Dow sank 128, decliners over advancers about 3-2 & NAZ dropped 25. The MLP index added 1+ to the 283s & the REIT index inched higher in the 355s. Junk bond funds drifted lower & Treasuries were purchased today. Oil shot up to the 48s & demand for gold continues strong with growing uncertainties around the globe.
AMJ (Alerian MLP Index tracking fund)
Reps return, with less than a month to avoid a gov shutdown & avert a default on the nation's debt, tasks that are being overshadowed by the quickly mounting costs of the response to Hurricane Harvey. Lawmakers need to pass a measure by Sep 30 to fund the gov, as well as one raising the debt limit before the end of the month. They also need to reauthorize programs like flood insurance & air traffic control & provide money for flood victims in Texas before they can turn to their top objective for the year, a major tax overhaul. And there isn't much time. The House is scheduled to be in session for only 12 legislative days this month & the Senate for 17, giving the majority party little margin for error on measures they will need to negotiate with Dems. There is already widespread bipartisan agreement on the need to fund disaster relief programs for Harvey. The White House has asked for nearly $8B in emergency aid, which the House is expected to vote on this week. Officials also signaled that Pres Trump won't press his demands to fund a wall on the US-Mexico border this month, a measure opposed by Dems. But other controversial executive actions on topics such as immigration could still disrupt bipartisan agreements. How Rep resolve these issues could influence the outcome of next year's congressional elections. If little is accomplished or the gov is forced to shut down, Dems will argue that the GOP can’t get anything done, despite controlling all branches of gov. If Reps can get thru the month without too much drama, they can turn more quickly to their promised tax overhaul. House Speaker Paul Ryan & Senate Majority Leader Mitch McConnell have difficult tasks ahead as they contend with warring factions in their own party & a pres who won't hesitate to criticize them. They'll also have to negotiate with Dems who strongly oppose their biggest priorities.
GOP Faces Pileup of Urgent Tasks Topped by Debt Limit Boost
Federal Reserve Governor Lael Brainard said the central bank needs to pay careful attention to underlying inflation before raising interest rates again, as longer-run price pressure trends appear to be lower. “My own view is that we should be cautious about tightening policy further until we are confident inflation is on track to achieve our target,” Brainard said. If inflation continues to fall short of the central bank's 2% target, “it would be prudent to raise the federal funds rate more gradually.” Inflation has missed the Fed's 2% target for most of the past 5 years & is currently showing inertia at low levels even as the economy continues to grow. She added that underlying inflation may be stuck in a lower trend after the financial crisis. Higher rates of resource use & central bank signaling about tolerance for some overshoot of the inflation target, may be required to push trend prices higher. Brainard also said conditions have been met to begin running off the Fed's balance sheet. “It could take a considerable undershooting of the natural rate of unemployment to achieve our inflation objective if we were to rely on resource utilization alone,” she said. “I believe it is important to be clear that we would be comfortable with inflation moving modestly above our target for a time.” Brainard argued for a wait-and-see approach before raising rates again. “The persistence of the shortfall in inflation from our objective should be one of the considerations in setting monetary policy,” she said. “Most immediately, we should assess inflation developments closely before making a determination on further adjustments to the federal funds rate.” Brainard said the FOMC should allow the balance sheet to run off in the background, an event that is anticipated to start this year. However, she noted that if term premia on longer-run Treasuries rise as a result, that could also imply a lower target for the short-run rate needed to keep supply and demand in balance in the economy. The Fed governor said it’s important to remain “vigilant” for signs of bubbles in a period of low rates & sustained economic growth, “especially in areas such as commercial real estate and corporate bonds, as well as the exceptionally low levels of expected volatility.” She said the economic effects of Hurricane Harvey “raise uncertainties about the economic outlook for the remainder of the year.” “Based on past experience, it appears likely that the hurricane will have a notable effect on GDP in the current quarter, although output is likely to rebound by the end of the year,” she added. The hurricane that slammed into Texas disrupted oil production and refining capacity, boosting gas prices. That increase “should be short lived, but this outcome is uncertain and will depend on the extent of damage to refining capacity,” she said.
Factory orders for Jul slumped after being propelled in the previous month by a flurry of orders for aircraft. Orders fell 3.3% in Jul, after an upwardly revised 3.2% gain in Jun, the Commerce Dept reported. That's the biggest monthly drop in nearly 3 years & was close to the forecast for a 3.4% decline. But orders for non-defense capital goods excluding aircraft jumped 1%.
Economic data means little today. Eyes are watching the goings on with North Korea & dysfunctional DC which has a ton of work that needs to get accomplished in a few weeks. Nobody knows where the Asia tensions will go & those guys in DC can only be counted on to supply hot air. These are scary times for the stock market & demand for safe haven gold keeps rising!!
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 48.58 | +1.29 | +2.77% |
| GC=F | Gold | 1,339.50 | +9.10 | +0.7% |
Reps return, with less than a month to avoid a gov shutdown & avert a default on the nation's debt, tasks that are being overshadowed by the quickly mounting costs of the response to Hurricane Harvey. Lawmakers need to pass a measure by Sep 30 to fund the gov, as well as one raising the debt limit before the end of the month. They also need to reauthorize programs like flood insurance & air traffic control & provide money for flood victims in Texas before they can turn to their top objective for the year, a major tax overhaul. And there isn't much time. The House is scheduled to be in session for only 12 legislative days this month & the Senate for 17, giving the majority party little margin for error on measures they will need to negotiate with Dems. There is already widespread bipartisan agreement on the need to fund disaster relief programs for Harvey. The White House has asked for nearly $8B in emergency aid, which the House is expected to vote on this week. Officials also signaled that Pres Trump won't press his demands to fund a wall on the US-Mexico border this month, a measure opposed by Dems. But other controversial executive actions on topics such as immigration could still disrupt bipartisan agreements. How Rep resolve these issues could influence the outcome of next year's congressional elections. If little is accomplished or the gov is forced to shut down, Dems will argue that the GOP can’t get anything done, despite controlling all branches of gov. If Reps can get thru the month without too much drama, they can turn more quickly to their promised tax overhaul. House Speaker Paul Ryan & Senate Majority Leader Mitch McConnell have difficult tasks ahead as they contend with warring factions in their own party & a pres who won't hesitate to criticize them. They'll also have to negotiate with Dems who strongly oppose their biggest priorities.
GOP Faces Pileup of Urgent Tasks Topped by Debt Limit Boost
Federal Reserve Governor Lael Brainard said the central bank needs to pay careful attention to underlying inflation before raising interest rates again, as longer-run price pressure trends appear to be lower. “My own view is that we should be cautious about tightening policy further until we are confident inflation is on track to achieve our target,” Brainard said. If inflation continues to fall short of the central bank's 2% target, “it would be prudent to raise the federal funds rate more gradually.” Inflation has missed the Fed's 2% target for most of the past 5 years & is currently showing inertia at low levels even as the economy continues to grow. She added that underlying inflation may be stuck in a lower trend after the financial crisis. Higher rates of resource use & central bank signaling about tolerance for some overshoot of the inflation target, may be required to push trend prices higher. Brainard also said conditions have been met to begin running off the Fed's balance sheet. “It could take a considerable undershooting of the natural rate of unemployment to achieve our inflation objective if we were to rely on resource utilization alone,” she said. “I believe it is important to be clear that we would be comfortable with inflation moving modestly above our target for a time.” Brainard argued for a wait-and-see approach before raising rates again. “The persistence of the shortfall in inflation from our objective should be one of the considerations in setting monetary policy,” she said. “Most immediately, we should assess inflation developments closely before making a determination on further adjustments to the federal funds rate.” Brainard said the FOMC should allow the balance sheet to run off in the background, an event that is anticipated to start this year. However, she noted that if term premia on longer-run Treasuries rise as a result, that could also imply a lower target for the short-run rate needed to keep supply and demand in balance in the economy. The Fed governor said it’s important to remain “vigilant” for signs of bubbles in a period of low rates & sustained economic growth, “especially in areas such as commercial real estate and corporate bonds, as well as the exceptionally low levels of expected volatility.” She said the economic effects of Hurricane Harvey “raise uncertainties about the economic outlook for the remainder of the year.” “Based on past experience, it appears likely that the hurricane will have a notable effect on GDP in the current quarter, although output is likely to rebound by the end of the year,” she added. The hurricane that slammed into Texas disrupted oil production and refining capacity, boosting gas prices. That increase “should be short lived, but this outcome is uncertain and will depend on the extent of damage to refining capacity,” she said.
Fed's Brainard Says Caution Warranted on Further Tightening
Factory orders for Jul slumped after being propelled in the previous month by a flurry of orders for aircraft. Orders fell 3.3% in Jul, after an upwardly revised 3.2% gain in Jun, the Commerce Dept reported. That's the biggest monthly drop in nearly 3 years & was close to the forecast for a 3.4% decline. But orders for non-defense capital goods excluding aircraft jumped 1%.
Factory orders for July slump as Boeing boost reverses
Economic data means little today. Eyes are watching the goings on with North Korea & dysfunctional DC which has a ton of work that needs to get accomplished in a few weeks. Nobody knows where the Asia tensions will go & those guys in DC can only be counted on to supply hot air. These are scary times for the stock market & demand for safe haven gold keeps rising!!
Dow Jones Industrials
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