Thursday, March 15, 2018

Lower markets on trade war concerns while the Dow gains

Dow rose 115 (well off the highs), decliners over advancers almost 2-1 & NAZ lost 15.  The MLP index plunged 11+ to the 348s after the Federal Energy Regulatory Commission ruled that master-limited partnerships can no longer recover a key income-tax allowance & the REIT index was flattish.  Junk bond funds slid lower & Treasuries were off a tad after recent buying.  Oil went up, going over 61, & gold dropped 8.

AMJ (Alerian MLP index tracking)

Live 24 hours gold chart [Kitco Inc.]

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The Dow accelerated gains following a modestly higher open as traders shrugged off trade war concerns & focused on a positive stream of fresh economic data.  The blue-chip index snapped a 3-day losing streak.  Investor sentiment was also buoyed by Trump's appointment of free-trade advocate Larry Kudlow as his top economic adviser.  Major industrial corps, which took a hit on concerns about the impact of steel & aluminum tariffs as well as the possibility for a trade war with China.  On Wed, markets took a hit after Trump said his administration will seek to trim the US trade deficit with China by $100B.

Dow jumps by triple digits, other stock indexes under pressure

The Intl Energy Agency (IEA) expects a modest increase in global energy demand this year, to 1.5M B/D versus the previous forecast for 1.4M B/D, but the organization noted that the ongoing turmoil in Venezuela could result in global oil demand outstripping global oil supply.  "Without any compensatory change from other producers it is possible that the Latin American country (Venezuela) could be the final element that tips the market decisively into deficit," the IEA said.  Venezuela holds the world's largest proven oil reserves, but production has plummeted as the economic crisis has stalled business activity in the socialist nation.  The IEA expects Venezuela's crude output will fall to 1.38M barrels per day (MB/D) by the end of 2018.  With the exception of the 2002-2003 strike, this would be the country's lowest oil output in 70 years.  Robust demand for oil should help offset increasing supply to keep the oil market roughly in balance.  Yesterday, OPEC raised its forecast for the US share of global oil production to rise by 130K B/D to an average of 5.72M B/D in 2018.  The IEA's latest 5-year outlook documented oil discoveries falling last year to a record low.  After petroleum investments barely increased in 2017, the organization is projecting investment spending to grow by 6% in 2018.

Venezuela turmoil could push oil market into deficit: IEA

Average long-term U.S. mortgage rates fell this week for the first time this year as the spring home buying season begins.

US mortgage rates fall for 1st time in '18; 30-year at 4.44

The Senate passed a bill to overhaul Dodd-Frank on yesterday, as a bipartisan group of lawmakers forge ahead with plans to roll back some of the 2010 law's banking provisions.  Senate Banking Committee Chairman Mike Crapo has spearheaded the effort to loosen restrictions for certain financial institutions, particularly smaller banks.  The bill will exempt banks with less than $250B in assets from tougher oversight by the Federal Reserve, including the central bank's annual stress tests.  Lawmakers are also seeking to ease the ratio of capital to debt that a bank must hold, among other measures.  “The bill provides much-needed relief from the Dodd-Frank Act for thousands of community banks and credit unions and will spur lending and economic growth without creating risks to the financial system,” the White House said.  13 Dems in the Senate have backed the bill, which has received broad Rep support.  The bill's fate in the House is less certain, as conservative Reps are seeking changes.  Pres Trump “looks forward to discussing any further revisions the House is interested in making,” the White House added.

Dodd-Frank rollback wins Senate approval

The US sanctioned a St. Petersburg-based “troll farm,” a close ally of Russian Pres Putin, 2 Russian intelligence services & other Russian citizens & businesses indicted by Special Counsel Robert Mueller on charges of meddling with the 2016 US presidential election.  The penalties follow the Feb indictment & more than a year of criticism from Dems & some Rep lawmakers that Trump has been too slow to act against Russia for intruding in the election.  Russia's ruble dropped 0.4% to 57.3505 per $, the lowest in a month & a 4th straight day of losses.  The US also publicly accused Russian gov hackers of attempting since at least Mar 2016 to intrude into a broad range of infrastructure including electric power & nuclear facilities.  Rep House Speaker Paul Ryan called the measures “long overdue,” adding in a twet that “we must hold Russia accountable for its dangerous interference.”  The Treasury Dept also announced sanctions against Russia's Federal Security Service, a spy organization know as the FSB & its Main Intelligence Directorate, a military intelligence service known as the GRU.  The 2 agencies and most of the intelligence officials had been previously sanctioned under the Obama administration.

U.S. Sanctions Russians Charged by Mueller for Election Meddling

Even though the Dow had a solid gain, it was less impressive that a triple digit advance indicates.  The NAZ declined, market breadth was weak & 10 stocks declined in the Dow.  Shakeups in DC make traders nervous & tariff anxiety is not going away soon.  The Dow is only up a tad YTD & trading has been choppy for weeks.

Dow Jones Industrials

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