Dow rose 54 (but off more than 100 from session highs), advancers over decliners 5-4 & NAZ added 51 (still above 8K). The MLP index went up 1+ to the 272s & the REIT index was off 4 to 346. Junk bond crawled higher & Treasuries fluctuated. Oil climbed to the 72s after Saudi Arabia agreed to add more crude to the market (more below) & gold dropped 11 to 1187.
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
Japan dodges US auto tariffs, for now, as Trump and Abe agree on trade talks
House poised to pass tax-cut bills despite unlikely Senate action
Pending home sales fall in August to the slowest pace since the start of the year
Saudi Arabia will quietly add extra oil to the market over the next couple of months to offset a drop in Iranian production but is worried it might need to limit output next year to balance global supply and demand as the US pumps more crude. The kingdom, OPEC's top producer, came under renewed pressure last week from Pres Trump to cool oil prices ahead of a meeting in Algiers between a number of OPEC ministers & allies including Russia. Sources said that Saudi Arabia is ready to put as much as 550K additional barrels onto the market. The gains will come from about 200K barrels per day from its Kurais oil field, as well as resumed capacity from some pipeline issues with the Manifa field. Sources said though that this increased supply is reliant on demand. If demand is apparent, supply will grow accordingly, OPEC insiders said. But Riyadh decided against pressing for an official increase now as it realized it would not secure agreement from all producers present at the talks, some of which lack spare production capacity & would be unable to boost output quickly. Such a move would have unsettled relations among producers, sources said, with the Saudis keen to maintain unity among the OPEC+ alliance in case Riyadh wants to change course in future & seek their collaboration on an output cut. "There are only two months left until the end of the year, so why create tensions now between Saudi Arabia, Iran and Russia?" one source said. Saudi Energy Minister Khalid al-Falih said Sun he was concerned that oil production gains, mainly from the US, could outstrip a projected increase in oil demand & result in an inventory overhang globally. "There are more demand threats next year compared to supply threats," said another source. Oil rices rose to their highest since 2014 above $80 per barrel this week on fears that a steep decline in Iranian oil exports because of new US sanctions will deepen an oil deficit, along with production declines in Venezuela. However, OPEC's latest report released at the weekend forecast that its non-OPEC rivals led by the US would increase output by 2.4M bpd in 2019 while global oil demand should grow by just 1.5M bpd. That, Saudi thinking goes, could create a large surplus of crude next year, especially if a stronger $ & weaker emerging market economies reduce global demand for oil. The big unknown, however, is to what extent Iran will be forced to reduce output next year as customers in Europe & Asia walk away from its oil, in reaction to US sanctions. OPEC's own reports show Iranian supply has already fallen by around 300K bpd in recent weeks, although Iran insists it has remained steady at some 3.8M bpd. Sources familiar with Saudi production plans said the kingdom would raise output by some 200-300K bpd in Sep & Oct on top of the 10.4M bpd it produced in Aug, to meet additional client demand, mainly in Asia.
Saudi Arabia will quietly add extra oil to the market to offset a drop in Iranian production
The drama in DC is getting just about everybody's attention today. But sellers returned in the PM to trim the AM advance. Investors are mulling over the Fed statement on interest rates & the sluggish market for home-builders is a worry (in what is a very strong economy). Then there is the trade mess which shows no sign of getting better anytime soon. The Dow is down 300 this week & up only about 450 in Sep.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
Pres & Japanese Prime Minister
Shinzo Abe agreed yesterday to start trade talks in an arrangement
that, for now, protects Japanese automakers from further tariffs. The 2 countries said in a joint statement the talks "will respect
positions of the other government," drawing lines on autos & Japan's
agriculture sector. Japan has a $69B trade surplus with the US with nearly 2/3 coming from auto exports. Trump wants a 2-way agreement to address it. The statement said a deal governing the auto sector would be written to boost production & jobs in the US. Tokyo
had worried that Trump could demand a reduction in auto imports from
Japan or that he could impose steep tariffs on such imports on national
security grounds. While economists saw the
agreement as a positive outcome for Japan for now, they noted what would
ultimately be agreed upon was still unknown. Shares
on the most export-reliant
Japanese automakers rose,
outperforming a slightly weaker Tokyo stock market.
Japan dodges US auto tariffs, for now, as Trump and Abe agree on trade talks
A 3-bill legislative package known as Tax
Reform 2.0 is expected to clear the GOP-dominated House during votes today & tomorrow. While the legislation is expected to be
dead on arrival if it makes it to the Senate, some proposed changes to
retirement savings could remain in play. Among other changes, the
bills would make recently enacted tax cuts for individuals permanent,
expand retirement & education accounts & create tax-advantaged
Universal Savings Accounts. While supporters say a 2nd
round of tax cuts would lead to continued economic growth, critics point
to its $627B price tag over the next 10 years, based on an
analysis by the Joint Committee on Taxation. That's on top of the $1.5T the already-passed cuts are projected to cost during the same
period. The bill, the Retirement Enhancement Security Act (S 2526), would
remove the 70½ age limit for making contributions to traditional IRAs & would make it easier for small
businesses to band together to offer 401(k) plans, among other
provisions. It also would make it
easier for 401(k) plans to offer annuities by creating a regulatory
"safe harbor" &, as long as plan administrators meet certain
requirements when choosing an annuity provider, they'd get some legal
protection. Although that provision
initially was excluded from the Tax Reform 2.0 package, it was added via
an amendment that was tacked on to one of the House bills late yesterday. House GOP leaders have been committed to pushing the tax bills
thru this month before members head to their districts to campaign
ahead of the Nov midterm elections. Even if most of the
provisions in the House bills end up shelved, they could be revived next
year when a new Congress is in place or at another time, depending on
the balance of power.
With both home prices & mortgage rates continuing to rise, fewer consumers signed contracts to buy existing homes in Aug. Pending home sales fell 1.8% for the month, according to the National Association of
Realtors' seasonally adjusted index. Sales were down 2.3%
compared with Aug 2017, the 4th monthly decline in the
past 5 months & the slowest sales pace since Jan. Sales have been hampered
all year by a very lean supply of affordable listings. Inventories did
rise slightly in Aug, but there is still precious little supply at
the entry level, where most of the demand is. "The greatest decline occurred
in the West region where prices have shot up significantly, which
clearly indicates that affordability is hindering buyers and those
affordability issues come from lack of inventory, particularly in
moderate price points," said Lawrence Yun, chief economist at the NAR. Pending home sales
dropped 5.9% in the West month to month & were down a striking
11.3% compared with Aug 2017. Prices in the West, however, are
still higher than a year ago, but the gains are shrinking. Prices
usually lag sales. Sales fell 1.3% in
the Northeast monthly & were down 1.6% annually. In the
Midwest, sales fell 0.5% monthly & 1.1% annually. In the
South, sales were down 0.7% monthly but were 1.3% higher
than a year ago. Despite still-low supply of homes for sale, a record high number of
Americans believe now is a good time to sell, according to a recent
survey. Nearly 77% of homeowners surveyed
indicated now is a good time to sell, compared with 55% a few
years ago. "With prices having risen
so quickly, many consumers were deciding to wait to list their homes
hoping to see additional price and equity gains," Yun said. "However,
with indications that buyers are beginning to pull out, price gains are
going to decelerate and potential sellers are considering that now is a
good time to list and bring more properties to the market." Sales of newly built
homes rose 3.5% in Aug month over month, according to the US
Census, which tracks signed contracts. Sales are still, however, well
below the historical norms for new construction. Prices for new homes
are at near-record levels, as builders contend with higher costs for
land, labor & especially materials, thanks to new tariffs on building products. The supply of new homes for sale is far higher, but demand is lower, due to affordability issues. Mortgage rates rose in
Aug as well & are now nearly a full percentage point higher than
they were one year ago. Job creation, however, is stronger as is wage
growth, which is pushing more demand for housing. The Realtors expect
total sales this year to be 1.6% lower than sales in 2017.
Pending home sales fall in August to the slowest pace since the start of the year
Saudi Arabia will quietly add extra oil to the market over the next couple of months to offset a drop in Iranian production but is worried it might need to limit output next year to balance global supply and demand as the US pumps more crude. The kingdom, OPEC's top producer, came under renewed pressure last week from Pres Trump to cool oil prices ahead of a meeting in Algiers between a number of OPEC ministers & allies including Russia. Sources said that Saudi Arabia is ready to put as much as 550K additional barrels onto the market. The gains will come from about 200K barrels per day from its Kurais oil field, as well as resumed capacity from some pipeline issues with the Manifa field. Sources said though that this increased supply is reliant on demand. If demand is apparent, supply will grow accordingly, OPEC insiders said. But Riyadh decided against pressing for an official increase now as it realized it would not secure agreement from all producers present at the talks, some of which lack spare production capacity & would be unable to boost output quickly. Such a move would have unsettled relations among producers, sources said, with the Saudis keen to maintain unity among the OPEC+ alliance in case Riyadh wants to change course in future & seek their collaboration on an output cut. "There are only two months left until the end of the year, so why create tensions now between Saudi Arabia, Iran and Russia?" one source said. Saudi Energy Minister Khalid al-Falih said Sun he was concerned that oil production gains, mainly from the US, could outstrip a projected increase in oil demand & result in an inventory overhang globally. "There are more demand threats next year compared to supply threats," said another source. Oil rices rose to their highest since 2014 above $80 per barrel this week on fears that a steep decline in Iranian oil exports because of new US sanctions will deepen an oil deficit, along with production declines in Venezuela. However, OPEC's latest report released at the weekend forecast that its non-OPEC rivals led by the US would increase output by 2.4M bpd in 2019 while global oil demand should grow by just 1.5M bpd. That, Saudi thinking goes, could create a large surplus of crude next year, especially if a stronger $ & weaker emerging market economies reduce global demand for oil. The big unknown, however, is to what extent Iran will be forced to reduce output next year as customers in Europe & Asia walk away from its oil, in reaction to US sanctions. OPEC's own reports show Iranian supply has already fallen by around 300K bpd in recent weeks, although Iran insists it has remained steady at some 3.8M bpd. Sources familiar with Saudi production plans said the kingdom would raise output by some 200-300K bpd in Sep & Oct on top of the 10.4M bpd it produced in Aug, to meet additional client demand, mainly in Asia.
Saudi Arabia will quietly add extra oil to the market to offset a drop in Iranian production
The drama in DC is getting just about everybody's attention today. But sellers returned in the PM to trim the AM advance. Investors are mulling over the Fed statement on interest rates & the sluggish market for home-builders is a worry (in what is a very strong economy). Then there is the trade mess which shows no sign of getting better anytime soon. The Dow is down 300 this week & up only about 450 in Sep.
Dow Jones Industrials
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