Dow tumbled 201, decliners over advancers a very big 4-1 & NAZ dropped a whopping 145 (both finishing above session lows). The MLP index fell 2+ to the 279s & the REIT index fell 3+ to the 344s. Junk bond funds remained lower & Treasuries continued to be sold, taking the yield on the 10 year Treasury up 4 basis points to 3.2% (7 year high) - more below. Oil dropped 1+ to the 74s & gold was steady at 1202.
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
US gov debt yields added to a marked climb higher, making new multiyear highs as strong economic data continued to tempt investors into riskier assets. The yield on the benchmark 10 year Treasusry note, which climbed nearly 12 basis points yesterday, hit its highest level since May 2011 today at 3.23%. The 10-year rate held higher at 3.19%, while the yield on the 30 year Treasury bond, which broke a new 2014 high earlier today, was up at 3.36%. Bond yields move inversely to prices. Rates surged yesterday following data that showed that private payrolls rose by 230K in Sep which far surpassed the 168K jobs in Aug. The report adds to the now-widespread view that the labor market is near or beyond full employment; the gov's monthly report on the employment situation, including the unemployment rate, is due tomorrow. Meantime, the ISM non-manufacturing index jumped to 61.6 last month, its highest level since 2008, when the index was established. Economic sentiment received another boost after the Labor Dept said that the number of Americans filing for unemployment benefits fell to a near 49-year low last week, with initial claims slipping to a seasonally adjusted 207K. In sum, the data provided additional evidence that the 9-year-old expansion in US economy has yet to show signs of slowing down.
10-year yield hits highest in 7 years as investors bet on roaring economy, higher inflation
The US relationship with China is "probably as poor as" it was before the Nixon administration opened up ties more than 4 decades ago, former Fed governor Kevin Warsh said. "We're at the risk of a real cold war" between the world's 2 biggest economic superpowers, said Warsh, who had been on Pres Trump's short list for Fed chairman. "The last 30 years we've been living and breathing globalization as if it's an inevitable force." Warsh was using the term "cold war" to mean an economic standoff, not the decades-long "mutually assured destruction" nuclear stalemate between the US & Russia that began to thaw in the detente period that led to the fall of the Berlin Wall in 1989. "We are probably on the precipice of a brand new relationship with the Chinese," Warsh said. "Could we be at the beginning of a 10- or 20-year cold war? That has huge implications for the economy." Warsh, a distinguished visiting fellow at the Hoover Institution think tank, said ties between the nations are deteriorating at the gov-to-gov & business-to-business levels. "Five or 10 years from now we might see two poles: a Chinese-centric world and an American-centric world. And the [other global] economies and countries will have to plug into one or both," he added. China has certainly been moving toward a more consumer-led economy & away from state-funded stimulus for growth. But China's brand of capitalism still has an aspect of being state-directed as its core, which is quite different from the free-market capitalism of the US. Warsh said the new US-China dynamic is bigger than Trump. "I think whoever is sitting in that seat will have a new relationship with China." "Great power relationships are not about how many soybeans you're going to buy [or how] many Boeing airplanes you're going to buy. It's about your core interests," he added, suggesting the current trade war is only one part of the ideological differences between communist China & the democratic US. "I suspect that there will need to be between [Chinese President Xi Jinping and President Trump a great summit, among great powers. And that requires two countries that want to have that discussion," said Warsh, who was Fed governor from 2006 to 2011 during the bursting of the housing bubble & the 2008 financial crisis.
US and China are at risk of a '10- or 20-year' economic cold war, former Fed governor Warsh says
Nearly 1/3 of the senior credit officers polled in a quarterly Federal Reserve survey reported a decline in funding demand for equities over the past 3 months. The new survey also found a 1/5 of officers reporting a decrease in the financing rates for equities. The Fed also asked questions about the yield curve, & found that insurance company clients & pension plans were more typically net long a scenario where there's a moderate inversion, & nonfinancial corp clients were more typically long a scenario where the slope of the yield curve remains unchanged.
Based on the giveaways from corp America, there has never been a better time to be a stockholder. According to S&P Dow Jones Indices, div payouts hit a record in Q3, the latest in a series of such records that has been matched by an even-more-aggressive avalanche of stock-buyback programs. Rising divs are common in the market & according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, “2018 is closing in on its seventh consecutive year of record dividend payments.” The acceleration in growth stems in large part from the tax bill that was passed in late 2017, which gave corps an influx of cash that they have in large part been using on shareholder-return programs. Net div increases rose by $19.2B in the qtr, up from both the $15B increase in the year-ago period & the $13B net increase posted in Q2. Aggregate increases, not including div decreases, were up $20.1B. For the S&P 500, div payments set a record of $13.66 a share, up 11% year-over-year & jumping 4.3% from Q2, which had also been a record. In aggregate, companies in the S&P paid out $115.7B in the qtr, another record. That data show there were 460 div increases reported during Q3, up 5% from the number of increases announced in Q3-2017. Only 67 companies decreased their divs, down 28% from the year-ago period. Currently, 81.4% of S&P 500 components pay a div & the index has an overall yield of 1.76%.
Oil futures settled lower on, with the US benchmark suffering its largest one-day percentage decline since mid-Aug. Nov West Texas Intermediate crude, the US benchmark contract, lost $2.08 (2.7%) to settle at $74.33 a barrel. That was the biggest one-day percentage decline since mid-Aug. Dec Brent fell $1.71 (2%) to $84.58 a barrel. The Energy Information Administration reported that domestic crude supplies surged by 8M barrels for the latest week. The Trump administration's decision to pull out of a 2015 intl agreement to curb Iran's nuclear program & a reimposition of economic sanctions on the 3rd-largest producer of crude set to kick in next month have helped to drive oil prices higher. In a further escalation of relations with Iran, Secretary of State Mike Pompeo announced yesterday that the US is terminating the 1955 Treaty of Amity, after a UN court said it prevented the US from imposing sanctions that affect humanitarian aid. That puts much attention on mega producer Saudi Arabia, the de facto leader of OPEC. The kingdom’s energy minister, Khalid al-Falih, announced that Saudi oil production would rise in Oct to 10.7M barrels a day, a record level. A survey showed that Saudi Arabia was still producing 10.53M barrels a day in Sep. On top of that, according to data from the Russian Ministry of Energy, Russia already stepped up its oil production to a record-high 11.36M barrels a day in Sep.
This qualifies as one ugly day, although the averages finished off session lows. Higher interest rates are rattling the stock market & the chaos in DC may be making matters even worse. A good jobs report tomorrow could help calm nervous traders.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
US gov debt yields added to a marked climb higher, making new multiyear highs as strong economic data continued to tempt investors into riskier assets. The yield on the benchmark 10 year Treasusry note, which climbed nearly 12 basis points yesterday, hit its highest level since May 2011 today at 3.23%. The 10-year rate held higher at 3.19%, while the yield on the 30 year Treasury bond, which broke a new 2014 high earlier today, was up at 3.36%. Bond yields move inversely to prices. Rates surged yesterday following data that showed that private payrolls rose by 230K in Sep which far surpassed the 168K jobs in Aug. The report adds to the now-widespread view that the labor market is near or beyond full employment; the gov's monthly report on the employment situation, including the unemployment rate, is due tomorrow. Meantime, the ISM non-manufacturing index jumped to 61.6 last month, its highest level since 2008, when the index was established. Economic sentiment received another boost after the Labor Dept said that the number of Americans filing for unemployment benefits fell to a near 49-year low last week, with initial claims slipping to a seasonally adjusted 207K. In sum, the data provided additional evidence that the 9-year-old expansion in US economy has yet to show signs of slowing down.
10-year yield hits highest in 7 years as investors bet on roaring economy, higher inflation
The US relationship with China is "probably as poor as" it was before the Nixon administration opened up ties more than 4 decades ago, former Fed governor Kevin Warsh said. "We're at the risk of a real cold war" between the world's 2 biggest economic superpowers, said Warsh, who had been on Pres Trump's short list for Fed chairman. "The last 30 years we've been living and breathing globalization as if it's an inevitable force." Warsh was using the term "cold war" to mean an economic standoff, not the decades-long "mutually assured destruction" nuclear stalemate between the US & Russia that began to thaw in the detente period that led to the fall of the Berlin Wall in 1989. "We are probably on the precipice of a brand new relationship with the Chinese," Warsh said. "Could we be at the beginning of a 10- or 20-year cold war? That has huge implications for the economy." Warsh, a distinguished visiting fellow at the Hoover Institution think tank, said ties between the nations are deteriorating at the gov-to-gov & business-to-business levels. "Five or 10 years from now we might see two poles: a Chinese-centric world and an American-centric world. And the [other global] economies and countries will have to plug into one or both," he added. China has certainly been moving toward a more consumer-led economy & away from state-funded stimulus for growth. But China's brand of capitalism still has an aspect of being state-directed as its core, which is quite different from the free-market capitalism of the US. Warsh said the new US-China dynamic is bigger than Trump. "I think whoever is sitting in that seat will have a new relationship with China." "Great power relationships are not about how many soybeans you're going to buy [or how] many Boeing airplanes you're going to buy. It's about your core interests," he added, suggesting the current trade war is only one part of the ideological differences between communist China & the democratic US. "I suspect that there will need to be between [Chinese President Xi Jinping and President Trump a great summit, among great powers. And that requires two countries that want to have that discussion," said Warsh, who was Fed governor from 2006 to 2011 during the bursting of the housing bubble & the 2008 financial crisis.
US and China are at risk of a '10- or 20-year' economic cold war, former Fed governor Warsh says
Nearly 1/3 of the senior credit officers polled in a quarterly Federal Reserve survey reported a decline in funding demand for equities over the past 3 months. The new survey also found a 1/5 of officers reporting a decrease in the financing rates for equities. The Fed also asked questions about the yield curve, & found that insurance company clients & pension plans were more typically net long a scenario where there's a moderate inversion, & nonfinancial corp clients were more typically long a scenario where the slope of the yield curve remains unchanged.
Fed survey reports plunge in funding demand for equities
Based on the giveaways from corp America, there has never been a better time to be a stockholder. According to S&P Dow Jones Indices, div payouts hit a record in Q3, the latest in a series of such records that has been matched by an even-more-aggressive avalanche of stock-buyback programs. Rising divs are common in the market & according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, “2018 is closing in on its seventh consecutive year of record dividend payments.” The acceleration in growth stems in large part from the tax bill that was passed in late 2017, which gave corps an influx of cash that they have in large part been using on shareholder-return programs. Net div increases rose by $19.2B in the qtr, up from both the $15B increase in the year-ago period & the $13B net increase posted in Q2. Aggregate increases, not including div decreases, were up $20.1B. For the S&P 500, div payments set a record of $13.66 a share, up 11% year-over-year & jumping 4.3% from Q2, which had also been a record. In aggregate, companies in the S&P paid out $115.7B in the qtr, another record. That data show there were 460 div increases reported during Q3, up 5% from the number of increases announced in Q3-2017. Only 67 companies decreased their divs, down 28% from the year-ago period. Currently, 81.4% of S&P 500 components pay a div & the index has an overall yield of 1.76%.
Dividend payouts hit another record as tax bill-fueled giveaway to shareholders continues
Oil futures settled lower on, with the US benchmark suffering its largest one-day percentage decline since mid-Aug. Nov West Texas Intermediate crude, the US benchmark contract, lost $2.08 (2.7%) to settle at $74.33 a barrel. That was the biggest one-day percentage decline since mid-Aug. Dec Brent fell $1.71 (2%) to $84.58 a barrel. The Energy Information Administration reported that domestic crude supplies surged by 8M barrels for the latest week. The Trump administration's decision to pull out of a 2015 intl agreement to curb Iran's nuclear program & a reimposition of economic sanctions on the 3rd-largest producer of crude set to kick in next month have helped to drive oil prices higher. In a further escalation of relations with Iran, Secretary of State Mike Pompeo announced yesterday that the US is terminating the 1955 Treaty of Amity, after a UN court said it prevented the US from imposing sanctions that affect humanitarian aid. That puts much attention on mega producer Saudi Arabia, the de facto leader of OPEC. The kingdom’s energy minister, Khalid al-Falih, announced that Saudi oil production would rise in Oct to 10.7M barrels a day, a record level. A survey showed that Saudi Arabia was still producing 10.53M barrels a day in Sep. On top of that, according to data from the Russian Ministry of Energy, Russia already stepped up its oil production to a record-high 11.36M barrels a day in Sep.
U.S. oil drops nearly 3% on domestic stockpile surge, talk of efforts to raise output
This qualifies as one ugly day, although the averages finished off session lows. Higher interest rates are rattling the stock market & the chaos in DC may be making matters even worse. A good jobs report tomorrow could help calm nervous traders.
Dow Jones Industrials
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