Thursday, March 15, 2018

Mixed markets as trade tensions don't go away

Dow gained 78, decliners over advancers 4-3 & NAZ crawled up only 1.  The MLP index was off a smidgen to 260 & the REIT index was even in the 329s.  Junk bond funds fluctuated & Treasuries inched higher with the yield on the 10 year Treasury at 2.81%.  Oil fluctuated around 61 & gold dropped 8 to 1317 on Larry Kudlow's comments (more below).

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil61.35

GC=FGold  1,318.20
-7.40  -0.56%

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Stocks fluctuated as traders look forward to next week's Federal Reserve policy decision.  10-year Treasury yields steadied after briefly drifting below 2.80%.  The S&P 500 was little changed as investors weigh prospects for more US trade protectionism after new White House appointee Larry Kudlow signaled support for a strong $ & took a tough line on China.  Gold declined after Kudlow said he'd sell the metal & buy the $, which gained.  The tech sector lagged, sending NAZ downward.  The Empire Manufacturing Index exceeded projections & initial jobless claims came in a hair below estimates, signaling continuing strength in the economy ahead of the Fed decision.  While an increase in borrowing costs at the meeting is seen as a done deal, it remains an open question whether the policy makers will lift their expectations for the pace of future increases.  The Stoxx Europe 600 Index advanced, with gains in insurance shares offsetting drops in household goods.  Norway's krone rose to the strongest level since early Feb after its central bank signaled faster interest-rate increases.  The ¥ gained for a 3rd day this week.  West Texas crude advanced above $61 a barrel as signs of stronger US fuel consumption balanced OPEC forecasting for the first time that new supplies from its rivals will exceed demand growth this year.

Stocks Mixed, Yields Steady on Factory, Jobs Data: Markets Wrap

The Federal Reserve's independence & monetary-policy approach had a White House ally in Gary Cohn.  His successor Larry Kudlow may be a different story.  “Just let it rip, for heaven’s sake,” Kudlow said of economic growth in the US.  “The market’s going to take care of itself. The whole story’s going to take care of itself. The Fed’s going to do what it has to do, but I hope they don’t overdo it.”  That last comment was an apparent reference to the Federal Reserve's moves to raise interest rates, which it has done 5 times since Dec 2015 & is expected to do so again when it meets next week.  Kudlow, Pres Trump's pick to replace Cohn as director of his National Economic Council, has criticized the central bank's policies over the past year, saying the Fed is using the wrong models to assess inflation & that it doesn't have power to move prices one way or another.  That's a big slap, because policy makers' dual mandate requires them to promote stable prices.  Kudlow's views come in stark contrast to Cohn, a one-time front-runner to lead the Fed, who adopted a much more careful tone when talking about the central bank, saying “the Federal Reserve is an independent agency and they operate as such" when asked about looming rate hikes.  Kudlow, who once worked as a staff economist at the NY Fed, has not joined Trump's team yet.  But if he keeps up his criticism of the central bank once he's in the job, it could be important.  Trump has said he's a “low interest-rate” person, though he has been mostly silent on Fed policy since becoming pres.

Kudlow's Advice to Fed on Economic Growth: ‘Let It Rip’

US filings for unemployment benefits fell for the 3rd time in 4 weeks & remain near the lowest level in 48 years, underscoring tightness in the job market, Labor Dept figures showed.  Jobless claims decreased 4K to 226K (est 228K).  Continuing claims rose by 4K to 1.879M in the latest week.  The 4-week average of initial claims, a less-volatile measure than the weekly figure, fell to 221K from the prior week's 222K (the year-earlier figure was 243K).  The US labor market is still in solid shape, with weekly applications for jobless benefits over the past 3 years below the 300K level that's consistent with health.  The figures reflect how companies are holding on to employees and highlight a big problem they face: finding people with necessary skills to fill open positions.  The data follow the Feb jobs report last week showing employers added the most workers since mid-2016, while the labor-force participation rate had the biggest jump in almost eight years.

Jobless Claims in U.S. Decline for Third Time in Four Weeks

Traders are twiddling their thumbs.  There is no shortage of excitement from DC & trade issues show no signs of going away.  As a result, stocks keep going sideways.  The Dow chart below shows that it is little changed from Dec.  Bull market thoughts are fading.

Dow Jones Industrials


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