Thursday, November 30, 2017

Markets soar after McCain indicates he will vote for tax plan

Dow surged 331, advancers over decliners 3-2 & NAZ went up 49.  The MLP index shot up over 10 to the 262s on optimism over oil & the REIT index was flat in the 358s.  Junk bond funds drifted lower & Treasuries retreated.  Oil was off pennies in the 57s after OPEC agreed to extend production cuts (more below) & gold dropped 8 to 1274 while stocks rallied

AMJ (Alerian MLP Index tracking fund)

Live 24 hours gold chart [Kitco Inc.]

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Stocks gained after John McCain backed the Senate tax bill & the biggest technology stocks rebounded from their worst selloff in more than a year.  The Dow extended its climb past 24K after the statement of support from the Arizona Rep as the measure headed for a marathon debate, while the S&P 500 was set for its longest monthly winning streak since 2007.  Treasuries extended their slide, with the 10-year yield breaking above 2.4%.  The € & £ strengthened as Brexit negotiators moved closer to a divorce agreement.  An up-or-down vote on the Senate tax bill could happen before the end of this week.  While McCain's support helped bring the measure one step closer to passing, Rep Senator Susan Collins said it “would be very difficult” for her to support the proposal in its current form.  The party can only afford to lose 2 of its 52 members to pass the bill without Dems.  Senators Bob Corker, Jeff Flake, James Lankford & Ron Johnson are all seen as potential “no” votes.  Data showed US consumer spending settled back in Oct to a still-decent pace after the biggest increase since 2009, as a post-storm surge in auto sales cooled.  Incomes remained robust & inflation showed progress toward the Federal Reserve's goal.  Treasuries sank, driving the benchmark 10-year yield to the highest in a month.  

Dow Surges More Than 300 Points

OPEC & allies outside the group agreed to maintain oil production cuts until the end of 2018, extending their campaign to wrest back control of the global market from America's shale industry.  After a day of talks in Vienna, the decision showed the strength of the unprecedented alliance between the world's top 2 oil producers, Saudi Arabia & Russia, & confounded analysts who predicted Moscow would be reluctant to keep going.  The deal was even beefed up through the inclusion of Nigeria & Libya, 2 members of OPEC originally exempted from the curbs.  “We are united, shoulder to shoulder,” Saudi Arabian Energy Minister Khalid Al-Falih said sitting next to his Russian counterpart Alexander Novak after the meeting.  “We are completely aligned.”  Since the pact started a year ago, global inventories have fallen & prices risen by more than $20 a barrel, but in rare display of unanimity at an OPEC meeting ministers agreed the job wasn't yet complete.  By keeping the 1.8M barrels a day of cuts in place for a further 9 months, the oil producers aim to return stockpiles to their 5-year average without overheating the market & eliciting a new flood of shale oil.   Benchmark Brent crude rose 0.7% to $63.57 a barrel.

OPEC Agrees to Extend Oil Cuts Until the End of 2018

A Rep tax reform plan passed in the House & now the Senate is debating their version of GOP tax reform.  Some Senators such as Sen. Ron Johnson have raised concerns that the tax reform plan benefits big corps too much & doesn't do enough for small businesses in America.  Small Business Association (SBA) administrator Linda McMahon weighed in on the tax reform debate, saying, “I’ve talked to more than 450 businesses and without fail every one of those businesses have said, “look, let me have tax cuts, those tax cuts will be plowed right back into my business, they’re not talking about percentages, they’re not talking about where things are going, what they want are those tax cuts.”  John Arensmeyer, founder of the organization Small Business Majority said that he would vote against the tax plan reform in its current form.  “This isn’t about partisan politics, it’s about doing what is best for small businesses and right now the way the law is written is that the vast majority of the benefits are going to go to hedge funds, real estate investment trusts (REITs), and others at the very top end of the income spectrum while very little is going to go to Main Street small businesses,” he said.  But McMahon cautioned that the tax plan is still being developed.  “I don’t know that that will be accurate Stuart because we don’t really know what the bill is going to be yet, I think it’s going through the right process, the amendments are being put forth, we’re voting, we’re actually debating this and this is the way the process is supposed to work.”

Tax cuts will be ‘plowed right back into’ small business: SBA’s Linda McMahon

Stocks are flying higher than ever with the scent of tax reform in the air!!  However the main problem is the possibility of rejection by the senate.  The bulls are assuming that will be worked out in DC.  A lot of drama lies ahead in the new month starting tomorrow.  This market keeps surging with the Dow up nearly a staggering 6K since the election.  Optimists have 25K for the Dow in sight, only 700 away (with their fingers crossed).  Hang on for a bumpy ride!

Dow Jones Industrials


Higher markets ahead of Senate tax vote

Dow jumped up 140 (yet another record), advancers over decliners 2-1 & NAZ recovered 36 after yesterday's selloff.  The MLP index rebounded 3+ to the 255s & the REIT index was even in the 358s.  Junk bond funds were mixed & Treasuries slid lower.  Oil fluctuated in the 57s & gold was off 3 to 1283.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil57.44

GC=FGold   1,282.90

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Stocks gained, led by energy producers, as OPEC & Russia said they are ready to extend cuts to crude output.  The Dow climbed past 24K, while the S&P 500 was poised for its longest monthly winning streak since 2007 as the Senate tax bill headed for a marathon debate.  The biggest tech stocks rebounded from their worst selloff in more than a year.  The € strengthened along with the £ as Brexit negotiators moved closer to a divorce agreement.  Treasury yields slipped, capping the least turbulent month for 10-year notes in almost 43 decades.  Progress over tax reform this week had prompted traders to rotate out of tech stocks, the year's best performers, & switch to firms seen benefiting most from a potential reduction in the cor tax rate such as banks.  Technology companies are expected to see little boost, as the industry's average effective tax rate of 18.5% is already lower than the new level of 20% proposed by Reps.  An up-or-down vote in the Senate could happen before the end of this week.  In a sign of the cloudy outlook for the bill, Rep Senator Susan Collins said it “would be very difficult” to support the measure in its current form.  Data showed US consumer spending settled back in Oct to a still-decent pace after the biggest increase since 2009, as a post-storm surge in auto sales cooled.  Incomes remained robust & inflation showed progress toward the Fed's goal.  The Stoxx Europe 600 was little changed.  Earlier, Hong Kong &South Korean-listed shares tumbled, while Japanese stocks gained.  South Korea's won slid after its central bank said it would eep an accommodative policy stance after raising interest rates for the first time since 2011.

U.S. Stocks Rise as Crude Climbs on OPEC Outlook: Markets Wrap

US consumer spending settled back in Oct to a still-decent pace after the biggest increase since 2009, as a post-storm surge in auto sales cooled.  Incomes remained robust & inflation showed progress toward the Fed's goal.  Purchases rose 0.3%, matching the projection, after a revised 0.9% advance in Sep, Commerce Dept figures showed.  Incomes grew 0.4% for a 2nd month, marking the best back-to-back gains since early 2017.  The figures, including the biggest rise in inflation-adjusted disposable income in 5 months, indicate American consumers are likely to drive growth this qtr as a pickup in business investment also helps lift demand.  Inflation data in the report may add further support for a Fed interest-rate increase in Dec that's already widely anticipated by investors.  The central bank's preferred price gauge, excluding food & energy, rose 0.2% in Oct from the prior month.  The Sep monthly gain was revised upward to 0.2% from 0.1%, making for the fastest consecutive increases since January & Feb.  While the latest figures indicate progress toward the Fed's 2% goal, inflation remains below target on an annual basis, as it has for most of the past 5 years.  Including all items, prices rose 1.6% from a year earlier following an upwardly revised 1.7% & the core measure was up 1.4% for a 2nd month.  Central bankers have said persistently low inflation is somewhat of a mystery & taken note of sluggish wage gains amid a tightening labor market.  Even so, Fed Chair Janet Yellen reiterated Wed that she expects inflation will gradually rebound to the Fed's target as transitory factors dissipate.

U.S. Consumer Spending Cools; Inflation May Encourage Fed

Fewer people sought unemployment benefits last week, a sign of strength in the job market.  Weekly applications for unemployment aid slipped 2K to a seasonally adjusted 238K, the Labor Dept said.  That's near a 4-decade low that was reached last month.  The 4-week average, a less volatile measure, increased 2K to 242K.  The number receiving aid increased 42K to 1.96M, also near a 4-decade low. The data comes after other evidence that the economic recovery from the recession remains strong in its 8th year.  The unemployment rate has fallen to a 17-year low of 4.1% & growth reached 3.3% at an annual rate in Q3, the fastest in 3years.  Hiring has been steady, despite interruptions from Hurricanes Harvey & Irma.  Employers added 261K jobs in Oct, a healthy gain after hiring fell in Sep because of the storms.  Applications are a proxy for layoffs.  Any figure below 300K indicates that hiring is likely healthy & employers are confident enough in future demand to keep their workers.  With unemployment so low, many companies say they are struggling to find qualified workers to fill jobs.  With so few workers available, companies are even less likely to lay off employees.

Applications for US jobless aid tick down to 238,000

The drama increases.  Stocks are rising as traders await to hear more about the fate of the tax bill.  Reps are sort of coming together with the realization that that need to get a bill passed.  And time is short given the announced deadlines.  Even with higher levels of drama, investors are optimistic & bidding stocks up.  The bulls now have their eyes on going up to 25K.

Dow Jones Industrials