Dow added 56, advancers slightly ahead of decliners & NAZ went up 35. The MLP index jumped up 5+ to the 269s & the REIT index rose in the 356s. Junk bond funds edged higher & Treasuries were flattish. Oil advanced in the 57s (more below) & gold fell 5 to 1139 as investors continue to embrace risk.
AMJ (Alerian MLP Index tracking fund)
A strengthening US economy may spur the Fed to raise interest rates twice in the next 3½ months as a tight labor market pushes risks to the upside, a Bloomberg survey showed. Median results of the survey of 41 economists, conducted Dec 5-7, showed economists still expect 3 rate hikes in 2018 but moved forward one of those projected moves to Mar from Jun. There was near unanimity the central bank will raise the target range for the federal funds rate a qtr percentage point to 1.25% to 1.5% after its 2-day meeting starts tomorrow. Fed Governor Jerome Powell, Pres Trump's nominee to succeed Janet Yellen in Feb, is likely to be confirmed by the Senate & the leadership change is not expected to result in any major shift in Fed policy in 2018. 90% of those surveyed said they believe the path of the fed funds rate will be “about the same” next year compared with their expectations had Yellen been reappointed. Economists do, however, see the economy beginning to pick up in ways that weren't evident in mid-2017. The survey showed the perceived balance of risks to the outlook for inflation & growth shifting noticeably higher, with 63% surveyed now seeing risks tilted to the upside. That means they think it’s more likely that growth & inflation will exceed the Fed's expectations than fall short. In the Sep poll, just 25% saw risks tilted to the upside. That balance was tilted to the upside in the Mar survey, but shifted to “roughly balanced,” and slightly to the downside, after inflation readings fell below expectations for several months beginning in Mar. Economists predicted a few changes in new quarterly projections that Fed officials will submit next week. Most notably they expected the Fed forecast for economic growth in 2018 to reach 2.3%, up from 2.1% in Sep. They didn't expect policy makers, however, to adjust their forecast for inflation at the end of 2018 from 1.9%. When it comes to the biggest threats to the US economy in 2018, 45% chose “an external economic or financial shock.” Another 25% said a steep decline in stocks was the biggest potential threat while 23% chose “a disruption in external trade relations.”
U.S. Growth Pickup to Spur Earlier Fed Hike in ‘18, Survey Shows
Oil prices rose, reversing earlier declines, after a North Sea pipeline shut for repairs & investors focused on commodities following an explosion in NY. Brent crude futures, the intl benchmark for oil prices, rose $1.01 to $64.41 a barrel & West Texas Intermediate (WTI) crude futures were at $57.70 a barrel, 35¢ above their last settlement. The difference between the 2 grades was the largest since late Oct, as Brent rallied after the shutdown of the pipeline that carries the largest grade of North Sea crude oil. The 450K barrels per day pipeline, which carries Forties crude from the North Sea to the Kinneil processing terminal in Scotland, has been operating at reduced capacity for about 4 days before the shutdown. The market had expected the pipeline to return to service quickly & was surprised by the extended shutdown. Earlier in the session, both benchmarks popped higher after an explosion rocked NY's Port Authority Bus Terminal, one of the city's busiest commuter hubs. Additionally, prices faced downward pressure from rising US drilling activity that pointed to a further increase in American production, countering OPEC-led output cuts. Brent & WTI have gained well over a 1/3 from 2017 lows, drawing support from a cut in production by OPEC & a group of non-OPEC producers, including Russia, which has been in place since the start of the year. During the weekend, Kuwait's oil minister suggested that an exit from the supply-cut agreement would be studied before Jun. The United Arab Emirates' energy minister said that OPEC plans to announce in Jun an exit strategy from the cuts, though he added it did not mean the pact would end by then. Gains from the cuts could also be undermined by rising output from the US, which is not participating in the deal to withhold production. The number of rigs drilling for new oil output in the US rose by 2 in latest week, the highest since Sep.
Oil gains on Forties Pipeline shutdown, New York blast
Prime Minister Theresa May said there is a new sense of optimism about negotiations over Britain's departure from the EU, insisting that a preliminary deal has given fresh impetus to the talks. She told the House of Commons that Britain will be able to leave the EU "in a smooth & orderly way." May updated lawmakers on the agreement reached Fri with the EU that covers the main divorce issues. Those include the rights of citizens affected by Brexit, Britain's financial obligations to the EU & how to keep open the border between Northern Ireland, which is part of the UK, & the Republic of Ireland (an EU member). Leaders of the other 27 EU members are expected to ratify the agreement later this week, allowing Brexit talks to move on to trade & security cooperation. May told Parliament the next phase would not be easy but that the atmospherics have improved. "Of course, nothing is agreed until everything is agreed," May said. "But there is, I believe, a new sense of optimism now in the talks and I fully hope and expect that we will confirm the arrangements I have set out today in the European Council later this week." She added that the implementation period she seeks will be discussed in the next phase of the talks & called for discussions to begin immediately. But weekend comments by the official in charge of the talks have threatened to spoil May's triumphant moment. Brexit chief David Davis suggested that last week's agreement was a "statement of intent" that wasn't legally binding. The comments caused unease in Ireland, where leaders demanded provisions in the agreement to ensure Brexit won't restrict travel & trade between the Republic of Ireland the UK's Northern Ireland. Officials in both parts of the island say the border must remain open to protect the Irish peace process. The Irish gov branded Davis' comments "bizarre" & insisted that Britain must live up to the commitments it made last week. Davis tried to mitigate the fallout, insisting his words had been "completely twisted." "What I actually said yesterday ... was we want to protect the peace process, want to protect Ireland from the impact of Brexit for them, and I said this was a statement of intent which was much more than just legally enforceable," Davis said.
Stocks fluctuated, not knowing where to go next. The last meeting for Janet will be held Tues & Wed where the interest rate is expected to be raised again. As pointed out so many times, the goings on in DC are getting most of traders' attention. The outcome of tax reform legislation is unknown as is the case for other important legislation. It's time to say a few extra prayers. While the economy is doing well, the guys in DC have a lot of work to complete so the market rally will be extended.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
A strengthening US economy may spur the Fed to raise interest rates twice in the next 3½ months as a tight labor market pushes risks to the upside, a Bloomberg survey showed. Median results of the survey of 41 economists, conducted Dec 5-7, showed economists still expect 3 rate hikes in 2018 but moved forward one of those projected moves to Mar from Jun. There was near unanimity the central bank will raise the target range for the federal funds rate a qtr percentage point to 1.25% to 1.5% after its 2-day meeting starts tomorrow. Fed Governor Jerome Powell, Pres Trump's nominee to succeed Janet Yellen in Feb, is likely to be confirmed by the Senate & the leadership change is not expected to result in any major shift in Fed policy in 2018. 90% of those surveyed said they believe the path of the fed funds rate will be “about the same” next year compared with their expectations had Yellen been reappointed. Economists do, however, see the economy beginning to pick up in ways that weren't evident in mid-2017. The survey showed the perceived balance of risks to the outlook for inflation & growth shifting noticeably higher, with 63% surveyed now seeing risks tilted to the upside. That means they think it’s more likely that growth & inflation will exceed the Fed's expectations than fall short. In the Sep poll, just 25% saw risks tilted to the upside. That balance was tilted to the upside in the Mar survey, but shifted to “roughly balanced,” and slightly to the downside, after inflation readings fell below expectations for several months beginning in Mar. Economists predicted a few changes in new quarterly projections that Fed officials will submit next week. Most notably they expected the Fed forecast for economic growth in 2018 to reach 2.3%, up from 2.1% in Sep. They didn't expect policy makers, however, to adjust their forecast for inflation at the end of 2018 from 1.9%. When it comes to the biggest threats to the US economy in 2018, 45% chose “an external economic or financial shock.” Another 25% said a steep decline in stocks was the biggest potential threat while 23% chose “a disruption in external trade relations.”
U.S. Growth Pickup to Spur Earlier Fed Hike in ‘18, Survey Shows
Oil prices rose, reversing earlier declines, after a North Sea pipeline shut for repairs & investors focused on commodities following an explosion in NY. Brent crude futures, the intl benchmark for oil prices, rose $1.01 to $64.41 a barrel & West Texas Intermediate (WTI) crude futures were at $57.70 a barrel, 35¢ above their last settlement. The difference between the 2 grades was the largest since late Oct, as Brent rallied after the shutdown of the pipeline that carries the largest grade of North Sea crude oil. The 450K barrels per day pipeline, which carries Forties crude from the North Sea to the Kinneil processing terminal in Scotland, has been operating at reduced capacity for about 4 days before the shutdown. The market had expected the pipeline to return to service quickly & was surprised by the extended shutdown. Earlier in the session, both benchmarks popped higher after an explosion rocked NY's Port Authority Bus Terminal, one of the city's busiest commuter hubs. Additionally, prices faced downward pressure from rising US drilling activity that pointed to a further increase in American production, countering OPEC-led output cuts. Brent & WTI have gained well over a 1/3 from 2017 lows, drawing support from a cut in production by OPEC & a group of non-OPEC producers, including Russia, which has been in place since the start of the year. During the weekend, Kuwait's oil minister suggested that an exit from the supply-cut agreement would be studied before Jun. The United Arab Emirates' energy minister said that OPEC plans to announce in Jun an exit strategy from the cuts, though he added it did not mean the pact would end by then. Gains from the cuts could also be undermined by rising output from the US, which is not participating in the deal to withhold production. The number of rigs drilling for new oil output in the US rose by 2 in latest week, the highest since Sep.
Oil gains on Forties Pipeline shutdown, New York blast
Prime Minister Theresa May said there is a new sense of optimism about negotiations over Britain's departure from the EU, insisting that a preliminary deal has given fresh impetus to the talks. She told the House of Commons that Britain will be able to leave the EU "in a smooth & orderly way." May updated lawmakers on the agreement reached Fri with the EU that covers the main divorce issues. Those include the rights of citizens affected by Brexit, Britain's financial obligations to the EU & how to keep open the border between Northern Ireland, which is part of the UK, & the Republic of Ireland (an EU member). Leaders of the other 27 EU members are expected to ratify the agreement later this week, allowing Brexit talks to move on to trade & security cooperation. May told Parliament the next phase would not be easy but that the atmospherics have improved. "Of course, nothing is agreed until everything is agreed," May said. "But there is, I believe, a new sense of optimism now in the talks and I fully hope and expect that we will confirm the arrangements I have set out today in the European Council later this week." She added that the implementation period she seeks will be discussed in the next phase of the talks & called for discussions to begin immediately. But weekend comments by the official in charge of the talks have threatened to spoil May's triumphant moment. Brexit chief David Davis suggested that last week's agreement was a "statement of intent" that wasn't legally binding. The comments caused unease in Ireland, where leaders demanded provisions in the agreement to ensure Brexit won't restrict travel & trade between the Republic of Ireland the UK's Northern Ireland. Officials in both parts of the island say the border must remain open to protect the Irish peace process. The Irish gov branded Davis' comments "bizarre" & insisted that Britain must live up to the commitments it made last week. Davis tried to mitigate the fallout, insisting his words had been "completely twisted." "What I actually said yesterday ... was we want to protect the peace process, want to protect Ireland from the impact of Brexit for them, and I said this was a statement of intent which was much more than just legally enforceable," Davis said.
UK leader says there's new optimism in Brexit talks
Stocks fluctuated, not knowing where to go next. The last meeting for Janet will be held Tues & Wed where the interest rate is expected to be raised again. As pointed out so many times, the goings on in DC are getting most of traders' attention. The outcome of tax reform legislation is unknown as is the case for other important legislation. It's time to say a few extra prayers. While the economy is doing well, the guys in DC have a lot of work to complete so the market rally will be extended.
Dow Jones Industrials
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