Friday, December 28, 2018

Market slide lower to conclude a week of wild price swings

Dow dropped 76 in another highly volatile day, advancers over decliners 3-2 & NAZ crawled up 5.  The MLP index was off fractionally to the 219s & the REIT index fluctuated in the 326s.  Junk bond funds edged higher & Treasuries crawled up in price, with the yield on the 10 year Treasury at 2.74%.  Oil climbed to the 45s & gold went up 1 to 1282 (more below).

AMJ (Alerian MLP Index tracking fund)

Live 24 hours gold chart [Kitco Inc.]

3 Stocks You Should Own Right Now - Click Here!

Pres Trump threatened to close the southern US border unless Congress agrees to provide $5B in taxpayer funds for a border wall with Mexico, blaming Dems for a partial gov shutdown that he previously said would be on him.  A dispute over funding for Trump's proposed wall has led to “non-essential” operations at numerous agencies being closed for lack of funding.  With Congress adjourned until next week there was no prospect of a quick resolution.  “We will be forced to close the Southern Border entirely if the Obstructionist Democrats do not give us the money to finish the Wall & also change the ridiculous immigration laws that our Country is saddled with,” Trump tweeted.  “Either we build (finish) the Wall or we close the Border,” he added.  The standoff over Trump's demand for money to help fund the border wall, estimated to cost about $23B in total, was in its 7th day & was widely expected to drag into Jan when Dems take control of the House.  Asked about Trump's border-closing threat, Mexican Pres Andres Manuel Lopez Obrador told reporters it was an internal US gov matter.  “We take great care of the relationship with the government of the United States,” Lopez Obrador said.  “Of course we will always defend our sovereignty ... We will always protect migrants, defend their human rights,” he added.  Earlier this month, Trump said he would be “proud” to shut down the gov over border security.  Today Trump aides blamed Dems for the continuing shutdown, contending that they have refused to negotiate since the White House made an offer last weekend.  “We’re here, and they know where to find us,” Mick Mulvaney, the White House chief of staff, said.  “Where is Chuck Schumer? Where is Nancy Pelosi? They’re not even talking right now,” he added. At present, the 2 sides remain far apart, Schumer's office said.  Dems have offered support for $1.3B in funding for general border security, but have long opposed the building of a wall.  If the stalemate persists, House Dems, led by Pelosi, plan to immediately offer a funding measure to re-open the gov when they take office on Jan 3.  Pelosi & Schumer have been discussing 3 general options for that legislation. The options are a stop-gap funding bill that would run thru Feb 8; 6 full 2019 appropriations bills for all but the Dept of Homeland Security, which would instead be funded thru a measure known as a continuing resolution maintaining current funding through Sep 30 or a continuing resolution for all shuttered gov agencies that would expire on Sep 30.  The legislation expected for a full House vote on Jan 3 could be a variation on any of the 3 options but added that no decision has been made.  The shutdown affects about 800K employees of the Depts of Homeland Security, Justice, Agriculture, Commerce & other agencies.  Most of the federal gov, which directly employs almost 4M, is unaffected.  Even agencies that are affected never totally close, with workers deemed “essential” still performing their duties.  Trump, who scrapped plans to spend Christmas in his Mar-a-Lago resort in Florida & stayed in DC due to the shutdown, had now also canceled his New Year's plans.

Trump threatens to close Mexico border, blames Democrats over shutdown

China's financial markets are safer after this year's stock market drop, a spokesman from the People's Bank of China (PBOC) said.  The local market is closed Mon & the Shanghai composite ended the year (today) at 2493 down nearly 25% for 2018 in its worst year since 2008.  The index hit a high of 3587 in Jan but tumbled as much as 31% from that level in Oct amid worries about an economic slowdown, a brewing trade war with the US & corporate financing issues.  “The extent of this drop is rather large,” said Zhou Xuedong, director general of the general exec office.  “But the market hasn’t seen major panic, (stock) dumping, or a large number of listed companies going bankrupt. This is a natural process of the market adjustment. The market participants have become relatively more mature.”  “After the stock market decline from 3,500 to 2,500, (with) valuations this low we are actually very safe,” Zhou added.  “The fewer bubbles there are, the safer we are. When stocks are safe, the overall banking industry is safer.”  Chinese authorities have made a flurry of announcements in the past several months in support of stocks & the economy.   Mainland trading is dominated by sentiment-driven retail investors rather than institutions, making market performance less tied to economic growth than stock indexes might be in other countries.  But as an indication of how much uncertainty hangs over China, the Shanghai composite has barely recovered from a near-4-year low hit in Oct & remains ½ the level it hit in 2015.  However, in contrast to heavy-handed market intervention during the summer market crash of 2015, gov handling of the latest stock market drop has been relatively subdued.  Authorities have encouraged private funds & local govs to establish investment funds to support companies struggling with a collateral system known as “share pledges.”  Last week, members of the Chinese State Council Financial Stability & Development Commission also said there should be implementation of market-oriented principles & reduction of administrative intervention in trading.  When Zhou and other representatives from the central bank were asked to expand on the statement, Zou Lan, deputy director-general of the financial market dept, gave the example of the PBOC's success in increasing financing for small- & medium-sized enterprises.  Overall, Zhou emphasized he is confident in China's financial stability & noted the larger banks are in good health.  The financial system goes thru a cycle roughly every 10 years, so it is about time that the risks which have built up should be exposed, he added.

China's stock drop this year reduces bubble worries, central bank official says

Gold futures closed slightly higher after a mixed session, leaving the haven metal at roughly 6-month highs & up 1.8% for the week.  Gold again tracked volatile stock trading & found support from a flagging $.  Gold for Feb delivery rose $1.90 (0.1%) at $1283 an ounce.  The contract's higher finish is its 4th in a row & marked the highest settlement since the 3rd week of Jun.  The SPDR Gold Shares ETF (GLD) was up 0.2% today.  The popular gold ETF rose more than 2% Wed, its best one-day percentage gain since Jul 2016, before drifting in the sessions since.  The ETF has gained roughly 8% since touching more than 2½-year lows in Oct.  Data from BullionVault, which calls itself the largest online market for physical precious metals, reveals the most robust demand since 2012, when the US & other major economies began to emerge from the global financial crisis.  The comparison is based on both the quantity of gold bought & for the number of new first-time investors in the metal, the company said.

Gold gains for fourth straight session as stocks chop in mixed action

Trying to make sense from the price swings this week is pointless.  Making any analysis more difficult is trading to adjust year-end positions.  The Dow has a range this week of 1700 in just 3½ days of trading.  It rallied 1300 off the depressed levels under 22K, but who knows what that means?  Demand for gold, the traditional safe haven investment, remains strong.  Try to have a good weekend & get ready for another volatile day on the last day of trading for 2018.

Dow Jones Industrials

No comments: