Dow lost 25, advancers over decliners 4-3 & NAZ rose a bigger 65. The MLP index was fractionally lower in the 269s & the REIT index rebounded 2+ to the 342s. Junk bond funds crawled higher & Treasuries rose in price, taking the yield on the 10 year Treasury down to 2.95%. Oil went up in the 66s (more below) & gold added 5 to 1307.
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
New applications for US unemployment benefits unexpectedly fell last week & the number of Americans on jobless rolls declined to a near 44 year low, pointing to a rapidly tightening labor market. Initial claims for state unemployment benefits dropped 4K to a seasonally adjusted 218K for the latest week, the Labor Dept said. The forecast called for claims rising to 224K. The 4-week moving average of initial claims, viewed as a better measure of labor market trends as it irons out week-to-week volatility, fell 1K to 224K last week. The labor market is considered to be close to or at full employment, with the jobless rate at an 18-year low of 3.8%. The unemployment rate has dropped by three-tenths of a percentage point this year & is near the Federal Reserve's forecast of 3.6% by the end of this year. The central bank yesterday raised interest rates for a 2nd time this year & projected 2 more rate hikes in H2. It said the labor market "continued to strengthen" & that job gains have been "strong." Layoffs have remained very low amid signs of growing worker shortages across all sectors of the economy. The were a record 6.7M job openings in Apr & the number of unemployed people per vacancy slipped to 0.9 from 1.0 in Mar, indicating that most people looking for a job are likely to find one. The claims report also showed the number of people receiving benefits after an initial week of aid declined 49K to 1.7M in the latest week, the lowest level since 1973. The 4-week moving average of the so-called continuing claims decreased 3K to 1.73M , also the lowest level since 1973.
The White House plans to roll out tariffs tomorrow on a truncated list of Chinese exports, according to leakers. The list is expected to include 800-900 products, compared with the original list of about 1300 products published by the trade representative in Apr. The $ value of the goods the administration expects to target is unclear. Pres Trump will meet with top trade advisors this PM & he reserves the final decision on whether to impose tariffs. However, a senior White House official called the move "fait accompli." The person notes that the administration has circulated talking points for the tariff actions among 10 gov agencies. In addition, a list of products has already been uploaded to a gov database for implementation. The expected tariffs on Chinese goods come as relations with multiple major trading partners have grown increasingly bitter. The US faces retaliation not only from Beijing but also from allies such as Canada, Mexico & the EU. The Trump administration's protectionist moves have prompted so far fruitless efforts from some congressional Reps to limit presidential power to impose tariffs. One factor that could influence Trump's thinking is China's response to the possible tariffs. Secretary of State Mike Pompeo is currently in Beijing discussing the next steps in the effort to get North Korea to abandon its nuclear & missile programs. The administration emerged from a summit between Trump & dictator Kim Jong Un optimistic about the prospect of denuclearization. China's willingness to put economic pressure on North Korea is critical to pushing Pyongyang to give up its nuclear ambitions. The round of tariffs could make China reluctant to cooperate with the US on North Korea. Beijing has said it would retaliate if the US imposes tariffs. The potential for reprisal has raised fears about a devastating series of trade barriers & damage to the American agricultural industry. Trump has decried what he calls abusive trade practices by Beijing. He argues China has long taken advantage of American leaders, damaging US companies & workers in the process. The Trump administration is currently trying to strike a trade agreement with China that would lead to the US exporting more goods.
White House expected to unveil tariffs on smaller list of Chinese products Friday
Oil under pressure as threat of higher supply looms ahead of OPEC meeting
The US economic outlook is strong, but the tax-&-spend policies make the fiscal stimulus stronger than what has been since the Johnson administration, the IMF said in a report on the US economy. "The near-term outlook for the U.S. economy is one of strong growth and job creation," the IMF said. The IMF identifies risks including higher public debt, a greater risk of an inflation surprise, intl spillover risks, the risk of future recession & increased global imbalances. The IMF added the deficit spending "will leave few budget resources available to invest in a range of urgently needed supply-side reforms, including infrastructure spending, that would raise living standards." The Fed will have to raise policy rates at a faster pace to achieve its dual mandate, the IMF added in what's called its Article IV consultation, which it does with every member nation.
The stock market is feeling good, helped by merger fever for tech & media stocks. Good news, but that won't last. Mundane stories about struggling trade negotiations are not getting much attention. But they will have a major impact on future growth. Uncertainty about the economic future is on the rise as traders throw caution to the wind. The Dow had a meager performance today with only 12 stocks managing gains today.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
The US economy is strengthening, the
unemployment rate is declining & employers can't find enough qualified
applicants to fill open jobs – so why aren’t wages growing? Turns out, not even Federal Reserve chair Jerome Powell knows the answer to that question. Powell
called the situation “a bit of a puzzle” during a press conference
following the FOMC's 2-day policy meeting yesterday. “I
certainly would've expected wages to react more to the very significant
reduction in unemployment that we've had, as I mentioned from 10% to
3.8%,” he said. “In a world where we're hearing lots and lots about –
about labor shortages, everywhere we go now we hear about labor
shortages, but where's the wage reaction?” While the unemployment rate hovers near
multi-decade lows, real average hourly earnings for all employees rose
just 0.1%, to $10.75, between April & May, according to the Bureau of
Labor Statistics. Year over year, average hourly earnings were flat. For employees in production or “nonsupervisory” roles, average hourly earnings actually decreased by 0.1% year-over-year. As Powell also mentioned, a slew of industries are struggling to find qualified workers – including both the construction & trucking industries – which should, in theory, drive salaries higher. The
Fed has partially attributed sluggish wage growth to low productivity,
or value added per hour on the job, & suggests the situation could
stabilize with continued economic growth. However,
there could be an additional challenge for workers in the form of
inflation, which the Fed announced this week was finally closing in on
the central bank's 2% objective. Over the near term, however, inflation
may exceed the Fed's target level thanks to rising oil prices. When factored into the earnings equation, inflation takes a bite out of gains for workers.
Sluggish wage growth puzzling, Fed’s Powell says
New applications for US unemployment benefits unexpectedly fell last week & the number of Americans on jobless rolls declined to a near 44 year low, pointing to a rapidly tightening labor market. Initial claims for state unemployment benefits dropped 4K to a seasonally adjusted 218K for the latest week, the Labor Dept said. The forecast called for claims rising to 224K. The 4-week moving average of initial claims, viewed as a better measure of labor market trends as it irons out week-to-week volatility, fell 1K to 224K last week. The labor market is considered to be close to or at full employment, with the jobless rate at an 18-year low of 3.8%. The unemployment rate has dropped by three-tenths of a percentage point this year & is near the Federal Reserve's forecast of 3.6% by the end of this year. The central bank yesterday raised interest rates for a 2nd time this year & projected 2 more rate hikes in H2. It said the labor market "continued to strengthen" & that job gains have been "strong." Layoffs have remained very low amid signs of growing worker shortages across all sectors of the economy. The were a record 6.7M job openings in Apr & the number of unemployed people per vacancy slipped to 0.9 from 1.0 in Mar, indicating that most people looking for a job are likely to find one. The claims report also showed the number of people receiving benefits after an initial week of aid declined 49K to 1.7M in the latest week, the lowest level since 1973. The 4-week moving average of the so-called continuing claims decreased 3K to 1.73M , also the lowest level since 1973.
US weekly jobless claims unexpectedly fall
The White House plans to roll out tariffs tomorrow on a truncated list of Chinese exports, according to leakers. The list is expected to include 800-900 products, compared with the original list of about 1300 products published by the trade representative in Apr. The $ value of the goods the administration expects to target is unclear. Pres Trump will meet with top trade advisors this PM & he reserves the final decision on whether to impose tariffs. However, a senior White House official called the move "fait accompli." The person notes that the administration has circulated talking points for the tariff actions among 10 gov agencies. In addition, a list of products has already been uploaded to a gov database for implementation. The expected tariffs on Chinese goods come as relations with multiple major trading partners have grown increasingly bitter. The US faces retaliation not only from Beijing but also from allies such as Canada, Mexico & the EU. The Trump administration's protectionist moves have prompted so far fruitless efforts from some congressional Reps to limit presidential power to impose tariffs. One factor that could influence Trump's thinking is China's response to the possible tariffs. Secretary of State Mike Pompeo is currently in Beijing discussing the next steps in the effort to get North Korea to abandon its nuclear & missile programs. The administration emerged from a summit between Trump & dictator Kim Jong Un optimistic about the prospect of denuclearization. China's willingness to put economic pressure on North Korea is critical to pushing Pyongyang to give up its nuclear ambitions. The round of tariffs could make China reluctant to cooperate with the US on North Korea. Beijing has said it would retaliate if the US imposes tariffs. The potential for reprisal has raised fears about a devastating series of trade barriers & damage to the American agricultural industry. Trump has decried what he calls abusive trade practices by Beijing. He argues China has long taken advantage of American leaders, damaging US companies & workers in the process. The Trump administration is currently trying to strike a trade agreement with China that would lead to the US exporting more goods.
White House expected to unveil tariffs on smaller list of Chinese products Friday
Oil prices were mixed, coming under
pressure from evidence of rising US output & uncertainty over the
outlook for supply before a meeting next week of the world's largest
exporters. West Texas Intermediate (WTI) crude futures ended the session up 25¢ at $66.89 a barrel & Brent crude futures were down 86¢ (1.1%) at $75.88 a barrel. OPEC other big producers meet on Jun 22-23 to discuss production & are widely expected to agree to
higher output. Russian Energy Minister
Alexander Novak said that members of the OPEC-plus production
cut deal can consider returning up to 1.5M bpd to the market
gradually. Saudi Energy Minister
Khalid al-Falih said he expected a reasonable & moderate agreement
next week when OPEC & non-OPEC oil producers meet. Brent & WTI hit 3½-year highs in May but have since drifted lower,
indicating investors expect the market to soon become better supplied as
US crude production rises & as OPEC & its allies look poised to
increase output. In 2017, OPEC began supply cuts of 1.8M bpd to support the
market. But, with Brent prices up by around 180% from their 2016
low, global crude inventories falling, Venezuelan production plummeting & imminent sanctions against Iran, the group may soon end their supply
cuts. The $ gained against
a basket of currencies, making moves towards the 6-month highs it hit
in late May as the € fell broadly as the ECB
planned to keep interest rates at record lows into the summer of 2019. US crude output has risen almost 30% in the last 2 years
to a record high of 10.9M barrels per day. Russia pumped 11.1M bpd in the first 2 weeks of Jun, above Saudi Arabia, which
produced slightly more than 10M bpd. The major Libyan oil
ports of Ras Lanuf & Es Sider were closed & evacuated today
due to attacks by armed brigades opposed to the powerful eastern
commander Khalifa Haftar, causing a production loss of 240K bpd.
Oil under pressure as threat of higher supply looms ahead of OPEC meeting
The US economic outlook is strong, but the tax-&-spend policies make the fiscal stimulus stronger than what has been since the Johnson administration, the IMF said in a report on the US economy. "The near-term outlook for the U.S. economy is one of strong growth and job creation," the IMF said. The IMF identifies risks including higher public debt, a greater risk of an inflation surprise, intl spillover risks, the risk of future recession & increased global imbalances. The IMF added the deficit spending "will leave few budget resources available to invest in a range of urgently needed supply-side reforms, including infrastructure spending, that would raise living standards." The Fed will have to raise policy rates at a faster pace to achieve its dual mandate, the IMF added in what's called its Article IV consultation, which it does with every member nation.
IMF says U.S. outlook is strong but deficit spending raises risks
The stock market is feeling good, helped by merger fever for tech & media stocks. Good news, but that won't last. Mundane stories about struggling trade negotiations are not getting much attention. But they will have a major impact on future growth. Uncertainty about the economic future is on the rise as traders throw caution to the wind. The Dow had a meager performance today with only 12 stocks managing gains today.
Dow Jones Industrials
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