Friday, April 21, 2017

Markets edge lower after Trump says tax plan will be announced on Wed

Dow lost 30, decliners over advancers 5-4 & NAZ gave back 6.  The MLP index remained fractionally lower in the 318s & the REIT index fell 1+ to the 354s.  Junk bond funds slid lower & Treasuries had a tiny gain, bringing the yield on the 10 year Treasury to 2.24%.  Oil dropped 1+ into the 49s (more below) & gold edged higher to 1286, remaining near recent highs.

Dow Jones Industrials

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Live 24 hours gold chart [Kitco Inc.]

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Pres Trump says businesses & individuals will receive a "massive tax cut" under a tax reform package he plans to unveil next week.  Trump says the plan will result in tax cuts for both individuals & businesses but would not provide details of the plan, saying only that the tax cuts will be "bigger I believe than any tax cut ever."  He says the package will be released on "Wednesday or shortly thereafter," just before his 100 day mark in office.  Treasury Secre Steve Mnuchin initially set a goal of getting tax reform passed by Aug, but that deadline has slipped.  Now Mnuchin now says the administration still hoped to get a bill passed well before the end of the year.
Trump Says He Will Unveil ‘Massive’ Tax Cut in Plan Next Week

Fed Vice Chair Stanley Fischer said a recent patch of weak economic data likely won't throw the central bank off track for 2 more interest-rate increases this year.  “There are reasons to think that the first quarter was, again, below what the rest of the year will be,” he said.  Asked if 2 more rate hikes for the year still feels appropriate, Fischer said, “We’re feeling that way and so far haven’t seen anything to change that.”  Fischer also said that major economies around the world have recently shown signs of renewed strength, contributing to an optimistic tone at the ongoing spring meetings of the IMF.  “A large part of the upbeat tone comes from the fact that China is doing better, Europe is doing better,” he added.  “We’re seeing positive changes throughout much of the world.”  “There is a very large weather aspect of the division between February and March data,” Fischer said.  He also played down the drop in inflation.  “The two surprises were energy prices and then a very large decline in the price of cell phone usage,” he said.  “It actually had an impact on the overall inflation rate. So that is a one-time shock which we believe will not continue to reduce the inflation rate as we move ahead.”  Asked about Trump's comments that the $ may be too strong, Fischer said, “We do not take a particular statement, by even a president, into account in making our decisions on the interest rate.”
Fed's Fischer Says Two More 2017 Hikes Still Feels Right

Oil prices tumbled, for the biggest weekly drop in a month on renewed concerns that increasing US production & high inventories will thwart OPEC's attempts to reduce the global crude glut.  US crude futures fell below $50 a barrel for the first time in 2 weeks, with volumes picking up in an active session.  Saudi Arabia & Kuwait, key members of OPEC, favor extending their production-limiting deal with non-member producers into H2.  Russia's Energy Minister Alexander Novak, however, declined to say whether the top non-OPEC oil producer would adhere to an extension, saying global stocks were declining.  "The situation has gradually been improving since the beginning of March," Novak said.  Uncertainty surrounding whether output cuts will be extended at a joint meeting on May 25 meeting is sure to drive market dynamics until then.  US crude futures were at $49.68 a barrel, down 2%, for the biggest weekly decline since Mar 10.  Oil fell this week as doubts emerged over the effect of the output cut by OPEC & other producing countries of almost 1.8M barrels per day (bpd).  US output is at its highest since Aug 2015 & analysts say inventories are not declining as fast as expected.

Oil Dives, US Crude Below $50 for First Time in 2 Weeks
Baker Hughes reported that the number of active US rigs drilling for oil rose by 5 to 688 rigs this week.  That marks a 14th weekly climb in a row.  The total active US rig count, which includes oil & natural-gas rigs, also climbed by 10 to 857.

Baker Hughes data show U.S. oil-rig count edged higher this week

The administration has told agencies to prepare for a gov shutdown at the end of next week.  As usual, nobody will know if it is to happen until the last minute, maybe later.  The French election is haunting the stock market.  The attack yesterday will likely help the far right candidate, La Pen.  Dow was flattish today, pretty much hugging the break-even line which is only about 600 below the record high made at the start of Mar.  Next week there will be more earnings, the threat of a gov shutdown, very high tensions around the globe & other unknowns which are difficult to imagine today.  But the Dow continues to take it all in stride.

Dow Jones Industrials

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