Tuesday, December 19, 2017

Markets pause after the House passes tax bill

Dow slid back 37, decliners ahead of advancers nearly 2-1 & the NAZ was off 30.  The MLP index lost 2+ to the 272s & the REIT index sank 7+ to the 354s.  Junk bond funds inched higher changed & Treasuries traded lower.  Oil rose in the 57s (more below) & gold remained flattish at 1250.

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House Reps passed a sweeping tax overhaul that delivers a deep, lasting cut for corps & temporary benefits for individuals, putting Pres Trump one step away from his first major legislative victory.  The bill, dubbed the Tax Cuts & Jobs Act, passed 227 to 203.  Only 12 Reps, mostly from high-tax states where some taxpayers stand to see higher bills, voted against the measure.  “Today, we are giving the people of this country their money back,” House Speaker Paul Ryan said just before the votes were cast.  He called the measure “real relief” for Americans who have struggled during what he called “the worst recovery since World War II.”   The legislation, which has scored poorly in public opinion polls so far, will immediately become one of the biggest issues in the 2018 elections that will determine whether the GOP retains its majorities in Congress.  The bill slashes the corp tax rate to 21% from 35%, vaulting the US into competition with other industrialized economies, which have an average corp rate of 22.5%.  It offers an array of temporary tax breaks for individuals & other types of businesses, including rate cuts that will tend to favor the highest earners & an increased standard deduction that benefits lower & middle-class workers.  The changes would reduce federal revenue by almost $1.5T over the coming decade, before accounting for any economic growth that might result, according to Congress's Joint Committee on Taxation.  The bill now heads to the Senate, where careful deal-making by GOP leaders over the past month is expected to assure its passage.  Trump has promised to sign the bill, which would represent the first major legislative accomplishment that the GOP has gained since taking control of both the legislative & exec branches in Jan.

House Passes Sweeping Tax Cuts, Moving Trump Closer to Major Win

Crude bumped higher as traders awaited a US gov report that's expected to show a 5th straight week of shrinking American inventories.  Futures rose almost 1%. Oil stored in US tanks & terminals last week probably dropped to the lowest level in more than 2 years, according to a survey.  If the decline is confirmed in an Energy Dept tally scheduled to be released tomorrow, it will aggravate tightening supply conditions stemming from the shutdown of a key North Sea crude pipeline.  Oil has held above $55 a barrel in NY since mid-Nov as OPEC & allied suppliers such as Russia curbed output to erode a glut.  West Texas Intermediate futures, which as recently as Jun were down more than 20% for the year, now are on track to finish 2017 with a gain of almost 7%.  West Texas Intermediate for Jan delivery, which expires at the close of this session, added 25¢ to $57.41 a barrel.  Brent for Feb settlement advanced 18¢ to $63.59 a barrel & the global benchmark traded at a premium of $6.11 to Feb WTI.  Repairs are progressing on the Ineos Group-operated Forties Pipeline System that connects North Sea oil fields to the UK mainland.  Custom equipment has been fabricated & will be delivered parts within days to repair the hairline crack that forced a shutdown last week.  The Forties system is among the planet's most important pipelines because the crude it delivers is used to set prices for much of the world's crude.  US crude stockpiles at the key pipeline hub in Cushing, Oklahoma, probably fell by 2.2M barrels last week, according to a forecast.  That would be the 6th weekly drop, the longest run since Jul, according to data from the US Energy Information Administration.

US current account trade deficit in Q3 declined to $100.6B, the smallest in 3 years.

US current account trade deficit in third quarter declined to $100.6 billion, smallest in 3 years

A closely watched survey shows German business confidence is down in Dec, from a record high a month earlier.  The Ifo Institute said its business climate indicator fell to 117.2 from 117.6 in Nov.  The ebb in optimism was due to waning euphoria, with company managers sensing that the strong growth seen in recent months can't continue forever, said the Ifo Institute.  Companies assessed their own current situation as better, at 125.4 in Dec compared with 124.5 the previous month.  Expectations for the next 6 months fell to 109.5 from 111 in Nov.  Analysts said many German companies will also be closely watching the passage of Trump's tax reform plans, which could affect foreign imports.

German business confidence falls in December

Stocks were lower as investors wait for Congress to vote on a tax bill that would lower corp tax rates.  Losses for technology companies are pulling stock indices away from all-time highs & energy companies were slightly higher as oil prices rose.  The Russell 2000 index of smaller-company stocks fell 6 (0.4%) to 1542.  All 4 major indices jumped to record highs yesterday.  While stocks weren’t doing much, bond prices fell.  The yield on the 10-year Treasury note rose to 2.47%, its highest in almost 2 months, from 2.39 yesterday.

Stocks dip as technology companies retreat from record highs

Stocks were resting, they're entitled.  The market has had an eye-popping run all year & it looks like the Senate is on the brink of passing the bill for tax reform, finally.  Economic statistics are strong & even oil has rebounded significantly from its lows.  The bulls have the Dow 25K in sight & it needs only another 250 to reach it.

Dow Jones Industrials

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