Thursday, July 20, 2017

Markets drift lower on sluggish earnings reports

Dow fell 47, advancers  barely ahead of decliners & NAZ lost 10.  The MLP index was fractionally higher in the 303s & the REIT index was off pennies in the 353s.  Junk bond funds went up & Treasuries were higher.  Oil is back in the 47s & gold gave back 3 to 1238.

AMJ (Alerian MLP Index tracking fund)

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Mario Draghi said policy makers are still waiting for inflation to catch up with the economy's recovery, as they put off any discussion on winding back stimulus until after the summer.  “We are finally experiencing a robust recovery where we only have to wait for wages and prices to follow course,” the ECB pres said.  “We need to be persistent and patient and prudent, because we’re not there yet.”  Draghi read out an assessment of the economic outlook that was very similar to the one he offered in Jun, when he called for colleagues to allow the central bank's stimulus time to work.  With less than ½ a year left of quantitative easing under the current program, policy makers have been debating publicly as to when they might start winding down asset purchases.  “While the ongoing economic expansion provides confidence that inflation will gradually glide toward levels in line with the inflation aim, it has yet to translate into stronger inflation dynamics,” Draghi added.  “A very substantial degree of monetary accommodation is still needed for underlying inflation pressures to gradually build up.”  His comments follow what seemed to be a shift in stance 3 weeks ago, when he said that renewed reflationary forces may provide room for “adjusting the parameters” of current stimulus, while keeping the level of accommodation broadly unchanged.
Draghi Says Officials ‘Aren't There Yet’ After ECB Keeps Stimulus

The number of Americans filing for unemployment benefits fell more than expected last week, touching its lowest level in nearly 5 months, suggesting another month of strong job growth.  Initial claims for state unemployment benefits dropped 15K to a seasonally adjusted 233K for the latest week, the Labor Dept said.  That was the lowest level since Feb, when claims fell to 227K, which was the best reading since 1973.  The forecast called for 245K.  It was the 124th straight week that claims remained below 300K, a threshold associated with a robust labor market, the longest such stretch since 1970, when the labor market was smaller.  The labor market is near full employment, with the jobless rate at 4.4%.  The 4-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 2K to 243K.  Last week's claims data covered the survey period for Jul's nonfarm payrolls.  The 4-week average of claims fell 1K between the Jun & Jul survey periods, suggesting strong job gains in Jul.  The economy created 222K jobs last month, the 2nd biggest payrolls increase this year.  It is believed that labor market strength likely keeps the Federal Reserve on track to raise interest rates for a 3rd time this year & announce a plan to start reducing its $4.2T portfolio, despite a recent ebb in inflation pressures.  The number still receiving benefits after an initial week of aid rose 28K to 1.98M.  Continuing claims have now been below 2M for 14 straight weeks, pointing to shrinking labor market slack.
The House Budget Committee yesterday approved a 2018 budget resolution that would allow the Senate to advance tax reform without the support of Dems.  Director of the Office of Management & Budget Mick Mulvaney said while it will be the subject of tremendous debate, it’s a good sign that Reps are unified behind the budget.  “The fact that every single Republican on that Budget Committee voted for the budget last night… I think that’s a tremendous success… Very impressed they were able to get 100% support… I think that’s a good sign as we move forward not only to get a budget but to lay the foundation through the budget for tax reform,” Mulvaney said.   The budget will now move to the House floor, where Mulvaney expects it to pass.   “If the House and Senate pass a budget… they pass the same budget then we can pass tax reform in the Senate with only 50 votes,” he said & added if they don't agree, then 60 votes would be needed to pass tax reform.  “A tax reform bill with 50 Republican votes would look different than a tax reform bill that has 52 Republican votes and 8 Democrat votes,” he said.

Full GOP support of budget opens door for tax reform: OMB Director Mick Mulvaney

Traders could not find reasons to take the markets higher today.  The earnings situation is always fluid.  Meanwhile DC remains in flux, made worse by Sen McCain's illness that will slow the major workload those guys have to deal with

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