Dow fell 39, but advancers over decliners 4-3, & NAZ dropped 51. The MLP index added 2+ to the 282s & the REIT index recovered 2+ to the 351s. Junk bond funds slid lower & Treasuries were purchased. Oil leaped over 51 (more below) & gold sloshes around 1296.
AMJ (Alerian MLP Index tracking fund)
Stocks slid as investors weighed the impact of the Rep tax proposal that would dramatically cut levies on corps & the wealthy. Politics dominated trading in Europe, with the € sliding after the German election, giving European stocks a boost. The S&P 500 opened lower, while the Stoxx Europe 600 climbed. The € weakened against almost all its major peers after Chancellor Angela Merkel won Germany's election with a smaller share of the vote, while the country's main far-right party, Alternative for Germany, posted a surprisingly strong result. The ¥ stayed weaker as Japan's prime minister unveiled fresh stimulus package & said he'll dissolve the lower house of parliament ahead of a general election. Developing-nation stocks headed for a 3rd day of declines & most gov bonds advanced. The process of building a new gov could take weeks, so markets may well move on from the result quickly. Trouble continues to foment in the Catalonia region of Spain, while central bank grandees including Fed Chair Janet Yellen & ECB Pres Mario Draghi are among those scheduled to speak this week.
Federal Reserve Bank of NY Pres William Dudley said factors restraining price pressures should disappear with time, allowing the central bank to maintain its gradual pace of monetary policy tightening. Dudley said inflation should pick up with “the fading of effects from a number of temporary, idiosyncratic factors,” stabilizing around the Fed's 2% goal over the medium term. “In response, the Federal Reserve will likely continue to remove monetary policy accommodation gradually,” Dudley said. Policy makers voted last week to begin to gradually unwind the Fed's $4.5T balance sheet next month. Central bankers are now focused on whether inflation will firm enough for the Fed to raise interest rates a 3rd time this year, as their forecasts show they expect. Price pressures have remained below target for most of the last 5 years, even as the unemployment rate has fallen & labor-force participation has stabilized, suggesting that job-market slack has been absorbed. While some of his colleagues are questioning whether that shortfall is temporary, Dallas Fed Pres Robert Kaplan said last week that structural factors may be reining in prices, though cyclical tightness could still help the central bank to hit its goal. Dudley's comments suggest that he believes the recent softness will proved short-lived. Business fixed-investment is likely to continue to rise, Dudley also said, as a tighter labor market & weaker $ encourage spending. “The U.S. economy remains on a trajectory of slightly above-trend growth, which is gradually tightening the U.S. labor market,” he added. “Over time, this should support a rise in wage growth. The fundamentals supporting continued expansion are generally quite favorable.”
Fed's Dudley Says He Sees Inflation Restraints Proving Temporary
Oil prices rose to their highest in 8 months after major producers said at a meeting in Vienna the global market was well on its way toward rebalancing. US crude for Nov delivery was up 41¢ at $51.07 a barrel, close to recent 4-month highs. OPEC, Russia & several other producers have cut production by about 1.8M barrels per day (bpd) since the start of 2017, helping lift oil prices by about 15% in the past 3 months. Kuwaiti Oil Minister Essam al-Marzouq said output curbs were helping cut global crude inventories to their 5-year average, OPEC's stated target. Russia's energy minister said no decision on extending output curbs beyond the end of Mar was expected before Jan, although other ministers suggested such a decision could be taken before the end of this year. Iran expects to maintain overall crude & condensate exports at around 2.6M bpd for the rest of 2017, while the UAE's energy minister said its compliance to supply cuts was 100%. Nigeria is pumping below its agreed output cap. OPEC production cuts have been met with rising US shale oil output, which has tempered the rise in US oil prices relative to the increase in Brent futures. The discount of the benchmark WTI crude contract to Brent futures rose to $6.64, the widest in 2 years. This gap has doubled in the last 6 weeks as US crude demand has been undermined by hurricane damage to US refineries. US energy firms cut the number of oil rigs operating for a 3rd week as a 14-month drilling recovery stalled.
Oil hits eight-month high as producers say market rebalancing
This is a choppy kind of day for stocks. Tech giants Apple (AAPL), a Dow stock, & Facebook (FB) are taking popular averages lower while market breadth is positive. With the month & fiscal year end for Congress closing this week, there is a lot to get done. However Congress has returned to being stuck in the mud. Tax reform, a longer term issue, has run into headwinds. But the Dow continues near its record highs.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 51.31 | +0.65 | +1.3% |
| GC=F | Gold | 1,296.40 | -1.10 | -0.1% |
Stocks slid as investors weighed the impact of the Rep tax proposal that would dramatically cut levies on corps & the wealthy. Politics dominated trading in Europe, with the € sliding after the German election, giving European stocks a boost. The S&P 500 opened lower, while the Stoxx Europe 600 climbed. The € weakened against almost all its major peers after Chancellor Angela Merkel won Germany's election with a smaller share of the vote, while the country's main far-right party, Alternative for Germany, posted a surprisingly strong result. The ¥ stayed weaker as Japan's prime minister unveiled fresh stimulus package & said he'll dissolve the lower house of parliament ahead of a general election. Developing-nation stocks headed for a 3rd day of declines & most gov bonds advanced. The process of building a new gov could take weeks, so markets may well move on from the result quickly. Trouble continues to foment in the Catalonia region of Spain, while central bank grandees including Fed Chair Janet Yellen & ECB Pres Mario Draghi are among those scheduled to speak this week.
U.S. Stocks Dip as Investors Digest Trump Tax Plan: Markets Wrap
Federal Reserve Bank of NY Pres William Dudley said factors restraining price pressures should disappear with time, allowing the central bank to maintain its gradual pace of monetary policy tightening. Dudley said inflation should pick up with “the fading of effects from a number of temporary, idiosyncratic factors,” stabilizing around the Fed's 2% goal over the medium term. “In response, the Federal Reserve will likely continue to remove monetary policy accommodation gradually,” Dudley said. Policy makers voted last week to begin to gradually unwind the Fed's $4.5T balance sheet next month. Central bankers are now focused on whether inflation will firm enough for the Fed to raise interest rates a 3rd time this year, as their forecasts show they expect. Price pressures have remained below target for most of the last 5 years, even as the unemployment rate has fallen & labor-force participation has stabilized, suggesting that job-market slack has been absorbed. While some of his colleagues are questioning whether that shortfall is temporary, Dallas Fed Pres Robert Kaplan said last week that structural factors may be reining in prices, though cyclical tightness could still help the central bank to hit its goal. Dudley's comments suggest that he believes the recent softness will proved short-lived. Business fixed-investment is likely to continue to rise, Dudley also said, as a tighter labor market & weaker $ encourage spending. “The U.S. economy remains on a trajectory of slightly above-trend growth, which is gradually tightening the U.S. labor market,” he added. “Over time, this should support a rise in wage growth. The fundamentals supporting continued expansion are generally quite favorable.”
Fed's Dudley Says He Sees Inflation Restraints Proving Temporary
Oil prices rose to their highest in 8 months after major producers said at a meeting in Vienna the global market was well on its way toward rebalancing. US crude for Nov delivery was up 41¢ at $51.07 a barrel, close to recent 4-month highs. OPEC, Russia & several other producers have cut production by about 1.8M barrels per day (bpd) since the start of 2017, helping lift oil prices by about 15% in the past 3 months. Kuwaiti Oil Minister Essam al-Marzouq said output curbs were helping cut global crude inventories to their 5-year average, OPEC's stated target. Russia's energy minister said no decision on extending output curbs beyond the end of Mar was expected before Jan, although other ministers suggested such a decision could be taken before the end of this year. Iran expects to maintain overall crude & condensate exports at around 2.6M bpd for the rest of 2017, while the UAE's energy minister said its compliance to supply cuts was 100%. Nigeria is pumping below its agreed output cap. OPEC production cuts have been met with rising US shale oil output, which has tempered the rise in US oil prices relative to the increase in Brent futures. The discount of the benchmark WTI crude contract to Brent futures rose to $6.64, the widest in 2 years. This gap has doubled in the last 6 weeks as US crude demand has been undermined by hurricane damage to US refineries. US energy firms cut the number of oil rigs operating for a 3rd week as a 14-month drilling recovery stalled.
Oil hits eight-month high as producers say market rebalancing
This is a choppy kind of day for stocks. Tech giants Apple (AAPL), a Dow stock, & Facebook (FB) are taking popular averages lower while market breadth is positive. With the month & fiscal year end for Congress closing this week, there is a lot to get done. However Congress has returned to being stuck in the mud. Tax reform, a longer term issue, has run into headwinds. But the Dow continues near its record highs.
Dow Jones Industrials
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