Dow jumped 347 (closing at the highs), advancers over decliners almost 4-1 & NAZ 127. The MLP index rose 1+ to the 265s. Junk bond funds were mixed & Treasuries found buyers, taking the yield on the 10 year Treasury down to 2.87%. Oil went up to the 63s (more below) & gold was off 1 to 1331.
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](http://www.kitco.com/images/live/gold.gif?0.8959760467469725)
The US labor market is near or beyond full employment, while some pockets of finance are showing signs of rising leverage & high valuations, according to a Federal Reserve report. “The labor market in early 2018 appears to be near or a little beyond full employment,” the Fed said in the Feb 2018 Monetary Policy Report. “The unemployment rate is now somewhat below most estimates of its natural rate.” The report, released days before Chairman Jerome Powell delivers his first semi-annual testimony before House & Senate committees, reprised recent economic data & the Fed's policy actions. Powell will preside over his first meeting of the FOMC on Mar 20-21. The report noted that the labor force participation rate, a measure of what % of the working age population either has a job or is looking for one, has been mostly unchanged over the past 4 years, “representing an important cyclical improvement relative to its declining trend.” “The current level” of the participation rate “is relatively close to many estimates of its trend,” the report said. While the participation rate for prime-age men remains below its pre- recession levels, that “seems to reflect the continuation of a decades-long secular decline rather than a cyclical shortfall.” The Fed said that despite reports employers are having difficulty finding qualified workers, “hiring has continued apace,” and wage gains have been moderate. “Serious labor shortages would probably bring about larger increases” in wages “than have been observed thus far.” Overall financial vulnerabilities “remain moderate on balance,” according to the report. “Valuation pressures continue to be elevated across a range of asset classes.” There are signs that “nonbank financial leverage has been increasing in some areas,” such as credit to stock investors such as hedge funds. Other hot spots included “increasing valuation pressures” in commercial real estate. Risks associated with maturity transformation “continue to be low,” the report said. The report noted that the asset-backed securities markets saw new types of asset pools, such as mobile phone leases & aircraft leases. Financial-market volatility has surged since policy makers met in Jan & financial conditions have tightened. Yields on 10-year gov bonds are around 4-year highs at 2.88%, while the S&P 500 is up almost 2% for the year after slipping from last month's record high. The discussion on inflation noted that the rate of price changes was low across advanced economies. The the rate of unemployment that exerts neither upward nor downward pressure on inflation could be lower than economists estimate. Inflation expectations could also be lower than indicators suggest.
The Dept of the Treasury's Office of Foreign Assets Control (OFAC) issued its largest sanctions package against North Korea, aimed at stemming illicit maritime activities the country has been using to engage in trade of coal & other products. “North Korea, we imposed today the heaviest sanctions ever imposed on a country before,” Pres Trump said. “And frankly, hopefully something positive can happen, we will see.” While the UN Security Council has issued resolutions against North Korea's fuel trade, Pyongyang has found ways to circumvent the sanctions in place by engaging in “UN-prohibited ship-to-ship transfers of refined petroleum products.” Some of the vessels are able to carry more than $5.5M worth of coal at a time & the regime can use coal revenues to fund its nuclear program. “We’re trying to make sure that the significant reduction in fuel mandated by the U.N. sanctions are unable to be circumvented,” senior administration officials said. “We are going after illicit activity wherever we see it, we’re going after sanction evasion wherever we see it.” The US issued a warning to companies that are engaging in these illicit activities with, or on behalf of, North Korea, that they will be subject to not only designations, but sanctions in certain circumstances. The sanctions specifically target one individual, 27 entities, and include 9 shipping companies & 28 vessels that were identified in nine locations, including North Korea, China, Taiwan, Hong Kong & Singapore. North Korea gets away with its deceptive shipping practices by concealing or falsifying information displayed on vessels & conducting ship-to-ship transfers, prohibited by the UN. The sanctions announcement is a continuation of the Trump administration's “campaign of maximum pressure” against the North Korean regime. Senior administration officials noted that the pres is frustrated with “upticks” he has seen in North Korea's nuclear program & is prepared to do whatever he can to target the various ways the regime is able to generate money.
US announces largest-ever sanctions tranche against North Korea
Pres Trump hosted Australian Prime Minister Malcolm Turnbull at the White House today, as the administration looks down under for ideas on how to kick start the $1.5T infrastructure plan. Joe Hockey, the Australian Ambassador to the US, who is known for delivering one of the largest federal infrastructure packages in the history of his home country by using private -public partnerships, is sharing ideas with the White House. “The private sector is awash with money, awash with money, the government isn’t as we are seeing playing down in Washington now, utilize that private sector money and deliver infrastructure which grows the economy” said Hockey. Hockey previously met with DJ Gribbin, Trump's senior adviser on infrastructure policy & formerly the head of gov relations at Macquarie Capital, to brainstorm ideas,. “The President’s team spoke with [Hockey] early on in the process of formulating the president’s infrastructure plan, mostly focused on the permitting side,” a senior White House official said. Since the meeting with Gribbin, Hockey has been in touch with members of the House Transportation Committee to discuss the benefits of private-public partnerships if they were implemented across the US, according to congressional aides. The committee, one of the key groups on Capitol Hill putting together a bipartisan infrastructure reform bill, is keeping these types of partnerships on the table, as well a potential gas tax, as a way to pay for the final infrastructure product.
What had started out as a stormy shortened week for stocks, finished very strong. Buying in the last hour & into the close raised the Dow to a gain of about 100 for the week. The Dow has returned to where it was on Jun 5 (on the way down). Additionally, the Dow is up 2% YTD. Not too bad. The march to higher Treasury yields was muted this week, making stocks look more attractive. Higher interest rates are on the way & traders have a tough time adjusting to them. The stock market rally is still in a pause phase.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
The US labor market is near or beyond full employment, while some pockets of finance are showing signs of rising leverage & high valuations, according to a Federal Reserve report. “The labor market in early 2018 appears to be near or a little beyond full employment,” the Fed said in the Feb 2018 Monetary Policy Report. “The unemployment rate is now somewhat below most estimates of its natural rate.” The report, released days before Chairman Jerome Powell delivers his first semi-annual testimony before House & Senate committees, reprised recent economic data & the Fed's policy actions. Powell will preside over his first meeting of the FOMC on Mar 20-21. The report noted that the labor force participation rate, a measure of what % of the working age population either has a job or is looking for one, has been mostly unchanged over the past 4 years, “representing an important cyclical improvement relative to its declining trend.” “The current level” of the participation rate “is relatively close to many estimates of its trend,” the report said. While the participation rate for prime-age men remains below its pre- recession levels, that “seems to reflect the continuation of a decades-long secular decline rather than a cyclical shortfall.” The Fed said that despite reports employers are having difficulty finding qualified workers, “hiring has continued apace,” and wage gains have been moderate. “Serious labor shortages would probably bring about larger increases” in wages “than have been observed thus far.” Overall financial vulnerabilities “remain moderate on balance,” according to the report. “Valuation pressures continue to be elevated across a range of asset classes.” There are signs that “nonbank financial leverage has been increasing in some areas,” such as credit to stock investors such as hedge funds. Other hot spots included “increasing valuation pressures” in commercial real estate. Risks associated with maturity transformation “continue to be low,” the report said. The report noted that the asset-backed securities markets saw new types of asset pools, such as mobile phone leases & aircraft leases. Financial-market volatility has surged since policy makers met in Jan & financial conditions have tightened. Yields on 10-year gov bonds are around 4-year highs at 2.88%, while the S&P 500 is up almost 2% for the year after slipping from last month's record high. The discussion on inflation noted that the rate of price changes was low across advanced economies. The the rate of unemployment that exerts neither upward nor downward pressure on inflation could be lower than economists estimate. Inflation expectations could also be lower than indicators suggest.
The Dept of the Treasury's Office of Foreign Assets Control (OFAC) issued its largest sanctions package against North Korea, aimed at stemming illicit maritime activities the country has been using to engage in trade of coal & other products. “North Korea, we imposed today the heaviest sanctions ever imposed on a country before,” Pres Trump said. “And frankly, hopefully something positive can happen, we will see.” While the UN Security Council has issued resolutions against North Korea's fuel trade, Pyongyang has found ways to circumvent the sanctions in place by engaging in “UN-prohibited ship-to-ship transfers of refined petroleum products.” Some of the vessels are able to carry more than $5.5M worth of coal at a time & the regime can use coal revenues to fund its nuclear program. “We’re trying to make sure that the significant reduction in fuel mandated by the U.N. sanctions are unable to be circumvented,” senior administration officials said. “We are going after illicit activity wherever we see it, we’re going after sanction evasion wherever we see it.” The US issued a warning to companies that are engaging in these illicit activities with, or on behalf of, North Korea, that they will be subject to not only designations, but sanctions in certain circumstances. The sanctions specifically target one individual, 27 entities, and include 9 shipping companies & 28 vessels that were identified in nine locations, including North Korea, China, Taiwan, Hong Kong & Singapore. North Korea gets away with its deceptive shipping practices by concealing or falsifying information displayed on vessels & conducting ship-to-ship transfers, prohibited by the UN. The sanctions announcement is a continuation of the Trump administration's “campaign of maximum pressure” against the North Korean regime. Senior administration officials noted that the pres is frustrated with “upticks” he has seen in North Korea's nuclear program & is prepared to do whatever he can to target the various ways the regime is able to generate money.
US announces largest-ever sanctions tranche against North Korea
Oil slipped to $66 a barrel, under
pressure from concerns that rising US oil output & exports will
offset OPEC-led attempts to erode stockpiles with output curbs. Oil production last week was 10.27M barrels per day, a record
level if confirmed by monthly figures. Crude exports jumped to more than
2M bpd, close to a record high of 2.1M hit in Oct. Brent crude, the global benchmark, was down 34¢ at $66.05. Prices had rallied in early 2018 &
reached $71.28 on Jan 25, the highest since Dec 2014. US crude fell 27¢ to $62.50. Oil
also slipped as the $ strengthened. A stronger $ can
make oil & other commodities denominated in the US currency more
expensive for other currency holders. The
latest decline for crude came despite the Energy Information
Administration reporting on Wed that crude stocks fell
unexpectedly by 1.6M barrels which
contributed to the decline. OPEC is not outwardly worried by rising in
US output & says it is comfortable at the speed the market is
moving towards balance. "I think the pace is
excellent, the deal is working and we're very happy with it," UAE Energy Minister Suhail al-Mazroui, the current OPEC
pres, said. "But the job is not yet complete." In
Jan 2017, OPEC & allies including Russia began to cut production
by about 1.8M bpd, almost 2% of global supply, to get rid
of a glut that had built up since 2014 & that led to a price collapse. OPEC
wants to reduce oil inventories held by industrialized nations to their 5-year average & is getting closer to that goal, although
officials are starting to talk about looking at different metrics.
Oil slips to $66 a barrel as U.S. output offsets OPEC curbs
Pres Trump hosted Australian Prime Minister Malcolm Turnbull at the White House today, as the administration looks down under for ideas on how to kick start the $1.5T infrastructure plan. Joe Hockey, the Australian Ambassador to the US, who is known for delivering one of the largest federal infrastructure packages in the history of his home country by using private -public partnerships, is sharing ideas with the White House. “The private sector is awash with money, awash with money, the government isn’t as we are seeing playing down in Washington now, utilize that private sector money and deliver infrastructure which grows the economy” said Hockey. Hockey previously met with DJ Gribbin, Trump's senior adviser on infrastructure policy & formerly the head of gov relations at Macquarie Capital, to brainstorm ideas,. “The President’s team spoke with [Hockey] early on in the process of formulating the president’s infrastructure plan, mostly focused on the permitting side,” a senior White House official said. Since the meeting with Gribbin, Hockey has been in touch with members of the House Transportation Committee to discuss the benefits of private-public partnerships if they were implemented across the US, according to congressional aides. The committee, one of the key groups on Capitol Hill putting together a bipartisan infrastructure reform bill, is keeping these types of partnerships on the table, as well a potential gas tax, as a way to pay for the final infrastructure product.
Trump’s Aussie infrastructure guru helping fix America's roads and bridges
What had started out as a stormy shortened week for stocks, finished very strong. Buying in the last hour & into the close raised the Dow to a gain of about 100 for the week. The Dow has returned to where it was on Jun 5 (on the way down). Additionally, the Dow is up 2% YTD. Not too bad. The march to higher Treasury yields was muted this week, making stocks look more attractive. Higher interest rates are on the way & traders have a tough time adjusting to them. The stock market rally is still in a pause phase.
Dow Jones Industrials
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