Dow jumped 207, advancers over decliners less than 2-1 & NAZ shot up 56. The MLP index slid back 1+ to a depressed 233 & the REIT index slumped 13 to the 338s. Junk bond funds also rebounded & Treasuries inched higher in price. Oil fell another 1+ to the 58s on worries about oversupply & gold was fractionally lower at 1251.
AMJ (Alerian MLP Index tracking fund)
US stocks up as Federal Reserve considers another rate hike
Chinese Pres Xi Jinping addressed his nation in Beijing to commemorate the 40th anniversary of China's "reform and opening up" — & he struck a relatively defiant tone in response to intl calls for changes to his country's economy. His remarks focused on how China's Communist Party guided the nation to its economic success & emphasized the country's right to pursue its own path going forward. In an address that lasted nearly 1½ hours, Xi did not mention trade tensions with the US & made only passing reference to market-oriented reform goals that previous speeches have discussed in detail. That idea of progress contrasts with other countries' increasingly vocal demands for less state control & could have significant consequences for whether the US reaches a trade deal with China by the end of its 90-day tariff ceasefire. "No one is in a position to dictate to the Chinese people what should or should not be done," Xi said. He called for China to "stay the course" on its current path. "What to reform and how to go about the reform must be consistent with the overarching goal of improving and developing the system of Socialism with Chinese Characteristics and modernizing China's system and capacity for governance," the Chinese leader added. "We will resolutely reform what should and can be reformed, and make no change where there should and cannot be any reform." Dec 18 commemorates how Chinese leader Deng Xiaoping's restructuring of the economy in 1978, paving the way for individual ownership in some industries & allowing foreign companies limited access. Many credit the policy change for helping lift hundreds of Ms out of poverty & turning China into an economic powerhouse that now ranks 2nd to the US. During the ceremony, Beijing recognized 100 "reform pioneers" & 10 recipients of the "China Friendship Medal."
In a sharp change toward a darker outlook, respondents to the CNBC Fed Survey have boosted the chance of recession next year to the highest level of the Trump presidency, reduced their support for the his handling of the economy & lowered their outlook for economic growth & Fed rate hikes, with some even flirting with the idea of a rate cut in 2019. Still, many of the 43 respondents, who include economists, fund managers & strategists, also argued that the market has overdone it to the downside. The chance of recession in the next 12 months rose to 23%, the 2nd straight increase & up from 19% in the prior survey. That's higher than the 19% long run average for the 7-year-old survey & 9 points higher than the low of the Trump presidency. 12% of respondents who think the Federal Reserve, after hiking in Dec, would next move to reduce the Fed Funds rate & do so by Oct. While the percentage is small, no forecasters predicted a 2019 rate cut in the Sep survey. The tone of responses is more negative, 63% of those surveyed believe the recent market sell-off reflects too pessimistic a view of the outlook & about 1/3 saying the market has it right. Just under 60% say the current low level of the spread between the yields on the 2-year & 10-year notes does not signal a recession. 67% expect that the current trade talks between China & the US will end on Mar 1 with an agreement to continue talking & without the imposition of additional tariffs. On average, however, the group expects tariffs to subtract 0.2% from growth in 2019, double the estimate from the Sep survey. That alone has taken on more significance now that growth forecasts have come down. The average estimate sees growth slowing to 2.3% in 2019 & 1.8% in 2020, down from just above 3% this year. The uncertainty is taking a toll on respondents' approval rating of Pres Trump's handling of the economy. The group has generally given the pres higher marks than the general public & that remains the case. But the numbers are lower. Just 52% said they now approve of the Trump's handling of the economy, down 14 points from the prior survey in which his approval had hit an all-time high. Disapproval rose 10 points to 31%.
Chance of recession rises to the highest level of the Trump presidency: CNBC Fed Survey
Today's recovery for the stock market is suspicious. Market breadth is only so-so while oil is having another tough day. Meanwhile demand for safe haven investments (gold & Treasuries) is still strong. Uncertainties about the outcome of the FOMC meeting along with comments on future rate hikes are weighing on stocks. The Dow remains down about 1K YTD.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 48.54 | -1.34 | -2.7% |
| GC=F | Gold | 1,246.40 | -1.00 | -0.1% |
Stocks opened higher a day after a big
sell-off & one day ahead of a Federal Reserve announcement about the
direction of interest rates. The Fed's 2-day
meeting concludes tomorrow with an announcement about whether the
central bank will raise a key interest rate, something that has been
expected, & feared by investors, but which may not happen in the
face of a massive equity decline. Pres Trump also tweeted, urging the Fed to “feel the market” as it mulls an interest rate hike. Investors
will also be watching the language that the Fed uses as it describes
its decision, hoping that the bank projects a more dovish posture toward
interest rates. Stocks closed sharply lower yesterday, deepening annual losses, amid continued
worries about the impact a trade war with China may have on the US economy. At the lows yesterday the Dow had fallen more than 600. Amid
the volatility, the Dow, the S&P 500 & NAZ were
all sitting in negative territory for 2018 -- the first down year since
2015. The Russell 2000, a basket of smaller US based companies,
closed in bear market territory. The NAZ erased its 2018 gains in the sell-off, leaving only the
NAZ 100 among the closely followed stock averages that remain
positive for 2018.
US stocks up as Federal Reserve considers another rate hike
Pres Trump encouraged policymakers at the
Federal Reserve to “feel the markets” before a 2-day policy meeting
that concludes tomorrow, during which they're widely expected to raise
interest rates. “I hope the people over at the
Fed will read today’s Wall Street Journal Editorial before they make
yet another mistake,” Trump wrote. “Also, don’t let the market become
any more illiquid than it already is. Stop with the 50 B’s. Feel the
market, don’t just go by meaningless numbers. Good luck!” A report said that he’s referring to -- “Time for a Fed pause”
-- made the case that pausing interest rate hikes is in the best
interest for the US economy. “Some
of our friends fret that if the Fed stops now, it will never get back
to normal. But it will surely never do so if there’s a near-term
recession,” the report added. “The best way to normalize is to keep
the expansion going as long as possible without inflation.” Trump has been a vocal critic of Fed policy, saying that Chairman Jerome Powell is responsible for curtailing economic growth. "So
far, I’m not even a little bit happy with my selection of Jay," Trump
said in Nov. ”Not even
a little bit. And I’m not blaming anybody, but I’m just telling you I
think that the Fed is way off-base with what they’re doing." So
far this year, policymakers have voted to hike the benchmark federal
funds rate 3 times, increasingly drawing the ire of Trump, who's
warned that if interest rates are too high, it could derail economic
growth. The Fed is expected to raise the rate again this week, bringing
the yearly total to 4.
Trump urges Fed to 'feel the market' before hiking interest rates
Chinese Pres Xi Jinping addressed his nation in Beijing to commemorate the 40th anniversary of China's "reform and opening up" — & he struck a relatively defiant tone in response to intl calls for changes to his country's economy. His remarks focused on how China's Communist Party guided the nation to its economic success & emphasized the country's right to pursue its own path going forward. In an address that lasted nearly 1½ hours, Xi did not mention trade tensions with the US & made only passing reference to market-oriented reform goals that previous speeches have discussed in detail. That idea of progress contrasts with other countries' increasingly vocal demands for less state control & could have significant consequences for whether the US reaches a trade deal with China by the end of its 90-day tariff ceasefire. "No one is in a position to dictate to the Chinese people what should or should not be done," Xi said. He called for China to "stay the course" on its current path. "What to reform and how to go about the reform must be consistent with the overarching goal of improving and developing the system of Socialism with Chinese Characteristics and modernizing China's system and capacity for governance," the Chinese leader added. "We will resolutely reform what should and can be reformed, and make no change where there should and cannot be any reform." Dec 18 commemorates how Chinese leader Deng Xiaoping's restructuring of the economy in 1978, paving the way for individual ownership in some industries & allowing foreign companies limited access. Many credit the policy change for helping lift hundreds of Ms out of poverty & turning China into an economic powerhouse that now ranks 2nd to the US. During the ceremony, Beijing recognized 100 "reform pioneers" & 10 recipients of the "China Friendship Medal."
In a sharp change toward a darker outlook, respondents to the CNBC Fed Survey have boosted the chance of recession next year to the highest level of the Trump presidency, reduced their support for the his handling of the economy & lowered their outlook for economic growth & Fed rate hikes, with some even flirting with the idea of a rate cut in 2019. Still, many of the 43 respondents, who include economists, fund managers & strategists, also argued that the market has overdone it to the downside. The chance of recession in the next 12 months rose to 23%, the 2nd straight increase & up from 19% in the prior survey. That's higher than the 19% long run average for the 7-year-old survey & 9 points higher than the low of the Trump presidency. 12% of respondents who think the Federal Reserve, after hiking in Dec, would next move to reduce the Fed Funds rate & do so by Oct. While the percentage is small, no forecasters predicted a 2019 rate cut in the Sep survey. The tone of responses is more negative, 63% of those surveyed believe the recent market sell-off reflects too pessimistic a view of the outlook & about 1/3 saying the market has it right. Just under 60% say the current low level of the spread between the yields on the 2-year & 10-year notes does not signal a recession. 67% expect that the current trade talks between China & the US will end on Mar 1 with an agreement to continue talking & without the imposition of additional tariffs. On average, however, the group expects tariffs to subtract 0.2% from growth in 2019, double the estimate from the Sep survey. That alone has taken on more significance now that growth forecasts have come down. The average estimate sees growth slowing to 2.3% in 2019 & 1.8% in 2020, down from just above 3% this year. The uncertainty is taking a toll on respondents' approval rating of Pres Trump's handling of the economy. The group has generally given the pres higher marks than the general public & that remains the case. But the numbers are lower. Just 52% said they now approve of the Trump's handling of the economy, down 14 points from the prior survey in which his approval had hit an all-time high. Disapproval rose 10 points to 31%.
Chance of recession rises to the highest level of the Trump presidency: CNBC Fed Survey
Today's recovery for the stock market is suspicious. Market breadth is only so-so while oil is having another tough day. Meanwhile demand for safe haven investments (gold & Treasuries) is still strong. Uncertainties about the outcome of the FOMC meeting along with comments on future rate hikes are weighing on stocks. The Dow remains down about 1K YTD.
Dow Jones Industrials
No comments:
Post a Comment