Dow falls below 18,000 on rate hike concerns

Dow dropped 173, decliners over advancers almost 4-1 & NAZ fell 54.  The MLP index lost 3+ to the 307s & the REIT index was fractionally higher in the 339s.  Junk bond funds were mixed (after a good run this year) & Treasuries are advanced bringing lower yields.  Oil slid back to 50 & gold rose.

AMJ (Alerian MLP Index tracking fund)

CL=F

Crude Oil Nov 16

50.00

-0.18

-0.4%

GC=F

Gold Futures,Dec-2016

1,262.50

8.70

0.7%

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Divided in their views over the labor market, most Federal Reserve officials last month ultimately listened to Chair Janet Yellen's argument for holding off on a rate hike, for now the FOMC voted 7-3 to leave interest rates unchanged.  Minutes showed “several” of those who supported the decision to wait on tightening policy said the decision was a “close call.”  Several also indicated it would be appropriate to raise rates “relatively soon.”  Following the minutes’ release, investors continued to see about a 2/3 chance of a rate increase in Dec, based on prices in federal funds futures contracts.  They assigned a 17% chance to a move in Nov, when the Fed meets a week before the presidential election.  Investors will get a chance to hear directly from Yellen tomorrow at a Boston Fed conference.  The record of the Sep FOMC meeting revealed a sharp debate over the potential impact of keeping rates ultra-low on the labor market & inflation.  One camp warned this risked driving unemployment too low, possibly triggering much higher inflation & forcing the Fed to raise rates more drastically, a tack that has historically led to a recession.  An opposing group argued that more slack remains for the labor market outside the official measure of unemployment.  Holding off on an increase, they claimed, could help draw people who had previously given up looking for jobs back into the work force.  That would allow for continued job growth without a surge in wages & inflation.

Fed Minutes Suggest Yellen Made the Difference in ‘Close Call’

Filings for unemployment benefits were at a 4-decade low over the past 2 weeks as sales prospects encouraged employers to maintain headcounts.  Jobless claims were 246K, unchanged from the previous week, which was revised lower, according to the Labor Dept.  The forecast called for 253K.  The 4-week average also fell to the lowest level since 1973.

Employers remain reluctant to lay off workers as the pool of potential job candidates dries up & openings remain near record highs, making conditions ripe for wage gains that may spur Federal Reserve policy makers to raise interest rates by year's end.  Filings have been below 300K for 84 straight weeks, the longest streak since 1970 & a level typical for a healthy labor market.  The 4-week average of claims declined to 249K from 252K in the prior week.  The number continuing to receive jobless benefits fell 16K to 2.05M, the lowest since 2000.  The unemployment rate among people eligible for benefits held at 1.5%.

Jobless Claims at 42-Year Low as U.S. Employers Shun Firings

Prices for foreign goods shipped to the US rose slightly in Sep, a sign that a modest rebound in oil markets is slowly lifting inflation.  The import-price index, measuring the cost of goods ranging from Brazilian coffee beans to Japanese cars, grew 0.1% from a month earlier, the according to the Labor Dept.  The forecast called for prices to rise 0.2%.  Import prices have risen for 6 of the past 7 months, helping to reverse a long slide.  Import prices were still 1.1% lower in Sep compared to a year earlier.  But that was the smallest decline in prices over any 12-month period since Aug 2014, suggesting inflation is firming.  The latest shift is tied to oil. The price of imported petroleum rose 1.2% in Sep from a month earlier, though it was still down 2.4% from a year earlier.  Outside of petroleum, import prices were flat last month & down 0.8% from the prior year.  Import prices have been kept in check in recent years by depressed oil prices, weak demand in overseas economies & stimulus efforts by global central banks that have pushed up the value of the dollar against other currencies.  The index is one of several the Federal Reserve studies to gauge how quickly prices for goods & services are rising & to determine whether the economy is growing healthily.  That, in turn, influences Fed policymakers as they plot when & how frequently to raise interest rates.

U.S. Import Prices Rose 0.1% in September

Stocks traders are nervous which has brought the Dow below the important 18K support level.  If that holds to the close, this bull market is in trouble.  There are plenty of problems out there, starting with the usual worries about a rate hike.  Growing global tensions, starting with a US destroyer being fired on by rebels off Yemen are adding to tensions.  Gold & Treasuries were higher today, safe haven investments are getting more attention.

Dow Jones Industrials