Dow index dropped 138, decliners over advancers better than 3-2 & NAZ retreated 31. The MLP index added 1+ to the 259s & the REIT fell 3+ to the 359s. Junk bond funds continued lower & Treasuries found buyers today. Oil slid lower in the 55s (more below) & gold fell 4 to 1278.
AMJ (Alerian MLP Index tracking fund)
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With the unemployment rate at the lowest level in 17 years, interest rates still well below the norm & the economy growing by more than 3% the last 2 qtrs, one could argue the US is showing the first signs of getting a bit overheated. But that’s way too soon to have that discussion, according to pres of the Chicago Federal Reserve Charles Evans. The central banker rebuffed a question about whether the fact that the Fed “running the economy hot” is bullish or bearish for investors. “The economy is doing quite well, but I would not express that as running hot,” he said. “The natural rate of unemployment is 4.5%. But there’s a substantial uncertainty around that. It could be higher than that or lower than that. I don’t see this labor market as running the economy hot.” “But 3% unemployment? Okay, that would be hot but we are a bit of a distance [away from that],” he added. Evans never got into whether it would be bullish or bearish for investors in any case. The joblessness rate fell to 4.1% in Oct, the lowest since 2000. Fed members have previously discussed the benefits of firing on all cylinders & let the unemployment rate decline to spur faster growth to boost consumer & business spending. Evans argued that the Fed should alter its communications with the markets to convince investors the central bank is willing to let inflation run hotter than the 2% target. “I’m concerned something more persistent is holding down inflation today. Namely, I feel we are facing below-target inflation expectations,” he said. “Our communications should be much clearer about our willingness to deliver on a symmetric inflation outcome, acknowledging a greater chance of inflation at 2.5% in the future than what has been communicated in the past.”
Business inventories in the US were basically flat in Sep following a slightly revised 0.6% increase in Aug, the Commerce Dept said. Sales rose 0.2% in the month. The ratio of inventories to sales, meanwhile, fell to 1.36 in Sep from 1.38. That's how many months it would take to sell all the inventory on hand. One year ago, the inventory-to-sales ratio was higher at 1.40.
Oil prices fell after the US gov reported an unexpected increase in crude & gasoline stocks, but an increase in refining runs & a dropoff in distillate stocks helped prices bounce off session lows. Prices remained under pressure from this week's International Energy Agency (IEA) outlook for slower growth in global crude demand. While the crude build of 1.9M barrels reported by the Energy Information Administration was more than forecast, it was not as big as the increase of 6.5M barrels reported yesterday by industry group the American Petroleum Institute. The EIA data encouraged buying at session lows. The data also showed distillate stocks in the US. Gulf fell to a one-year low, while refining rates rose in the latest week, led by a jump in East Coast refining, which is operating at a record 99.8% of capacity. Increased refining rates could eventually reduce crude inventories. West Texas Intermediate (WTI) crude finished the session down 37¢ at $55.33 per barrel, following a nearly 2% decline in the previous session. Brent crude futures were down 38¢ at $61.83 per barrel, having fallen 1.5% on yesterday, its largest one-day drop in a month. Brent's price is down nearly 5% since last week when it hit its highest since mid-2015. Yesterday, the IEA cut its oil demand growth forecast by 100K barrels per day (bpd) for both 2017 & 2018. That could mean world oil consumption may not breach 100M bpd next year as many had expected. Also, supplies are likely to exceed that level, particularly as US production continues to rise. The IEA report countered a regular market update from OPEC, which just a day earlier said 2018 would see a strong rise in oil demand. US oil production has jumped more than 14% since mid-2016 to 9.65Mn bpd and is expected to grow further. The IEA said non-OPEC production would rise 1.4M bpd in 2018, undermining efforts by OPEC & other producers to limit global crude supplies to support prices.
Oil slumps 37 cents, settling at $55.33, as sell-off continues after rise in US crude stockpiles
The long term bull run for stocks is taking a rest. Some would say it's well needed. Just look at the chart below. So far, this decline is not disturbing to the bulls. Tax reform has been the top driver for this market. Now all the wrangling in DC, which may be routine (whatever that means) is center stage. Delays are getting more attention. At the end of days, there may be no tax bill, or, perhaps, a very watered down bill that makes nobody happy. Traders do not like uncertainty but they have grown accustomed to living with it. The pullback in the last week suggests their patience is will not last. The Dow was in the red all day, finishing near the lows.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
With the unemployment rate at the lowest level in 17 years, interest rates still well below the norm & the economy growing by more than 3% the last 2 qtrs, one could argue the US is showing the first signs of getting a bit overheated. But that’s way too soon to have that discussion, according to pres of the Chicago Federal Reserve Charles Evans. The central banker rebuffed a question about whether the fact that the Fed “running the economy hot” is bullish or bearish for investors. “The economy is doing quite well, but I would not express that as running hot,” he said. “The natural rate of unemployment is 4.5%. But there’s a substantial uncertainty around that. It could be higher than that or lower than that. I don’t see this labor market as running the economy hot.” “But 3% unemployment? Okay, that would be hot but we are a bit of a distance [away from that],” he added. Evans never got into whether it would be bullish or bearish for investors in any case. The joblessness rate fell to 4.1% in Oct, the lowest since 2000. Fed members have previously discussed the benefits of firing on all cylinders & let the unemployment rate decline to spur faster growth to boost consumer & business spending. Evans argued that the Fed should alter its communications with the markets to convince investors the central bank is willing to let inflation run hotter than the 2% target. “I’m concerned something more persistent is holding down inflation today. Namely, I feel we are facing below-target inflation expectations,” he said. “Our communications should be much clearer about our willingness to deliver on a symmetric inflation outcome, acknowledging a greater chance of inflation at 2.5% in the future than what has been communicated in the past.”
Fed’s Evans: U.S. economy is not ‘running hot’
Business inventories in the US were basically flat in Sep following a slightly revised 0.6% increase in Aug, the Commerce Dept said. Sales rose 0.2% in the month. The ratio of inventories to sales, meanwhile, fell to 1.36 in Sep from 1.38. That's how many months it would take to sell all the inventory on hand. One year ago, the inventory-to-sales ratio was higher at 1.40.
U.S. business inventories flat in September as sales rise
Oil prices fell after the US gov reported an unexpected increase in crude & gasoline stocks, but an increase in refining runs & a dropoff in distillate stocks helped prices bounce off session lows. Prices remained under pressure from this week's International Energy Agency (IEA) outlook for slower growth in global crude demand. While the crude build of 1.9M barrels reported by the Energy Information Administration was more than forecast, it was not as big as the increase of 6.5M barrels reported yesterday by industry group the American Petroleum Institute. The EIA data encouraged buying at session lows. The data also showed distillate stocks in the US. Gulf fell to a one-year low, while refining rates rose in the latest week, led by a jump in East Coast refining, which is operating at a record 99.8% of capacity. Increased refining rates could eventually reduce crude inventories. West Texas Intermediate (WTI) crude finished the session down 37¢ at $55.33 per barrel, following a nearly 2% decline in the previous session. Brent crude futures were down 38¢ at $61.83 per barrel, having fallen 1.5% on yesterday, its largest one-day drop in a month. Brent's price is down nearly 5% since last week when it hit its highest since mid-2015. Yesterday, the IEA cut its oil demand growth forecast by 100K barrels per day (bpd) for both 2017 & 2018. That could mean world oil consumption may not breach 100M bpd next year as many had expected. Also, supplies are likely to exceed that level, particularly as US production continues to rise. The IEA report countered a regular market update from OPEC, which just a day earlier said 2018 would see a strong rise in oil demand. US oil production has jumped more than 14% since mid-2016 to 9.65Mn bpd and is expected to grow further. The IEA said non-OPEC production would rise 1.4M bpd in 2018, undermining efforts by OPEC & other producers to limit global crude supplies to support prices.
Oil slumps 37 cents, settling at $55.33, as sell-off continues after rise in US crude stockpiles
The long term bull run for stocks is taking a rest. Some would say it's well needed. Just look at the chart below. So far, this decline is not disturbing to the bulls. Tax reform has been the top driver for this market. Now all the wrangling in DC, which may be routine (whatever that means) is center stage. Delays are getting more attention. At the end of days, there may be no tax bill, or, perhaps, a very watered down bill that makes nobody happy. Traders do not like uncertainty but they have grown accustomed to living with it. The pullback in the last week suggests their patience is will not last. The Dow was in the red all day, finishing near the lows.
Dow Jones Industrials
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