Dow rose 94 (closing near the highs), decliners slightly ahead of advancers & NAZ crawled up 2. The MLP index edged up in the 265s & the REIT index was off 1 to the 355s. Junk bond funds were off a tad & Treasuries continued higher. Oil rose climbed to 71 (more below) & gold fell 4 to 1241.
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
club.ino.com/trend/analysis/stock/WFC?a_aid=CD3289&a_bid=6ae5b6f7
The Federal Reserve says it expects low unemployment & rising inflation will keep it on track to raise interest rates at a gradual pace over the next 2 years. By late 2019, the Fed says its key policy rate should be at a level that will be slightly restrictive for growth. The Fed's projection on rate hikes came with release of the central bank's semi-annual monetary report to Congress. Fed Chairman Jerome Powell is scheduled to testify on the report for 2 days next week. The Fed last month raised its policy rate for a 2nd time this year & projected 2 more hikes in 2018. The monetary report says the expectation is that further hikes will leave the rate slightly above its neutral level by late next year.
Consumer sentiment dropped below expectations at the beginning of Jul to a 6-month low on rising fears regarding the Trump administration's trade battles. Consumer sentiment fell to 97.1, according to the Univ of Mich monthly survey of consumers. The forecast called for a reading of 98.2. "The darkening cloud on the horizon, however, is due to rising concerns about the potential negative impact of tariffs on the domestic economy," Richard Curtin, Surveys of Consumers chief economist, said. Over 50% of those in the top 1/3 of the income distribution cited escalating trade tensions as a reason for a future decline in the pace of economic growth & an uptick in inflation. The top 1/3 of the income distribution accounts for ½ of consumer spending. In the most recent trade spat, Pres Trump proposed a 10% tariff on Chinese goods which value $200B in trade annually. The Jun preliminary reading was the highest the measure has been since hitting 101.4 in March, more than a point above May's reading of 98. The Univ of Mich report considers 500 consumer attitudes about future economic conditions, including personal finances, unemployment, gov policies & interest rates.
Consumer sentiment hits six-month low on 'darkening cloud' of tariffs
Oil rebounds, but set for second straight weekly drop as supply concerns ease
The Dow had a good day, NAZ did not participate in the rise & market breadth was negative. Maybe some traders left early for a long weekend holiday. Trump is in Europe, meeting with the Queen & getting ready to talk with Putin. The Dow closed above 25K, but now the bulls have to challenge to take it higher.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
Wells Fargo (WFC) Q2 results missed
expecations, with its profit declining year-over-year as the bank
continues to try to move past its regulatory problems. EPS was 98¢, missing the estimate for
$1.12. Revenue was $21.6B, slightly under.the estimate of $21.68B. EPS included a discrete income tax expense of 10¢. In
Apr, the bank lowered its Q1 earnings after paying a $1B settlement to regulators over improp charges to car loan &
mortgage customers. The bank had EPS of $1.08 in the year ago qtr & revenue was $22.2B. In Q1, the bank reported adjusted EPS of $1.12 on revenue of $21.9B. Commenting
on the latest results, the bank added that Q2
results included $619M of operating losses primarily related to
"non-litigation expense for previously disclosed matters." The stock fell 70¢.
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Wells Fargo misses 2Q earnings expectations
The Federal Reserve says it expects low unemployment & rising inflation will keep it on track to raise interest rates at a gradual pace over the next 2 years. By late 2019, the Fed says its key policy rate should be at a level that will be slightly restrictive for growth. The Fed's projection on rate hikes came with release of the central bank's semi-annual monetary report to Congress. Fed Chairman Jerome Powell is scheduled to testify on the report for 2 days next week. The Fed last month raised its policy rate for a 2nd time this year & projected 2 more hikes in 2018. The monetary report says the expectation is that further hikes will leave the rate slightly above its neutral level by late next year.
Federal Reserve projects further gradual hikes in key rate
Consumer sentiment dropped below expectations at the beginning of Jul to a 6-month low on rising fears regarding the Trump administration's trade battles. Consumer sentiment fell to 97.1, according to the Univ of Mich monthly survey of consumers. The forecast called for a reading of 98.2. "The darkening cloud on the horizon, however, is due to rising concerns about the potential negative impact of tariffs on the domestic economy," Richard Curtin, Surveys of Consumers chief economist, said. Over 50% of those in the top 1/3 of the income distribution cited escalating trade tensions as a reason for a future decline in the pace of economic growth & an uptick in inflation. The top 1/3 of the income distribution accounts for ½ of consumer spending. In the most recent trade spat, Pres Trump proposed a 10% tariff on Chinese goods which value $200B in trade annually. The Jun preliminary reading was the highest the measure has been since hitting 101.4 in March, more than a point above May's reading of 98. The Univ of Mich report considers 500 consumer attitudes about future economic conditions, including personal finances, unemployment, gov policies & interest rates.
Consumer sentiment hits six-month low on 'darkening cloud' of tariffs
Oil prices rose about 1% as strike
actions in Norway & Iraq hit supplies, but futures had a 2nd straight week of decline after Libyan ports reopened & on the
view that Iran might still export some crude despite US sanctions. US benchmark West Texas Intermediate crude ended up 68¢ (1%) to $71.01. The
contract fell nearly 4% over the last 5 days, marking its 2nd straight weekly loss. Brent crude was up $1.11 (1.5%) at $75.56 a barrel, for a weekly fall of 2%. The market, however, found support today from supply concerns. Hundreds of workers on
Norwegian offshore oil & gas rigs went on strike on Tues after
rejecting a proposed wage deal, closing Shell's (RDS/A) Knarr field, which
produces 23K barrels of oil equivalent per day. In Iraq, about 100 protesters demanding jobs &
better services from Iraq's leaders closed access to Umm Qasr
commodities port near the southern city of Basra today said. Crude futures approached
$80 in Jun & early July due to Libyan & Venezuelan supply
disruptions & fears the US would press all buyers of
Iranian oil to cut imports to zero from Nov. But prices weakened in
recent days as OPEC member Libya reopened its ports in the east & Secretary of State Mike Pompeo said the administration would consider granting
waivers to some of Iran's crude buyers. Russian Energy Minister
Alexander Novak said today that a deal under which Russia would
provide goods to Iran in exchange for oil is still possible. Russia is
studying all legal issues related to the possible deal, he added. Prices also slid amid broader market fears that a US-China trade dispute could hit global economic growth. The Intl Energy Agency (IEA) warned yesterday that the
world was short of spare supply capacity & hence any new disruption
could further elevate oil prices. "Rising production from
Middle East Gulf countries and Russia, welcome though it is, comes at
the expense of the world's spare capacity cushion, which might be
stretched to the limit," the IEA said in its monthly report. "This vulnerability currently underpins oil prices and seems likely to continue doing so," the agency added. IEA also said demand for crude oil will be softer than previously expected in H2. The US oil rig count
remained steady at 863 in the latest week. The rate of growth has
slowed over the past month or so with a decline in crude prices from late May thru late Jun.
Oil rebounds, but set for second straight weekly drop as supply concerns ease
The US has nosed ahead of Saudi Arabia & is on
pace to surpass Russia to become the world's biggest oil producer for
the first time in more than 4 decades. The
latest forecast from the US Energy Information Administration predicts
that US output will grow next year to 11.8M barrels a day. "If
the forecast holds, that would make the U.S. the world's leading
producer of crude," says Linda Capuano, who heads the agency, a part of
the Energy Dept. Saudi Arabia & Russia
could upend that forecast by boosting their own production. In the face
of rising global oil prices, members of the OPEC cartel & a few
non-members including Russia agreed last month to ease production caps
that had contributed to the run-up in prices. Pres Trump has urged the Saudis to
pump more oil to contain rising prices. He tweeted on Jun 30 that King
Salman agreed to boost production "maybe up to 2,000,000 barrels." The
White House later clarified that the king said his country has a reserve
of 2M barrels a day that could be tapped "if and when
necessary." The idea that the US could ever again become the world's top oil producer once seemed preposterous. The
US led the world in oil production for much of the 20th
century, but the Soviet Union surpassed America in 1974 & Saudi
Arabia did the same in 1976, according to Energy Dept data. By
the end of the 1970s the USSR was producing 1/3 more oil than the
US & by the end of the 1980s, Soviet output was nearly double that of
the US. The last decade or so has seen a
revolution in American energy production, however, led by techniques
including hydraulic fracturing, or fracking, & horizontal drilling. Those
innovations, & the breakup of the Soviet Union, helped the US
narrow the gap. Last year, Russia produced more than 10.3M
barrels a day, Saudi Arabia pumped just under 10M & the US
came in under 9.4M barrels a day, according to US gov figures. The US has been pumping more than 10M barrels a day on average since Feb & probably pumped
about 10.9M barrels a day in Jun, up from 10.8M in May,
the energy agency said in its latest short-term outlook. According
to the Energy Dept, the US edged ahead of Saudi Arabia in
Feb & stayed there in Mar; both trailed Russia. The forecast is that US crude output will average 10.8M
barrels a day for all of 2018 & 11.8M barrels a day in 2019.
The current US record for a full year is 9.6M barrels a day in
1970. The trend of rising US output prompted the Intl Energy Agency to
predict this spring that the US would leapfrog Russia & become the
world's largest producer by next year, if not sooner. One
potential obstacle for US drillers is a bottleneck of pipeline
capacity to ship oil from the Permian Basin of Texas & New Mexico to
ports & refineries. Some analysts believe that Permian
production could decline, or at least grow more slowly, in 2019 or 2020
as energy companies move from their best acreage to more marginal areas.
US expected to become world's top oil producer next year
The Dow had a good day, NAZ did not participate in the rise & market breadth was negative. Maybe some traders left early for a long weekend holiday. Trump is in Europe, meeting with the Queen & getting ready to talk with Putin. The Dow closed above 25K, but now the bulls have to challenge to take it higher.
Dow Jones Industrials
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