Dow rose 119, advancers over decliners about 2-1 & NAZ gave back 20. The MLP index went up 2+ to the 266s amp; the REIT index added 2+ to 350. Junk bond funds inched higher & Treasuries fluctuated. Oil surged 3+ to the 68s (more below) & gold hardly moved at 1270.
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
Banks have cleared the Federal Reserve's latest test of their ability to withstand another economic doomsday, but the real test for investors comes next week, when the banks reveal how much they are able to pay out in divs & share buybacks. Test results made public by the Fed show that large & regional banks have enough capital to withstand the crisis scenarios used in the test. This year 38 banks went through the ringer, though 3 banks ended up being exempted because of a new law that set a minimum size of $100B of assets for those required to participate. It is the 4th straight year all the banks met Fed standards. That helped bolster arguments from Rep lawmakers that regulations on the industry could be loosened without adverse effects. The test is not "pass/fail," but coming through the worst-case scenario is seen as a positive. "Despite a tough scenario and other factors that affected this year's test, the capital levels of the firms after the hypothetical severe global recession are higher than the actual capital levels of large banks in the years leading up to the most recent recession," said Fed Vice Chair Randal K. Quarles. Analysts expected banks clear the hurdle by wide margins, though they were closely watching results from the 6 foreign banks new to the annual ritual this year. Senior Fed officials said the test had been run on 3 banks that ended up being exempted & it was up to those firms to decide whether to release their results. The largest banks showed they had adequate capital to withstand the harshest scenario, clearing above the minimum requirement. Senior Fed officials said this week's test numbers aren't necessarily reflective of what next week's results will look like, when banks are given approval on their capital plans or told to make adjustments.
Banks clear the Fed's doomsday stress test, but investors await payouts
Oil prices surged as much as 5% as OPEC agreed to a modest increase in output to compensate for losses in production at a time of rising global demand. West Texas Intermediate (WTI) crude futures finished today's session up $3.04 (4.6%) at $68.58 a barrel & Brent crude oil futures rose $2.50 (3.4%) to $75.55. OPEC said that it would go back to 100% compliance with previously agreed output cuts but gave no concrete figures. Saudi Arabia said the move would translate into a nominal output rise of around 1M barrels per day (bpd), 1% of global supply. Iraq said the real increase would be around 770K bpd because several countries that had suffered production declines would struggle to reach full quotas. The actual output increases set a bullish tone, as they came in below some of the highest figures that had been discussed prior to the meeting. OPEC's decision confused some in the market as the producers gave opaque targets for the increase, making it difficult to understand precisely how much more it will pump. The expectation that the increase will fall short of the 1M bpd figure boosted the market. Oil prices have been on a roller-coaster ride over the last few years, with the intl marker, Brent, trading above $100 a barrel for several years until 2014, dropping to almost $26 in 2016 & then recovering to over $80 last month. The most recent price rally followed an OPEC decision to restrict supply in an effort to drain global inventories. Falling production in Venezuela & Libya, as well as the risk of lower output from Iran as a result of US sanctions, have all increased market worries of a supply shortage. Another big uncertainty for oil is the escalating dispute between the US & its trading partners, which could hit US crude oil exports to China. If a 25% duty on US crude imports is implemented by Beijing, American oil would become uncompetitive in China, forcing it to seek buyers elsewhere. Chinese buyers are already starting to scale back orders, with a drop in supplies expected from Sep. That would leave markets prone to supply shortages and price spikes in case of large, unforeseen disruptions. A large decline in inventories at the US storage hub of Cushing, Oklahoma, also helped trigger the rally. Data today showed US energy companies this week cut one oil rig, the first reduction in 12 weeks, after drillers started to slow down the rate of additions this month as pipeline constraints put a damper on future production. The total oil rig count dipped to 862 in the latest week.
US crude surges 4.6%, settling at $68.58, after OPEC agrees to moderate oil output hike
Much of today's rally in the Dow was led by energy companies & oversold multinationals that may be impacted by higher tariffs. NAZ was only about break even. Companies have to get used to adjusting to higher tariffs on intl trade & that can bring pain for earnings. Aside from the opening weeks this year, the Dow has been treading water. With rising uncertainties for intl business, this trend should continue.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
Pres Trump is putting the EU &
its automakers on notice with a threat to slap a 20% tariff on all
European made cars coming into the US. Based
on the Tariffs & Trade Barriers long placed on the US & it great
companies & workers by the EU, if these Tariffs &
Barriers are not soon broken down & removed, we will be placing a 20%
Tariff on all of their cars coming into the U.S. Build them here! The Commerce Dept is currently investigating whether auto
imports are a threat to national security. Commerce Secretary
Wilbur Ross has been in discussion with European leaders & said back in Mar that he expects to reduce Europe's trade barrier in an
expedited manner, but warned of challenges with the bureaucratic
European Commission. Separately,
Trump spent a good portion of this week blasting the Chinese with the
potential of a new round of tariffs on $200B worth of Chinese
goods.
Trump to EU: Drop your tariffs, barriers on US goods or I'll retaliate
Banks have cleared the Federal Reserve's latest test of their ability to withstand another economic doomsday, but the real test for investors comes next week, when the banks reveal how much they are able to pay out in divs & share buybacks. Test results made public by the Fed show that large & regional banks have enough capital to withstand the crisis scenarios used in the test. This year 38 banks went through the ringer, though 3 banks ended up being exempted because of a new law that set a minimum size of $100B of assets for those required to participate. It is the 4th straight year all the banks met Fed standards. That helped bolster arguments from Rep lawmakers that regulations on the industry could be loosened without adverse effects. The test is not "pass/fail," but coming through the worst-case scenario is seen as a positive. "Despite a tough scenario and other factors that affected this year's test, the capital levels of the firms after the hypothetical severe global recession are higher than the actual capital levels of large banks in the years leading up to the most recent recession," said Fed Vice Chair Randal K. Quarles. Analysts expected banks clear the hurdle by wide margins, though they were closely watching results from the 6 foreign banks new to the annual ritual this year. Senior Fed officials said the test had been run on 3 banks that ended up being exempted & it was up to those firms to decide whether to release their results. The largest banks showed they had adequate capital to withstand the harshest scenario, clearing above the minimum requirement. Senior Fed officials said this week's test numbers aren't necessarily reflective of what next week's results will look like, when banks are given approval on their capital plans or told to make adjustments.
Banks clear the Fed's doomsday stress test, but investors await payouts
An escalating trade spat between the US & some
of its closest trading partners has American dairy farmers worried
about the harm tariffs on milk & cheese could do to their businesses. “They’re
deeply concerned about the current situation,” US Dairy Council
Export CEO Tom Vilsack said. “We had momentum. The
first four months of this year we saw record exports to Canada, to
Mexico and to China. Now, there’s a little bit of uncertainty.” Other
countries, in total, buy $628B in dairy products from the US.
But now, Canada is threatening a 270% tariff on American milk, in a
direct, tit-for-tat retaliation to Pres Trump's imposition of
tariffs on steel & aluminum imports. Canada
wasn't the only country to respond by targeting the dairy sector: Mexico
will impose a 25% tariff on cheese starting in Jul & China will
impose a 25% tariff on imports of milk, cream, yogurt, whey, butter &
cheese. “Producers are just now coming out of a
significant low price situation,” Vilsack said. “They were hopeful that
this year would be a better year than last year, and now there’s a bit
of uncertainty.” From here, Vilsack said he
hopes to see the Trump administration -- which has been aggressive in
pursuing what it believes to be fair trade deals with US allies --
resolve the discussions revolving around the North American Free Trade
Agreement (NAFTA) with Canada & Mexico. The pres, he said, then
needs to work through the challenges with Beijing and “continue to
maintain momentum.”
US dairy farmers ‘deeply concerned’ about exports situation
Oil prices surged as much as 5% as OPEC agreed to a modest increase in output to compensate for losses in production at a time of rising global demand. West Texas Intermediate (WTI) crude futures finished today's session up $3.04 (4.6%) at $68.58 a barrel & Brent crude oil futures rose $2.50 (3.4%) to $75.55. OPEC said that it would go back to 100% compliance with previously agreed output cuts but gave no concrete figures. Saudi Arabia said the move would translate into a nominal output rise of around 1M barrels per day (bpd), 1% of global supply. Iraq said the real increase would be around 770K bpd because several countries that had suffered production declines would struggle to reach full quotas. The actual output increases set a bullish tone, as they came in below some of the highest figures that had been discussed prior to the meeting. OPEC's decision confused some in the market as the producers gave opaque targets for the increase, making it difficult to understand precisely how much more it will pump. The expectation that the increase will fall short of the 1M bpd figure boosted the market. Oil prices have been on a roller-coaster ride over the last few years, with the intl marker, Brent, trading above $100 a barrel for several years until 2014, dropping to almost $26 in 2016 & then recovering to over $80 last month. The most recent price rally followed an OPEC decision to restrict supply in an effort to drain global inventories. Falling production in Venezuela & Libya, as well as the risk of lower output from Iran as a result of US sanctions, have all increased market worries of a supply shortage. Another big uncertainty for oil is the escalating dispute between the US & its trading partners, which could hit US crude oil exports to China. If a 25% duty on US crude imports is implemented by Beijing, American oil would become uncompetitive in China, forcing it to seek buyers elsewhere. Chinese buyers are already starting to scale back orders, with a drop in supplies expected from Sep. That would leave markets prone to supply shortages and price spikes in case of large, unforeseen disruptions. A large decline in inventories at the US storage hub of Cushing, Oklahoma, also helped trigger the rally. Data today showed US energy companies this week cut one oil rig, the first reduction in 12 weeks, after drillers started to slow down the rate of additions this month as pipeline constraints put a damper on future production. The total oil rig count dipped to 862 in the latest week.
US crude surges 4.6%, settling at $68.58, after OPEC agrees to moderate oil output hike
Much of today's rally in the Dow was led by energy companies & oversold multinationals that may be impacted by higher tariffs. NAZ was only about break even. Companies have to get used to adjusting to higher tariffs on intl trade & that can bring pain for earnings. Aside from the opening weeks this year, the Dow has been treading water. With rising uncertainties for intl business, this trend should continue.
Dow Jones Industrials
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