Dow dropped 156, decliners modestly over advancers & NAZ fell only 6. The MLP index was fractionally higher in te 259s. Junk bond funds were slightly lower & Treasuries crawled higher. Oil slid back to the 61s & gold lost 3 to 1331.
AMJ (Alerian MLP Index tracking fund)
Stocks fell, while Treasuries rose as Pres Trump's plans to punish imports appeared to gather force. The $ weakened against the Japanese ¥ & €. The S&P 500 headed for the first decline in 4 days after the resignation of Trump economic adviser Gary Cohn removed a free-trade proponent from the White House & news that the pres is considering clamping down on China. European shares erased declines as investors awaited key central bank decisions & US labor data later this week. Treasury yields fell for the first time in 4 sessions, leading most bond yields lower across Europe. The ¥ rose to its strongest level in almost 16 months. Oil fell on rising US stockpiles & as trade-war fears sapped most commodities. Gold slipped. The EU mounted a last-ditch push to stop Trump from triggering tariffs on foreign steel & aluminum, vowing a "firm" response & warning of widespread damage from a trans-Atlantic trade war. Chinese officials, who have been studying curbs on US products such as soybeans according to past reports, appeared to remain mostly quiet on the tariff question.
U.S. Stocks Drop, Treasuries Rise on Trade Gloom: Markets Wrap
The US trade deficit widened more than forecast in Jan to a post-recession high, adding to figures cited by Pres Trump as evidence of American weakness while he brings the nation to the brink of a trade war. The gap increased 5% to $56.6B, the biggest since Oct 2008, from a revised $53.9B in the prior month, Commerce Dept data showed. Exports fell 1.3% from Dec, the most in more than a year, while imports were little changed. From a current economic standpoint, the widening deficit indicates trade may again be a drag on the pace of Q1 expansion. The gap has increased in recent months as steady household spending & business investment boost imports. Improving global growth & a weaker $ have been supporting overseas sales of American-made goods, though not enough to outpace inbound shipments. From a political standpoint, however, the gap has formed a statistical backdrop first to Trump's 2016 election campaign & now to his planned tariffs on steel & aluminum. The pres has opened multiple fronts in trade battles, from targeting strategic rival China to angering allies like Canada & EU with threats to erect fresh barriers. The EU is preparing retaliatory levies on products including motorcycles, jeans & bourbon whiskey if Trump follows through on his threat. A full-blown trade war would risk blunting the effects of the Trump's policies such as tax cuts and reduced regulation, aimed at boosting US growth. “The United States has been taken advantage of by other countries, both friendly and not so friendly, for many, many decades,” Trump said when asked if he would push forward with the tariffs despite concerns from fellow Reps. In an apparent reference to the full-year trade gap in goods, Trump said, “we have a trade deficit of $800 billion a year. And that’s not going to happen with me.” The estimate called for a Jan trade deficit of $55B. Exports declined to $200.9B, led by civilian aircraft, oil & other industrial materials. At the same time, exports of consumer goods rose to a record $17.9B, while shipments of automotive vehicles & parts were the highest since Jul 2014.
U.S. Trade Gap Widens to Post-Recession High
Federal Reserve Governor Lael Brainard, one of the central bank's most ardent doves, sounded optimistic about the US economy’s outlook & suggested the pace of monetary policy tightening may need to accelerate. “The macro environment today is the mirror image of the environment we confronted a couple of years ago,” Brainard said. “In the earlier period, strong headwinds sapped the momentum of the recovery and weighed down the path of policy. Today, with headwinds shifting to tailwinds, the reverse could hold true.” Brainard's optimistic remarks reveal a meaningful shift in her outlook for the US economy. Since joining the Fed in 2014, she's been a leading voice at the central bank for holding back on rate hikes, arguing slow growth abroad & weak inflation at home, called for caution. Her comments followed upbeat congressional testimony last week from Fed Chairman Jerome Powell, which prompted investors to lift the odds of 4 Fed rate hikes this year from the 3 moves it projected in Dec. “Many of the forces that acted as headwinds to U.S. growth and weighed on policy in previous years are generating tailwinds currently,” she said, citing a pickup in economic activity outside the US & fiscal stimulus from tax cuts & higher spending & closely echoing one of Powell's key observations to lawmakers. “The most notable tailwind is the shift in America’s fiscal policy stance from restraint to substantial stimulus in an economy close to full employment,” she added. Citing estimates, Brainard said tax cuts would add as much as 0.5 percentage point to growth in the US this year & next. Still, she noted that inflation remained subdued. “Continued gradual increases in the federal funds rate are likely to remain appropriate to ensure inflation rises sustainably to our target and to sustain full employment,” she said. She declined to say if she'd shifted her outlook to 4 rate hikes this year, when asked about this. Asked whether the possibility of a trade war, a concern as Pres Trump plans tariffs on steel & aluminum & other countries consider retaliation, could disrupt her outlook, she said it’s too soon to tell. “We would take into account developments if they proved to be material to the outlook,” Brainard said. “It’s early to tell what the broader implications could be, so I see it as an uncertainty, but not something that would materially change my outlook, today.”
Fed's Brainard Suggests Growth Tailwinds May Speed Hike Pace
The resignation by Cohn was not well received by investors, especially because his thoughts are different than Trump's on Tariffs. That drama will continue to play out with no end in sight, a major depressant for stock prices. The trade deficit in Jan will add fuel to Trump's argument. With this decline the Dow is barely in the black YTD.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 61.77 | -0.83 | -1.3% |
| GC=F | Gold | 1,330.70 | -4.50 | -0.3% |
Stocks fell, while Treasuries rose as Pres Trump's plans to punish imports appeared to gather force. The $ weakened against the Japanese ¥ & €. The S&P 500 headed for the first decline in 4 days after the resignation of Trump economic adviser Gary Cohn removed a free-trade proponent from the White House & news that the pres is considering clamping down on China. European shares erased declines as investors awaited key central bank decisions & US labor data later this week. Treasury yields fell for the first time in 4 sessions, leading most bond yields lower across Europe. The ¥ rose to its strongest level in almost 16 months. Oil fell on rising US stockpiles & as trade-war fears sapped most commodities. Gold slipped. The EU mounted a last-ditch push to stop Trump from triggering tariffs on foreign steel & aluminum, vowing a "firm" response & warning of widespread damage from a trans-Atlantic trade war. Chinese officials, who have been studying curbs on US products such as soybeans according to past reports, appeared to remain mostly quiet on the tariff question.
U.S. Stocks Drop, Treasuries Rise on Trade Gloom: Markets Wrap
The US trade deficit widened more than forecast in Jan to a post-recession high, adding to figures cited by Pres Trump as evidence of American weakness while he brings the nation to the brink of a trade war. The gap increased 5% to $56.6B, the biggest since Oct 2008, from a revised $53.9B in the prior month, Commerce Dept data showed. Exports fell 1.3% from Dec, the most in more than a year, while imports were little changed. From a current economic standpoint, the widening deficit indicates trade may again be a drag on the pace of Q1 expansion. The gap has increased in recent months as steady household spending & business investment boost imports. Improving global growth & a weaker $ have been supporting overseas sales of American-made goods, though not enough to outpace inbound shipments. From a political standpoint, however, the gap has formed a statistical backdrop first to Trump's 2016 election campaign & now to his planned tariffs on steel & aluminum. The pres has opened multiple fronts in trade battles, from targeting strategic rival China to angering allies like Canada & EU with threats to erect fresh barriers. The EU is preparing retaliatory levies on products including motorcycles, jeans & bourbon whiskey if Trump follows through on his threat. A full-blown trade war would risk blunting the effects of the Trump's policies such as tax cuts and reduced regulation, aimed at boosting US growth. “The United States has been taken advantage of by other countries, both friendly and not so friendly, for many, many decades,” Trump said when asked if he would push forward with the tariffs despite concerns from fellow Reps. In an apparent reference to the full-year trade gap in goods, Trump said, “we have a trade deficit of $800 billion a year. And that’s not going to happen with me.” The estimate called for a Jan trade deficit of $55B. Exports declined to $200.9B, led by civilian aircraft, oil & other industrial materials. At the same time, exports of consumer goods rose to a record $17.9B, while shipments of automotive vehicles & parts were the highest since Jul 2014.
U.S. Trade Gap Widens to Post-Recession High
Federal Reserve Governor Lael Brainard, one of the central bank's most ardent doves, sounded optimistic about the US economy’s outlook & suggested the pace of monetary policy tightening may need to accelerate. “The macro environment today is the mirror image of the environment we confronted a couple of years ago,” Brainard said. “In the earlier period, strong headwinds sapped the momentum of the recovery and weighed down the path of policy. Today, with headwinds shifting to tailwinds, the reverse could hold true.” Brainard's optimistic remarks reveal a meaningful shift in her outlook for the US economy. Since joining the Fed in 2014, she's been a leading voice at the central bank for holding back on rate hikes, arguing slow growth abroad & weak inflation at home, called for caution. Her comments followed upbeat congressional testimony last week from Fed Chairman Jerome Powell, which prompted investors to lift the odds of 4 Fed rate hikes this year from the 3 moves it projected in Dec. “Many of the forces that acted as headwinds to U.S. growth and weighed on policy in previous years are generating tailwinds currently,” she said, citing a pickup in economic activity outside the US & fiscal stimulus from tax cuts & higher spending & closely echoing one of Powell's key observations to lawmakers. “The most notable tailwind is the shift in America’s fiscal policy stance from restraint to substantial stimulus in an economy close to full employment,” she added. Citing estimates, Brainard said tax cuts would add as much as 0.5 percentage point to growth in the US this year & next. Still, she noted that inflation remained subdued. “Continued gradual increases in the federal funds rate are likely to remain appropriate to ensure inflation rises sustainably to our target and to sustain full employment,” she said. She declined to say if she'd shifted her outlook to 4 rate hikes this year, when asked about this. Asked whether the possibility of a trade war, a concern as Pres Trump plans tariffs on steel & aluminum & other countries consider retaliation, could disrupt her outlook, she said it’s too soon to tell. “We would take into account developments if they proved to be material to the outlook,” Brainard said. “It’s early to tell what the broader implications could be, so I see it as an uncertainty, but not something that would materially change my outlook, today.”
Fed's Brainard Suggests Growth Tailwinds May Speed Hike Pace
The resignation by Cohn was not well received by investors, especially because his thoughts are different than Trump's on Tariffs. That drama will continue to play out with no end in sight, a major depressant for stock prices. The trade deficit in Jan will add fuel to Trump's argument. With this decline the Dow is barely in the black YTD.
Dow Jones Industrials
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