Dow rose 87, decliners slightly ahead of advancers & NAZ fell 22. The MLP index index added 2+ to the 251s & the REIT was off 2+ to the 348s. Junk bond funds were mixed & Treasuries went up in price. Oil jumped up 1+ to the 57s & gold gained 6 to the 1221.
AMJ (Alerian MLP Index tracking fund)
US stocks struggle as tech sector weighs on indexes
Fed's Clarida says central bank getting closer to neutral and should be 'data dependent' on more hikes
US manufacturing output beats expectations in October
Saudi Arabia is slashing shipments of crude to the US, a move that appears calibrated to boost oil prices after a swift & punishing sell-off. The move could put the kingdom at loggerheads with Pres Trump, who wants to drive down energy costs for Americans & frequently accuses the Saudi-led OPEC cartel of jacking up oil prices. The Saudis are loading fewer barrels on ships bound for the US this month, continuing a trend that began in Sep. A loading estimate suggests that US imports of Saudi crude oil could soon fall toward the lowest levels on record. Sending fewer barrels to the US means US crude stockpiles are more likely to drop & shrinking inventories tend to push up oil prices, a tactic the Saudis used last year to amplify their main strategy for draining a global crude glut & propping up the market: cutting output alongside fellow OPEC members, Russia & several other producers. The maneuver shows how Saudi Arabia's efforts to manage the oil market have evolved. During the 2014-2016 oil price crash, traders closely monitored weekly US stockpile data to see whether oversupply was shrinking or growing. As the world's biggest exporter, Saudi Arabia realized it could nudge the data in a direction that boosts the cost of crude. The Nov drop in Saudi barrels bound for the US follows a 6-week oil market rout that saw prices plunge 25% into bear market territory. It also comes after Saudi Energy Minister Khalid al-Falih warned on Mon that OPEC, Russia & several other producers may soon launch a fresh round of price-boosting output cuts. Shortly after Falih issued the warning, Trump took to Twitter to voice his disapproval with that plan. But Saudi Arabia may not be swayed by Trump’s pressure campaign. Analysts say Trump's threats to impose harsh sanctions on Iran, OPEC's 3rd-biggest producer, played a part in convincing the producers to stop capping output & start pumping more oil. But Trump ultimately allowed some of Iran's biggest customers to keep importing its oil, which meant the oil squeeze the alliance feared never materialized.
Saudis slash oil shipments to US, a tactic that boosts prices
Stocks meander, looking for direction. There are plenty of mixed signals. Economic data remains strong but chip makers are under pressure. Today's dovish comments from a Fed official were helpful. Trade talks are up in the air. Dow is down more than 600 this week & off 1.5K since the Oct 3 record.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 57.82 | +1.36 | +2.4% |
| GC=F | Gold | 1,221.90 | +6.90 | +0.6% |
Stocks fell, with chipmakers dragging down the tech sector, a day after the S&P 500 snapped a 5-day losing streak. Europe, markets bounced back from the Brexit bruising they've taken
this week. London's FTSE traded up 0.2%, Germany's
DAX was gaining 0.5% & France's CAC added 0.3%. In Asia, Japan's Nikkei fell as a drop in
semiconductor-related stocks weighed after US chip designer Nvidia
(NVDA) plunged after disappointed the market with worse-than-expected earnings, while
Nintendo (NTDOY) also fell sharply. The Nikkei average ended the day 0.6 %
lower & was down 2.6% this week. China's
Shanghai Composite finished the session 0.4% higher, gaining 3.1% for the week. Hong Kong's Hang Seng index finished the day up
0.3% & up 2.3% for the week. Yesterday US stocks closed near session highs amid another volatile
session. The Dow climbed back from losses to gain
208 (0.8%) & the NAZ & the S&P 500
captured gains of over 1% each.
US stocks struggle as tech sector weighs on indexes
The Federal Reserve is close to the point of being
“neutral” on interest rates & should predicate further increases on
economic data, the central bank's vice chairman said. Recent appointee Riochardx Clarida said that nearly 3 years of increases have
brought the Fed's short-term interest rate near where it is neither
restrictive nor stimulative, a key consideration when considering the
future path of monetary policy. “As you move in the range of policy that by some estimates is close to
neutral, then with the economy doing well it’s appropriate to sort of
shift the emphasis toward being more data dependent,” Clarida said, his first public comments since being confirmed in Sep. He
spoke at a time when the markets are watching Fed speakers closely for
what happens next with rates. Fed Chairman Jerome Powell helped stoke
market volatility in mid-Oct when he said the central bank remains
“a long way” from neutral, an indication that it would be more
aggressive with policy than investors had anticipated. With his comments, Clarida becomes the 2nd central banker in as many days to suggest that neutral isn't so far away. Atlanta Fed Pres Raphael Bostic said yesterday that the federal funds rate is “not too far” from neutral. Clarida
noted that the most recent projections from Federal Open Market
Committee members indicate that the long-run funds rate projection is 3%. The current funds rate target range is 2-2.25%, with markets widely expecting the FOMC to approve another
qtr-point increase in Dec. “I think being at neutral would make sense,” he added. In Oct, Powell said the Fed may actually want
to go past neutral if it sees a need to stop the economy from
overheating. While Powell’s comments helped rankle markets,
Clarida said “there is no clear signal” from the markets about the
direction of the economy. He also defended the Fed’s actions from
criticism that it is moving too quickly with rates & could harm the
momentum seen over the past 2 years. “The Fed began hiking
rates almost three years ago, and so it’s been a very gradual cycle,” he
said. “The economy this year is growing north of 3 percent,
unemployment’ s at a 50-year low almost, and so I think also right now
the policy that we set, the federal funds rate, is just barely above the
rate of inflation for the first time in a decade. So I wouldn’t agree
with that.” While he said the economy continues to grow, he
did not a slowdown globally that could factor into the Fed's
decision-making. “The economy this year as I said is going to be
growing at a pace we haven’t seen in a decade. Going forward, you have
to look at a lot of trends, including the global economy ... Some of it
is slowing,” Clarida added. “Broadly, we’re going to set a policy that
will help us achieve the mandate given to us by Congress.” “At least from my perspective, we’re at a point now where we need to be especially data-dependent,” he said.
Fed's Clarida says central bank getting closer to neutral and should be 'data dependent' on more hikes
US manufacturing output increased for a 5th
straight month in Oct, shrugging off a sharp decline in motor
vehicle production & suggesting underlying strength in factory
activity. The Federal Reserve said manufacturing
production rose 0.3% last month. Data for September was revised
up to show output at factories increasing 0.3% instead of
advancing 0.2% as previously reported. The forecast called for manufacturing output rising 0.2% in Oct. Motor
vehicle production slumped 2.8% after increasing 1.3% in
Sep. Excluding motor vehicles & parts, manufacturing gained a
solid 0.5% last month, boosted by a strong increase in the output
of business equipment. That followed a 0.2% rise in Sep. Manufacturing,
which accounts for about 12% of the economy, is being supported
by a strong domestic economy. But growing capacity constraints amid
labor shortages & more expensive raw material are slowing momentum. A
strong $ & cooling global growth are restraining exports. Oct's
rise in manufacturing production offset decreases in mining &
utilities output, leading to a 0.1% gain in industrial production
last month. Industrial output rose 0.2% in Sep. Mining
output fell 0.3% in Oct after slipping 0.1% in
Sep. Oil & gas well drilling rebounded 1.6% after
declining for 3 straight months. Utilities output dropped 0.5% in Oct after dipping 0.1% in the prior month. Capacity
utilization for the manufacturing sector, a measure of how fully firms
are using their resources, rose to 76.2%, the highest
since Jul 2015, from 76.1% in Sep. Overall capacity use
for the industrial sector fell to 78.4% from 78.5 in Sep (1.4 percentage points below its 1972-to-2017 average).
US manufacturing output beats expectations in October
Saudi Arabia is slashing shipments of crude to the US, a move that appears calibrated to boost oil prices after a swift & punishing sell-off. The move could put the kingdom at loggerheads with Pres Trump, who wants to drive down energy costs for Americans & frequently accuses the Saudi-led OPEC cartel of jacking up oil prices. The Saudis are loading fewer barrels on ships bound for the US this month, continuing a trend that began in Sep. A loading estimate suggests that US imports of Saudi crude oil could soon fall toward the lowest levels on record. Sending fewer barrels to the US means US crude stockpiles are more likely to drop & shrinking inventories tend to push up oil prices, a tactic the Saudis used last year to amplify their main strategy for draining a global crude glut & propping up the market: cutting output alongside fellow OPEC members, Russia & several other producers. The maneuver shows how Saudi Arabia's efforts to manage the oil market have evolved. During the 2014-2016 oil price crash, traders closely monitored weekly US stockpile data to see whether oversupply was shrinking or growing. As the world's biggest exporter, Saudi Arabia realized it could nudge the data in a direction that boosts the cost of crude. The Nov drop in Saudi barrels bound for the US follows a 6-week oil market rout that saw prices plunge 25% into bear market territory. It also comes after Saudi Energy Minister Khalid al-Falih warned on Mon that OPEC, Russia & several other producers may soon launch a fresh round of price-boosting output cuts. Shortly after Falih issued the warning, Trump took to Twitter to voice his disapproval with that plan. But Saudi Arabia may not be swayed by Trump’s pressure campaign. Analysts say Trump's threats to impose harsh sanctions on Iran, OPEC's 3rd-biggest producer, played a part in convincing the producers to stop capping output & start pumping more oil. But Trump ultimately allowed some of Iran's biggest customers to keep importing its oil, which meant the oil squeeze the alliance feared never materialized.
Saudis slash oil shipments to US, a tactic that boosts prices
Stocks meander, looking for direction. There are plenty of mixed signals. Economic data remains strong but chip makers are under pressure. Today's dovish comments from a Fed official were helpful. Trade talks are up in the air. Dow is down more than 600 this week & off 1.5K since the Oct 3 record.
Dow Jones Industrials
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