initially Rep counties logged bigger gains following the election, which gave conservatives unexpected victories, they've since become relatively more pessimistic over the last few months, whereas confidence in Dem counties has held up.

Consumer Confidence Up More in Blue Counties Since Trump's Win

Factories in NY State grew more slowly this month as shipments rose & new orders slipped.  The Federal Reserve Bank of NY said that its Empire State Manufacturing index declined to 18 in Dec from 19.4 last month.  The index is down from a 3-year high of 30.2 last month.  Still, any reading over zero signals growth.  The index is watched closely because it provides a first look at the health of US manufacturing each month.  A measure of shipments increased at a faster pace in Dec, while a gauge of new orders rose at a slightly slower pace.  Hiring slipped but remained positive.  US factories are benefiting from solid global growth & a cheaper $, which makes US goods less expensive overseas.  Those trends have lifted exports of manufactured goods.  A gauge of inventories fell to just 1.4, a sign companies are clearing out their stockpiles & that could boost production in future months.  And there were signs of mild inflationary pressures.  A measure of the prices paid by factories for raw materials rose 5 points to 29.7, though that is below levels that were reached earlier this month.

Survey: New York manufacturers grows at slightly slower pace

It looks like the Reps have finally come together to pass tax reform,  Nothing is final until the vote is taken, but holdouts are cooperating.  Details of the proposed bill are being released shortly & next week the stock market will react.

Dow Jones Industrials


Markets rise as investors await tax bill release

Dow shot up 137, advancers over decliners 5-2 & NAZ gained 37.  The MLP index lost 2+ to the 272s & the REIT index added 1+ to the 259s.  Junk bond funds went up & Treasuries declined.  Oil was flat in the 57s & gold hardly budged at 1257.

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CL=FCrude Oil57.23


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Stocks gained with the $ as investors assessed messages from the Federal Reserve & ECB meetings this week with concerns lingering about the prospects for US tax overhaul.  All major equity gauges were higher, with S&P 500 shooting up to a record level.  Trading in US stock markets may be volatile today amid a quarterly event known as quadruple witching, when futures & options contracts on indices & individual shares expire.  Treasuries edged lower, which continued to trade above $57 a barrel, & gold climbed with crude.  Uncertainty surrounding the fate of tax reform has investors on edge as they look to the end of a stellar year for equities.  Money managers have shown signs of  dialing back their appetite to take risk amid signals that the 8-year stock rally may not be far from its end.  The Stoxx Europe 600 Index was lower with retailers leading the decline.  South Africa's rand gained even as volatility soared before the ruling African National Congress meets this weekend to elect a new leader.  The € headed for its first weekly advance of the month after the ECB remained cautious about the prospects of reaching its inflation goals while reiterating a pledge to keep stimulus in place.  The £ dropped & yields on UK gilts fell to the lowest since Sep amid speculation Brexit talks are about to get more difficult.  Russia's ruble fluctuated after the nation's central bank cut rates more than expected.

U.S. Stocks Rise, Dollar Steady Amid Tax Debate: Markets Wrap

US industrial production rose at a slower pace in Nov as factory output moderated following the biggest advance in more than 7 years that reflected a hurricane-related surge, Federal Reserve data showed.  Total industrial production, which also includes mines & utilities, increased 0.2% (est 0.3% rise) after an upwardly revised 1.2% jump that was the largest since 2010.  Factory output also increased 0.2% (est 0.3% gain) after climbing an upwardly revised 1.4% advance (biggest since 2010).  Capacity utilization, measuring the amount of a plant that is in use, edged up to 77.1% (est 77.2%) from 77%.  3 straight months of increased factory output show that manufacturing remains on solid ground amid steady consumer spending & strong gains in business investment.  An improvement in overseas markets may also boost export demand in coming months.  The latest advance in manufacturing production reflected a widespread increase in the output of durable goods, driven by primary metals.  In a sign factories are putting more resources to use, capacity utilization at manufacturers climbed to 76.4%, the highest since 2008.  Total industrial production was driven by a 3% increase in oil & gas extraction as activity returned to normal levels following Hurricane Nate, the Fed said.  Excluding the rebound in energy extraction, total industrial output would have been unchanged.

Pres Trump's drive to win passage of a sweeping Rep tax bill in Congress hit potential obstacles on yesterday as 2 more Rep senators insisted on changes, joining a list of lawmakers whose support is uncertain.  Florida's Marco Rubio said that if the bill's proposed refundability to taxpayers of the child tax credit is not expanded, “I‘m a no ... It has to be higher than $1,100.”  Rubio & Sen Mike Lee are in talks with other senators about expanding child tax credit refundability, said a Lee spokesman.  Lee is now “undecided on the tax bill as currently written,” Carroll his spokesman added.  The child tax credit now in the tax code is meant to lower the tax bills of working families with children.  As the fast-moving Rep tax package has evolved, it has tilted increasingly toward benefiting businesses & wealthy taxpayers, a trend that aides were saying privately is a growing concern for some lawmakers.  Provisions for offsetting the revenue costs of last-minute changes also were becoming worrisomely unclear, they said.  After resisting demands for weeks to cut the top income tax rate for the richest taxpayers, the bill's authors did agree in recent days to lower it to 37% from 39.6%.

As Republican tax vote nears, more senators waver

Uncertain times in Congress were getting to the stock market, but not today.  Those guys in DC are tweaking final changes in the tax bill & there is hope they can make it happen.  With many unknowns, the final vote will not be before the end of next week.  Then there is funding the gov to avoid shutdown at the end of next week.  Overriding good economic news is keeping the bulls happy because they are ignoring the uncertainty..  But Congress has to cooperate to extend this rally.

Dow Jones Industrials

Thursday, December 14, 2017

Markets decline on increased worries about the tax bill

Dow lost 76 (closing at the lows), decliners over advancers 2-1 & NAZ slid back 19.  The MLP index added 1+ to the 274s & the REIT index slid lower in the 358s.  Junk bond funds fell & Treasuries inched higher.  Oil rose to the 57s (more below) & oil went up 9 to 1254 when stocks were sold.

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Rep Sen Marco Rubio says he's a "no" vote on the sweeping tax package, unless the child tax credit is more generous to low-income families.  The bill would expand the child tax credit to $2K from $1K.  He wants a further expansion, & his opposition undercuts Rep leaders trying to muscle the tax bill thru the Senate next week.  In a conversation with reporters, Rubio did not specify how high he wants the credit to go.  House & Senate leaders have agreed on the bill in principle but are still finalizing the legislation that they plan to unveil tomorrow.   A spokesman says Rep Mike Lee is another Senator who is undecided on the bill.

The Latest: Rubio demands bigger child tax credit in bill

The number of Americans applying for unemployment benefits fell by 11K last week to 225K, the lowest in nearly 2 months & another sign that workers are enjoying job security.  The Labor Dept said that the less volatile 4-week average also fell, by 7K to 235K.  Overall, 1.89M Americans are collecting unemployment checks, down more than 7% from a year earlier & close to a 4-decade low reached in Nov.  Unemployment claims are a proxy for layoffs.  They've been below 300K a week for nearly 3 years, the longest stretch in more than 4 decades.  The low levels reflect the strength of the job market & the overall economy.  The unemployment rate has fallen to a 17-year low of 4.1%.  Employers, who added 228K jobs last month, are holding onto workers & often struggling to find new ones.  The economy grew at a sprightly 3.3% annual pace from Jul thru Sep, fastest in 3 years.

Applications for US jobless aid drop by 11,000 to 225,000

US import prices surged in Nov amid an increase in the cost of imported petroleum products, leading to the largest year-on-year increase in 7 months.  The Labor Dept said that import prices jumped 0.7% last month after a downwardly revised 0.1% gain in Oct.  The forecast called for import prices to increase 0.7% in Nov after a previously reported 0.2% rise in Oct.

US import prices surge in November

Oil prices were up slightly as a pipeline outage in Britain continued to lift Brent crude prices.  West Texas Intermediate futures rose 16¢ (0.3%) to $56.76 a barrel & Brent crude futures were up 47¢ (0.8%) at $62.91 a barrel.  Prices have been supported by an outage on the Forties crude pipeline that was expected to last several weeks.  Operator Ineos declared force majeure on crude oil, gas & condensate deliveries from the pipeline.  A fall in US crude inventories last week also lent some support.   Stocks fell by 5.1M barrels in the latest week, the 4th consecutive week of decline, to 443M barrels, the lowest since Oct 2015.  The front month of the US crude curve for Feb & Mar remains in backwardation.  Crude backwardation, in which the futures contract trades below the crude oil’s expected spot price at the contract's maturity, is an indicator of a tight market.  The International Energy Agency (IEA) expects the oil market to have a surplus of 200K barrels per day (bpd) H1-2018 before reverting to a deficit of about 200K bpd in H2-2018.  That means 2018 overall should show “a closely balanced market.”  The IEA said US crude output next year would increase by 870K barrels per day, up from its Nov forecast of 790K bpd.

Oil prices up slightly on pipeline outage support

The stock market is feeling the pressure in the Senate for passing a tax bill.  In the next week, AT A MINIMUM, there will be a lot of wrangling as a few Senators insist on putting in their favorite fixes for taxes.  Half a dozen Senators are shaky.  With the thin margin the Reps have, the fate of the tax bill is unclear.  Making matters worse, those guys have to pass a bill to extend funding for the gov in fiscal 2018 or there will be a shutdown at the end of next week.  The stock market can be expected to play defense until the tax bill & funding the gov issues are settled.

Dow Jones Industrials