Markets try to edge higher, cautiously

Dow fell 333, advancers over decliners 4-3 & NAZ went up 42.  The MLP index added 1+ to the 265s & the REIT index fluctuated in the 342.  Junk bond funds were mixed & Treasuries slid slightly lower.  Oil added 1 to 66 & gold was off 2 to 1276.

AMJ (Alerian MLP Index tracking fund)

CL=F

Crude Oil

65.85

+0.78

+1.2%

GC=F

Gold

1,276.60

-2.00

-0.2%

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Stocks were cautiously higher, as traders moved to look past concerns of a trade war which has pressured stocks this week.  The escalating tit-for-tat trade tensions between the world's 2 biggest economies comes after Trump, last Fri, put tariffs on $50B worth of Chinese goods, warning that if China retaliated, so would Trump who is also threatening to target $200B more in tariffs.  Yesterday the Dow slipped 287 (1.2%) to 24,700.  The S&P 500 fell 11 (4%) to 2762 & the NAZ was down 21 (0.3%) at 7,725.  General Electric (GE), one of the 30 original members of the Dow Jones Industrial Average, will be removed from the leading index amid a prolonged stock slide & financial difficulties that have forced the one-time giant to cut costs, the S&P Dow Jones Index Committee announced.  Despite the news GE shares opened higher.  Walgreen Boots Alliance (WBA) will replace the longtime industrial member, those shares popped on the news.  Economic data released today included existing home sales, which declined by 0.4% in May to 5.43M, the 2nd-consecutive month of declines.  Commodities were mixed but oil futures were higher, rallying on the possibility that OPEC won't be able to reach an agreement on raising output following a clash between Saudi Arabia & Iran.  As reported, Iran said it was likely to reject any agreement that raised output from the group.

Stocks rebound as trade fears ease

Pres Trump won't allow China to prey on US technology any longer, White House National Trade Council Director Peter Navarro said.  Trump on Mon threatened to impose an additional $200B in new tariffs on Chinese goods in response to retaliatory levies from Beijing.  Navarro said if the proposed investment restrictions are enforced they would protect America's future.  “The purpose of those would be to prevent China from coming into Silicon Valley paying a very high premium,” Navarro said.  “They are stealing our crown jewels.”  Trump recently approved heavy tariffs on $50B of Chinese imports.  China responded by proposing duties on $50B in US goods, including pork, beef & cars.

Trump’s China clamp down defends America’s crown jewels: trade director Peter Navarro

Citing robust growth and a generational low in unemployment, Federal Reserve Chairman Jerome Powell emphasized the central bank's commitment to further interest rates in a speech today.  Economic gains are negating the need for crisis-era monetary policy, the Fed leader said.  "Earlier in the expansion, as the economy recovered, the need for highly accommodative monetary policy was clear," Powell said.   "But with unemployment low and expected to decline further, inflation close to our objective, and the risks to the outlook roughly balanced, the case for continued gradual increases in the federal funds rate is strong."  His remarks came a week after the policymaking FOMC voted to raise rates 0.25 basis percentage pojnts.  It was the 6th such increase since the Fed began normalizing policy in Dec 2015 after 7 years of keeping its benchmark rate target anchored near zero as the economy recovered from the financial crisis.  At that meeting, FOMC officials indicated they were likely to approve 2 more rate increases, bringing the 2018 total to 4.  Markets, though, have remained unconvinced, with the futures market assigning just a 50.9% to a 4th hike.  Powell spoke at length about the jobs market, saying that although wage pressures remain moderate there's still good reason to believe the economy is nearing full employment.  The unemployment rate is at 3.8%, tied for the lowest rate since 1969.  "Today, most Americans who want jobs can find them," he said.  "High demand for workers should support wage growth and labor force participation."  As he has in the past, Powell stressed the need not to let accommodative policy in place too long.  He pointed out that the last 2 recessions were caused by "financial imbalances" rather than inflation, the financial crisis of 2008 & the dotcom implosion in the early 2000s.  However, he said he doesn't see anything worrisome from asset prices at present.  "While some asset prices are high by historical standards, I do not see broad signs of excessive borrowing or leverage. In addition, banks have far greater levels of capital and liquidity than before the crisis," Powell added.  While he said there remains uncertainty around monetary policy, the case for interest rate hikes is solid, a position he said is supported "broadly" by FOMC members.

Fed Chair Powell calls case 'strong' for more interest rate hikes

Stock buyers did not come out in force after the big decline in the last week.  Trade tensions are running high with no sign of relief in sight.  Tech stocks are still in demand, but even they will experience selling  pressure if trading uncertainties persist.  Dow remains back to where it was 6 months ago (on the way up).

Dow Jones Industrials