Dow dropped 327 (not far from the lows), decliners over advancers better than 3-1 & NAZ sank 157. The MLP index lost 1+ to 271 & the REIT index was little changed in the 339s. Junk bond funds slipped lower & Treasuries were steady while stocks were sold. Oil fell the 68s (more below) & gold went up 2 to 1229 while stocks were sold.
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
Treasury Secretary Steve Mnuchin said he will not attend a high-profile investor conference in Saudi Arabia, the latest fallout from the disappearance & presumed death of Saudi journalist Jamal Khashoggi. Mnuchin had planned to attend the Future Investment Initiative summit in Riyadh, set for Oct 23-25. But Khashoggi, a powerful critic of Saudi Arabia’s monarchy, disappeared after entering the kingdom’s consulate in Turkey. Widely held worries that Khashoggi was murdered in the consulate has led numerous global gov & corp leaders, including leaders from Google (GOOG), the World Bank & Uber, to cancel plans to attend the summit. Last year, FOX Business was among the few to sitdown with the Crown Prince who is pushing economic & social progression in the Kingdom. The country is also building a new futuristic city called NEOM.
Larry Kudlow, the director of the National Economic Council, went after China for digging in its heels in trade talks with the US. “They are unfair traders. They are illegal traders. They have stolen our intellectual property,” Kudlow said. “China has not responded positively to any of our asks.” “America has the greatest technology in the world; it is the backbone of our economy,” he added. “China can’t seem to do that, so they steal it. We can’t allow that.” Kudlow's comments come as the US & China have slapped tariffs on B$ worth of each other's goods. These protectionist trade policies have stoked fears of a possible slowdown in the global economy & have kept investors on edge for most of 2018. “We have to defend America’s interests; we have to defend American workers and farmers,” Kudlow said. “We have used tariffs as part of [President Donald Trump’s] negotiating strategy, and he won’t let go of his criticism that China must change.” Kudlow also pointed out that the US economy is stronger than China's, noting the Chinese yuan's fall is a sign that investors have lost confidence in their economy. “We are in a boom, and they know it,” Kudlow continued.
Larry Kudlow: China 'has not responded positively to any of our asks' in US trade talks
Oil plunges nearly 11% in just 2 weeks, shrugging off Iran sanctions and Saudi tension
Fed's Quarles says uncertainty calls for gradual U.S. rate hikes
St Louis Pres James Bullard said he was content with the current level of short-term interest rates & didn't understand why his colleagues were penciling in steady increases. “We’re in great shape right now,” he said. Bullard said he was willing to go along with interest-rate increases so far this year because the economy has surprised to the upside. The Fed has penciled in one more rate hike this year & 3 in 2019 & projects the benchmark federal funds rates will hit 3.4% by 2020. Bullard added that the Fed's forecast of 3.4% short-term rates in 2020 would be “quite a way” into restrictive territory. Minutes of the Fed’s last policy meeting show many officials think rates will have to be restrictive, at least for a short time. Bullard played down the recent volatility in the equity & bond markets, saying nothing has happened that hadn't been expected. He said the equity market has done very well over the past 2 years & so “it’s not surprising there was some kind of selloff.” At the same time, the rise in long-term bond yields was “long anticipated,” he continued. Even today, the rise in long-term bond yields is not enough to make the yield curve slope “healthy,” he said. A 70 basis point spread between short-term securities & long-term bonds could be considered “healthy,” he said. At the moment, the spread between 2-year Treasury notes & 10-year Treasurys is 30 basis points. Bullard said the “Nafta 2.0” agreement with Mexico & Canada was a milestone for businesses, because it gives hope that the US won't “perpetually be in a tit-for-tat” trade skirmish with other major trading partners. Bullard said he wasn't surprised to see that the spate of trade tariffs have not had an obvious impact on the US economy. Economic models don’t show much of an effect on growth by tariffs unless they are “blanket” & “permanent,” like the Smoot-Hawley tariffs imposed in 1930 that shut down global trade, he said.
The intl scene has been getting a lot of attention while stocks were being sold in Oct. First it was China & now it's Saudi Arabia. Meanwhile interest rates are on the rise with the main question being, how much & how fast? The Dow finished off the lows, but that doesn't say much. It's still down more than 1K in Oct. This was a dreary day & the NAZ with those tech stocks suffered more pain. Oct looks gloomy for stocks with more selling ahead.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
Treasury Secretary Steve Mnuchin said he will not attend a high-profile investor conference in Saudi Arabia, the latest fallout from the disappearance & presumed death of Saudi journalist Jamal Khashoggi. Mnuchin had planned to attend the Future Investment Initiative summit in Riyadh, set for Oct 23-25. But Khashoggi, a powerful critic of Saudi Arabia’s monarchy, disappeared after entering the kingdom’s consulate in Turkey. Widely held worries that Khashoggi was murdered in the consulate has led numerous global gov & corp leaders, including leaders from Google (GOOG), the World Bank & Uber, to cancel plans to attend the summit. Last year, FOX Business was among the few to sitdown with the Crown Prince who is pushing economic & social progression in the Kingdom. The country is also building a new futuristic city called NEOM.
Treasury Secretary Mnuchin drops out of Saudi Arabia summit
Larry Kudlow, the director of the National Economic Council, went after China for digging in its heels in trade talks with the US. “They are unfair traders. They are illegal traders. They have stolen our intellectual property,” Kudlow said. “China has not responded positively to any of our asks.” “America has the greatest technology in the world; it is the backbone of our economy,” he added. “China can’t seem to do that, so they steal it. We can’t allow that.” Kudlow's comments come as the US & China have slapped tariffs on B$ worth of each other's goods. These protectionist trade policies have stoked fears of a possible slowdown in the global economy & have kept investors on edge for most of 2018. “We have to defend America’s interests; we have to defend American workers and farmers,” Kudlow said. “We have used tariffs as part of [President Donald Trump’s] negotiating strategy, and he won’t let go of his criticism that China must change.” Kudlow also pointed out that the US economy is stronger than China's, noting the Chinese yuan's fall is a sign that investors have lost confidence in their economy. “We are in a boom, and they know it,” Kudlow continued.
Larry Kudlow: China 'has not responded positively to any of our asks' in US trade talks
Talk of oil prices spiking to $100 has been replaced by another discussion: How low can crude futures go? The oil market has undergone a spectacular reversal, even against a backdrop of looming US sanctions on Iran, OPEC's 3rd-largest crude producer, & rising tensions between the US & Saudi Arabia, the world's biggest oil exporter. US crude futures fell to a one-month low of $68.55 today, plunging more than $8 a
barrel from this month's nearly 4-year high at $76.90. That’s a
remarkable 10.9% plunge from peak to trough over just 2 weeks. Meanwhile, Brent crude bottomed out at $78.69 a barrel, down $8 (9.3%) from its 4-year high at $86.74 on Oct 3. The supply of oil held in US storage tanks
has risen sharply over the last 4 weeks, Brent crude's spike above $86 a barrel 2 weeks ago sparked
fears that the high cost of oil would start to erode demand for the
commodity &
crude got swept up in a sell-off last week that saw investors dump risk
assets. So far, the geopolitical turmoil over Saudi
Arabia's alleged role in the suspected slaying of Saudi journalist &
US resident Jamal Khashoggi has not had much impact on the market. American lawmakers have said Saudi Arabia could face sanctions over the
incident, & today Treasury Secretary Mnuchin pulled out of a high-profile Saudi investment conference. Pres Trump is depending on Saudi Arabia to hike its oil output to offset his Iran
policy's inflationary pressure on oil prices. The kingdom is one of the
few nations with enough spare capacity to tame the cost of crude. Despite veiled threats from Saudi Arabia,
analysts say the market is deeply skeptical that Riyadh would cut
output & push oil prices higher to settle a political score.
Oil plunges nearly 11% in just 2 weeks, shrugging off Iran sanctions and Saudi tension
Because it is unclear how long the US economy
can sustain its current strength, the Federal Reserve should continue
with its gradual interest rate hikes until it becomes undeniable that a
change of course is necessary, an influential Fed governor said. Randal Quarles, the central bank's vice chair of
supervision, who rarely discusses monetary policy, said he was
optimistic about the economy's prospects, & that calls for continued
“stable, gradual, and predictable” policy tightening. The
Fed should “follow that course through the temporarily shifting and
sometimes conflicting signs from the economy unless some strong and
steady signal requires a firm but moderate correction,” he added.
Fed's Quarles says uncertainty calls for gradual U.S. rate hikes
St Louis Pres James Bullard said he was content with the current level of short-term interest rates & didn't understand why his colleagues were penciling in steady increases. “We’re in great shape right now,” he said. Bullard said he was willing to go along with interest-rate increases so far this year because the economy has surprised to the upside. The Fed has penciled in one more rate hike this year & 3 in 2019 & projects the benchmark federal funds rates will hit 3.4% by 2020. Bullard added that the Fed's forecast of 3.4% short-term rates in 2020 would be “quite a way” into restrictive territory. Minutes of the Fed’s last policy meeting show many officials think rates will have to be restrictive, at least for a short time. Bullard played down the recent volatility in the equity & bond markets, saying nothing has happened that hadn't been expected. He said the equity market has done very well over the past 2 years & so “it’s not surprising there was some kind of selloff.” At the same time, the rise in long-term bond yields was “long anticipated,” he continued. Even today, the rise in long-term bond yields is not enough to make the yield curve slope “healthy,” he said. A 70 basis point spread between short-term securities & long-term bonds could be considered “healthy,” he said. At the moment, the spread between 2-year Treasury notes & 10-year Treasurys is 30 basis points. Bullard said the “Nafta 2.0” agreement with Mexico & Canada was a milestone for businesses, because it gives hope that the US won't “perpetually be in a tit-for-tat” trade skirmish with other major trading partners. Bullard said he wasn't surprised to see that the spate of trade tariffs have not had an obvious impact on the US economy. Economic models don’t show much of an effect on growth by tariffs unless they are “blanket” & “permanent,” like the Smoot-Hawley tariffs imposed in 1930 that shut down global trade, he said.
Fed’s Bullard happy with current level of interest rates
The intl scene has been getting a lot of attention while stocks were being sold in Oct. First it was China & now it's Saudi Arabia. Meanwhile interest rates are on the rise with the main question being, how much & how fast? The Dow finished off the lows, but that doesn't say much. It's still down more than 1K in Oct. This was a dreary day & the NAZ with those tech stocks suffered more pain. Oct looks gloomy for stocks with more selling ahead.
Dow Jones Industrials
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