Dow lost 1, advancers barely ahead of decliners & NAZ were off 9. The MLP index fell 2+ to the 273s & the REIT index dropped 6 to 351. Junk bond funds inched higher & Treasuries pulled back, bringing higher yields. Oil rose in the 72s & gold added 2 to 1207.
AMJ (Alerian MLP Index tracking fund)
Stocks little changed as investors await Fed decision
Consumer confidence rose in Sep, notching its highest level in 18 years. The Consumer Board's index rose to 138.4 this month from 134.7 in Aug. The forecast called for consumer confidence to dip to 132. "Consumers' assessment of current conditions remains extremely favorable, bolstered by a strong economy and robust job growth," said said Lynn Franco, director of economic indicators at the Conference Board. "These historically high confidence levels should continue to support healthy consumer spending, and should be welcome news for retailers as they begin gearing up for the holiday season." Franco added the Sep index print is near the all-time high of 144.7 reached in 2000. The survey measures Americans' sentiment on current economic conditions & prospects for the next six months, including business and labor market conditions. The Conference Board also said optimism about the short-term outlook improved considerably this month, with 27.6% of consumers expecting business conditions to improve over the next 6 months; that's up from 24.4% in Aug. Consumers expecting business conditions to worsen, meanwhile, dropped to 8% from 9.9%. Labor-market expectations also improved in Sep as 22.5% of consumers expected more jobs in the months ahead, up from 21.5% in Aug. This comes after the Labor Dept said Thurs initial weekly jobless claims fell to 201K, the lowest level in nearly 49 years.
Consumer confidence rises to highest level in 18 years
US, Iran clash comes to UN, helping push oil higher
Look out for 2 more rate hikes this year from the Fed to go along with economic growth nearing 3% & a central bank that eventually raises rates explicitly to slow growth. A full 98% of the 46 respondents, who include economists, fund managers & strategists, see the Fed hiking rates a qtr point this week to a new range of 2-2¼% & 96% believe another qtr-point hike is coming in Dec. Respondents see the funds rate rising by 2 more qtr points (50 basis points) in 2019, which would bring it to a range of 2.75-3%. After that, divisions set in, with about ½ the group seeing a 3rd hike in 2019. About 60% of the group see the Fed raising rates above neutral to slow the economy. The average that respondents see the funds rate eventually ending this hiking cycle is 3.3%. A 5th of the group say a "fed policy mistake" is one of the biggest threats facing the expansion, 2nd only to trade protectionism. Respondents support Trump's handling of the economy by a 61% to 30% margin, unchanged from the Jul survey. But 59% say his trade policies will reduce growth & 52% say they will lower employment in the US. A slight 53% majority also say his negotiating tactics will lead to better trade agreements for the US, while 20% say they will be worse & 22% expect them not to change much. Overall, the tariff effects on the economy are seen as modest. Among those who see negative effects, the average is just a 0.2% decline for GDP in 2019 & a 0.2% higher inflation. Forecasts suggest the pres has some room for his trade policies to subtract from growth without doing enormous economic damage. Respondents look for GDP year over year to be up 2.8% in 2018, versus 2.2% in 2017 & up 3% in 2019, defying the general belief in a slowdown next year predicted by many economists. Inflation is seen ticking up to around 2.5% this year & next, while the unemployment rate is forecast to fall to 3.7% by 2019. "Rarely are so many economic gauges of the U.S. economy so strong — including employment, income, retail sales, business spending, manufacturing and small business," wrote Jack Kleinhenz, chief economist for the National Retail Federation. "The near-term outlook appears to be steady as she goes."
Fed to hike rates two more times this year : CNBC Survey
After a wild day yesterday, excitement in DC has calmed down a bit, at least for the time being. Economic data & confidence measures are all looking good while nagging thoughts about trade wars are on everybody's' minds. The Fed announcement tomorrow should be a non-event after the rate hike has been advertised so well. While the popular stock averages are all essentially at record levels, it is unusually difficult to make sense out of what is going on (especially in DC).
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 72.44 | +0.36 | +0.5% |
| GC=F | Gold | 1,206.50 | +2.10 | +0.2% |
Stocks were little changed as the Federal Reserve's 2-day policy meeting kicked off. The
FOMC begins a 2-day meeting,
investors widely expect policymakers to set in motion another increase
to short-term interest rates. Investors & economists will also be
watching Fed Chairman Jerome Powell, whose comments tomorrow at a press conference, may offer a better picture of plans heading into 2019 & potential concerns over the economic impact
of new import tariffs. Stocks closed in negative territory ysterday after the White House said
Pres Trump would meet Rod Rosenstein, deputy attorney general, on
Thurs, dialing back earlier reports that an immediate firing was
possible. The Dow fell 181 (0.7%) to 26,562 & the S&P 500 dropped 10 (0.3%) to 2919. The NAZ ticked 6 higher (0.1%) to 7993. The
Trump administration on placed tariffs of 10% on $200B of Chinese products, with the tariffs set to go up to 25%
by the end of 2018. Beijing's new levies, which also went into effect yesterday, will be 5-10%. China’s Shanghai Composite returned to trading following a holiday & traded down 0.8% & Hong Kong remained closed. Japan's Nikkei ended the day up 0.3%. In Europe, London’s FTSE gained 0.4%, Germany's DAX was 0.4% higher & France's CAC was up 0.4%.
Stocks little changed as investors await Fed decision
Consumer confidence rose in Sep, notching its highest level in 18 years. The Consumer Board's index rose to 138.4 this month from 134.7 in Aug. The forecast called for consumer confidence to dip to 132. "Consumers' assessment of current conditions remains extremely favorable, bolstered by a strong economy and robust job growth," said said Lynn Franco, director of economic indicators at the Conference Board. "These historically high confidence levels should continue to support healthy consumer spending, and should be welcome news for retailers as they begin gearing up for the holiday season." Franco added the Sep index print is near the all-time high of 144.7 reached in 2000. The survey measures Americans' sentiment on current economic conditions & prospects for the next six months, including business and labor market conditions. The Conference Board also said optimism about the short-term outlook improved considerably this month, with 27.6% of consumers expecting business conditions to improve over the next 6 months; that's up from 24.4% in Aug. Consumers expecting business conditions to worsen, meanwhile, dropped to 8% from 9.9%. Labor-market expectations also improved in Sep as 22.5% of consumers expected more jobs in the months ahead, up from 21.5% in Aug. This comes after the Labor Dept said Thurs initial weekly jobless claims fell to 201K, the lowest level in nearly 49 years.
Consumer confidence rises to highest level in 18 years
With oil bubbling higher, the UN
provide the next catalyst for prices, with both Pres Trump & Iranian Pres Rouhani each speaking about US sanctions
on Iran. Trump & Rouhani appear separately at
the UN General Assembly today, against the backdrop of
already rising oil prices. Rouhanie has no plans to meet with Trump. He said conditions were not ripe for talks &
said the US has made threats against his country. Oil prices were higher with
Brent crude just under $82 per barrel, a 4-year high. Oil was boosted
by supply concerns following a weekend meeting between OPEC ministers & Russia, where it was decided the current output agreement would remain unchanged for now. The severe decline in Venezuelan oil
output has exacerbated global supply, which could be made worse by the
coming restrictions on Iranian crude. The US pulled out of the Iran nuclear agreement, known as the Joint
Comprehensive Plan of Action [JCPOA], between Iran & 6 countries
that removed economic sanctions in return for Iran's promise to end its
nuclear program. However, the Trump administration opposed the agreement
as one-sided & said it allowed for Iran to eventually resume its
nuclear program. The other parties in the agreement remain in it, along
with Iran, but the US has already set plans to sanction Iran's oil
business in early Nov. Analysts say about
650K barrels of Iranian oil has already been taken off the market.
Even if European countries remain in the nuclear agreement, many
companies will no longer deal with Iranian crude for fear of being kept from business dealings with the US. Estimates
of 1M barrels or more of Iranian crude could be off the market by
year end. The US has also
objected to Iranian meddling in the conflicts in Syria & Yemen, in
which it supports rebels that are hostile to Saudi Arabia. The US has
also charged that Iran supports terrorist organizations such as
Hezbollah & Hamas. A terrorism attack in
Iran on Sun left more than 2 dozen dead & 70 injured. Iran blamed
US allies in the region for the attack, which was carried out by
militants dressed as soldiers at a military parade in Ahvaz. A local
Arab separatist group claimed responsibility. Trump chairs the 15-member security council tomorrow & has said
it will be about Iran, though it is expected to be broader. The 4
other permanent members — China, France, Russia, Britain — plus Germany
were parties to the Iranian nuclear agreement.
US, Iran clash comes to UN, helping push oil higher
Look out for 2 more rate hikes this year from the Fed to go along with economic growth nearing 3% & a central bank that eventually raises rates explicitly to slow growth. A full 98% of the 46 respondents, who include economists, fund managers & strategists, see the Fed hiking rates a qtr point this week to a new range of 2-2¼% & 96% believe another qtr-point hike is coming in Dec. Respondents see the funds rate rising by 2 more qtr points (50 basis points) in 2019, which would bring it to a range of 2.75-3%. After that, divisions set in, with about ½ the group seeing a 3rd hike in 2019. About 60% of the group see the Fed raising rates above neutral to slow the economy. The average that respondents see the funds rate eventually ending this hiking cycle is 3.3%. A 5th of the group say a "fed policy mistake" is one of the biggest threats facing the expansion, 2nd only to trade protectionism. Respondents support Trump's handling of the economy by a 61% to 30% margin, unchanged from the Jul survey. But 59% say his trade policies will reduce growth & 52% say they will lower employment in the US. A slight 53% majority also say his negotiating tactics will lead to better trade agreements for the US, while 20% say they will be worse & 22% expect them not to change much. Overall, the tariff effects on the economy are seen as modest. Among those who see negative effects, the average is just a 0.2% decline for GDP in 2019 & a 0.2% higher inflation. Forecasts suggest the pres has some room for his trade policies to subtract from growth without doing enormous economic damage. Respondents look for GDP year over year to be up 2.8% in 2018, versus 2.2% in 2017 & up 3% in 2019, defying the general belief in a slowdown next year predicted by many economists. Inflation is seen ticking up to around 2.5% this year & next, while the unemployment rate is forecast to fall to 3.7% by 2019. "Rarely are so many economic gauges of the U.S. economy so strong — including employment, income, retail sales, business spending, manufacturing and small business," wrote Jack Kleinhenz, chief economist for the National Retail Federation. "The near-term outlook appears to be steady as she goes."
Fed to hike rates two more times this year : CNBC Survey
After a wild day yesterday, excitement in DC has calmed down a bit, at least for the time being. Economic data & confidence measures are all looking good while nagging thoughts about trade wars are on everybody's' minds. The Fed announcement tomorrow should be a non-event after the rate hike has been advertised so well. While the popular stock averages are all essentially at record levels, it is unusually difficult to make sense out of what is going on (especially in DC).
Dow Jones Industrials
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