Friday, September 7, 2018

Mixded markets as they weigh rate hike fears

Dow fell 15, decliners over advancers about 3-2 & NAZ recovered 16 following 2 days of selling.  The MLP index was fractionally lower to the 279s & the REIT index rose 1 to the 362s.  Junk bond funds did little & Treasuries were sold, taking the yield on the 10 year Treasury up 6 basis points to 2.93%.  Oil was about even in the 67s & gold lost 1 to 1202.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil67.24
-0.53 -0.8%

GC=FGold  1,203.80
-0.50 -0.0%

3 Stocks You Should Own Right Now - Click Here!

Stocks were mixed even following a positive monthly read on the employment sector.  Of the 3 major stock market indices, the Dow was the biggest loser.  The broad-based S&P 500 was also lower, however, but the NAZ erased earlier losses to trade in positive territory.  The US added 201K jobs in Aug, surpassing expectations, while the unemployment rate was stable at Jul's 3.9%.  Wages finally picked up, with the annual pace of wage growth rising to 2.9% from Aug's 2.7%.  The forecast called for 191K positions created in Aug, while they forecast the unemployment rate would dip to 3.8% from in Jul.  Meanwhile, market jitters surround the fact that the trade dispute between the US & China could escalate as the White House was planning to place additional duties on Chinese goods.  In company news, Tesla's (TSLA) shares took a hit amid news of one confirmed, & one rumored exec departure.  Commodities were mostly lower.

Stocks mixed despite solid jobs data

The US jobs market is humming along, with hiring picking up in Aug & paychecks growing whole the unemployment rate held steady.  Payrolls increased by 201K in Aug & the unemployment rate stayed at 3.9%  . Analysts anticipated an additional 191K jobs with the unemployment rate decreasing to 3.8% from Jul's 3.9%.  This is the 95th straight month that US employers have added jobs.  Wages picked up in Aug, with the annual wage growth increase moving up to 2.9% from Jul's 2.7%.  The sluggish pace of wage growth has concerned some economists, but the latest reading shows that companies are having to boost pay to attract workers.  Jun jobs additions were revised to 208K & Jul to 147K, a net downward revision.

August jobs growth tops expectations, unemployment holds near 18-year low

Larry Kudlow, the White House top economic advisor, said China may feel more isolated if trade talks with the US fail.  "I think the Chinese, you know, may find themselves more isolated if they don't come into the global process and if they don't provide new information and begin to say yes to the asks of President Trump," he said.  The US is continuing to try to work with China to lower trade barriers.  "They've got to show some action," Kudlow added.  He added that the biggest story in 2018 is the economic boom "virtually no one thought possible."

Kudlow says China may find itself more isolated if trade talks with US fail

The Federal Reserve should continue to raise rates at a gradual pace should the US economy continue to do well, Boston Fed Pres Eric Rosengren said.  "Gradually increasing over the course of this next year makes sense," Rosengren said.  "If things work out well for the economy, and that's what I expect and hope, then we'll be in a situation where we need to have somewhat restrictive policy over time."  The US economy has been growing at fast pace recently.  Last week, the Commerce Dept said the US economy grew by 4.2% in Q2, up from an initial estimate of 4.1%.  That marks the fastest growth rate for the US economy since Q3-2014.  Rosengren added that the Fed funds neutral rate, which takes into account inflation, is probably in a range of 2.5-3%.  "I'd probably be at the upper end of that range. So we still have a ways to go."  The current Fed funds target rate sits in a range of 1.75-2%.  His comments come ahead of the Fed's monetary policy meeting scheduled for later this month.  The central bank is largely expected to raise rates a qtr point at its Sep meeting.  Market estimates for another rate hike in Dec are at 72%.  The Fed has already raised rates twice this year.  The central bank slashed interest rates to zero following the financial crisis in 2008 as a way to help jump start the economy & rates remained at that level until late 2015.  Rosengren said that US fiscal & monetary policy makers are not adequately prepared to face an economic downturn in the future.  "More attention should be given to establishing appropriate policy buffers to mitigate future shocks," Rosengren added.  Existing policy buffers, including fiscal, monetary & banking regulations, "may not be sufficient to offset future shocks, reducing the capacity available to policymakers to insulate the economy from future adverse shocks," he said.

Rosengren says Fed should continue gradually raising rates

News has not been very disturbing, but rate hike worries crept into today's thinking.  And of course trade war issues remain a constant worry.  Then there is the talk about lower US taxes.  Words are cheap, but the thought is welcomed by investors.  The US continues strong but doubts remain about what' ahead, especially with national elections in 2 months.

Dow Jones Industrials

No comments: