Wednesday, April 11, 2018

Markets slide lower while waiting for a missle attack on Syria

Dow dropped 109, decliners over advancers 4-3 & NAZ added 13.  The MLP index went up 1 to the 247s & the REIT index fell 1+ to the 324s.  Junk bond funds did little & Treasuries were up a tad.  Oil climbed higher in the 65s (more below) & gold shot up 11 to 1355 on rising tensions in the MidEast.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil66.19

GC=FGold  1,355.60
+9.70  +0.7%

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Stocks fell & Treasuries rose as global financial markets turned cautious amid rising tension in the Middle East & renewed political discord in America.  The $ stayed lower as a key gauge of inflation accelerated.  Most major equity indexes were lower but gave back some of their early losses after Pres Trump's provocative comments about Russia & his warning that America's preparing to attack Syria.  Banks & financial firms led decliners.  Crude oil continued to climb, pushing past $66 a barrel.  The market had rallied this week as trade tensions appeared to ease.  The flight to higher-quality assets spurred a jump in gold & sent the 10-year Treasury yield to 2.78%.  Aluminum headed for its biggest winning streak since 1988.  The market's respite from ebbing protectionist concerns proved short-lived as geopolitical risk ratcheted up, with Trump, who is preparing his response to an attack that Russia says didn't happen, saying relations between the 2 countries are worse than they have ever been.  That also overshadowed the latest reading on consumer prices in the US.  The key inflation measure accelerated to the highest in a year as a drag from mobile-phone costs faded, bearing out the Federal Reserve's forecast for a pickup in price gains.  Earlier, Asian stocks were mixed, with indices in China & Hong Kong posting the biggest gains as People's Bank of China Governor Yi Gang offered more details on pledges to open the world's 2nd-largest economy.  The announcement was seen as further alleviating trade tensions with the US.

Trump's Syria Tweets Shake Stocks, Boost Treasuries

A key measure of US inflation accelerated to the highest in a year as a drag from mobile-phone costs faded, bearing out the Federal Reserve's forecast for a pickup in price gains.  Excluding food & energy, the core consumer price index rose 2.1% from Mar 2017 after a 1.8% gain in the year thru Feb, a Labor Dept report showed.  The gauge was up 0.2% from the prior month, matching the estimate.  Including all items, the CPI was down 0.1% from Feb on a drop in gasoline costs, with the index up 2.4% from a year earlier, also the most in a year.  The core CPI's pickup will help reinforce the view of policy makers that inflation had been weighed down by transient factors such as the unusual weakness in the cost of wireless-phone services.  The acceleration will reinforce Fed expectations that its preferred gauge of inflation, a separate consumption-based figure from the Commerce Dept, is gradually approaching its 2% goal.  The advance in the core CPI brought the 3-month annualized gain to 2.9%, after 3.1% in Feb.  Mobile-phone service prices increased 0.2% in Mar after falling 0.5% the prior month.  They had slumped a record 7% in Mar 2017 from the previous month as carriers sweetened data packages & weakness in the category, along with softer prices for items such as cars and medical care, continued to restrain core CPI for the next few months.  Other details of the latest data showed the increase in pricing power reflected advances in shelter, including an outsize gain in hotel & motel rates, along with medical care, personal care, motor vehicle insurance & airfares.  Prices declined for apparel & used cars & trucks.  Investors are looking out for signs of inflation pressures that could prompt faster interest-rate hikes by the Fed. Minutes of the central bank's Mar meeting, when it lifted borrowing costs by a qtr percentage point, will be released later today.  Most officials have penciled in 2 or 3 more increases this year.

U.S. Core Inflation Accelerates as Mobile-Phone Drag Fades

Pres Trump said relations with Russia have never been worse & warned Moscow to “get ready” for a missile strike on Syria over a suspected chemical weapons attack.  “Russia vows to shoot down any and all missiles fired at Syria. Get ready Russia, because they will be coming, nice and new and “smart!,” Trump wrote on Twitter.  “You shouldn’t be partners with a Gas Killing Animal who kills his people and enjoys it!”  Trump's remarks weighed on investors already concerned about war.  Oil prices surged to the highest level in 2 weeks.  Turkey, which has troops in Syria, saw its currency weaken to a record, while the Borsa Istanbul 100 Index for stocks reversed gains to drop 1.5%.  Saudi Arabia's main stock index also extended its decline.  The US relationship with Russia is "worse now than it has ever been, and that includes the Cold War,” Trump said.  “There is no reason for this. Russia needs us to help with their economy, something that would be very easy to do, and we need all nations to work together. Stop the arms race?"  A strike that hits Russian assets in Syria, even if unintentionally, could result in a dangerous game of one-upmanship, potentially dragging the US further into a conflict the pres wants to leave.  Russia has strengthened Syria’s air-defense capabilities, deploying S-400 missile batteries after US strikes a year ago hit a Syrian base.  A Russian spokesman told official news agencies that the Kremlin still hopes that destabilizing steps can be avoided.

Trump Tells Russia to ‘Get Ready’ for Missiles Coming at Syria

Traders are nervous about the prospects pof a missile attack on Syria, but taking that threat with a sense of relative calm.  Since it has been well advertised, it might be delayed for days.  Meanwhile earnings reports from the big banks & then from the regular companies are coming.  The reports should be good, but guidance going forward is an unknown.  The Dow remains close to 24K after being on defense for almost 3 months.  Gold is in demand & near its recent highs above the mid 1300s.

Dow Jones Industrials

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