Tuesday, January 8, 2019

Higher markets as investors await news on China trade talks

Dow jumped up 256, advancers over decliners 3-1 & NAZ gained 73.  The MLP index recovered 5+ to the 249s & the REIT index added 2+ to the 328s.  Junk bond funds continued in demand & Treasuries were weak, taking the yield on the 10 year Treasury up to 2.71%.  Oil rose 1+ to the 49s & gold pulled back 4 to 1285 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Live 24 hours gold chart [Kitco Inc.]

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Apple (AAPL), a Dow & NAZ stock, CEO Tim Cook was notably reassuring when asked about the prospects of US-China trade talks today.  Cook cast the trade-related economic weakness in China as "temporary," saying it was in both countries' "best interests" to reach an agreement.  "It is a very complex trade agreement and it needs to be updated, but as I've said before, I'm very optimistic that this will happen," Cook said.  "That clearly will be good not only for us, frankly, but I think more about the world in general. The world needs a strong U.S. and China economy for the world economy to be strong."  The US & China will continue trade talks in Beijing for an unscheduled 3rd day, a member of the US delegation said, as the world's 2 largest economies looked to resolve their bitter trade dispute.

Apple CEO Tim Cook: 'I'm very optimistic' about US-China trade talks

Consumer borrowing stayed strong for the 2nd straight month in Nov, according to the Federal Reserve.  Total consumer credit increased $22.1B in Nov to a seasonally adjusted $3.98T.  That’s down only slightly from a $25B gain in Oct, which was the fastest pace in 11 months.  The forecast called for a $19B gain in credit.  This is the 3rd month out of the past 4 with consumer credit growing above $20B (that hasn't happened in 4 years).  Consumer credit has been trending around a $15B growth rate.  Revolving credit, like credit cards, cooled off a bit in Nov, rising by 5.5% after a 10.9% gain in Oct.  Nonrevolving credit, typically auto & student loans, picked up, rising 7.1% in Nov after a 6.5% gain in the prior month.  The data does not include mortgage loans.  Economists have not been troubled by the gains in consumer credit.  Households appear to be in good shape, at least thru Q4.  Spending is strong & credit growth remains below gains in personal income & wages.  This could all change next year if the uncertainty over the outlook starts to feed back into job cuts.  For now, the rise in consumer borrowing adds to signs of a strong holiday shopping season.  The steady qtr-percentage-point interest rate increases by the Federal Reserve has not had a big effect to date on lending rates.  Latest data from the American Bankers Association shows installment loan & bank card delinquencies are rose in Q3 but remain low by historical standards.

Consumer credit has second-straight big jump in November

Oil futures tallied a 7th straight session gain, the longest for the US benchmark since the 8-session string of gains that ended in Jul 2017.  Progress toward a trade resolution between the US & China helped ease worries about energy demand along with Dec declines in crude output from Saudi Arabia have contributed to the gains in oil prices.  The Energy Information Administration tomorrow is also expected to report a decline of 1.4M barrels in crude stockpiles for last week according to a survey.

Oil futures settle higher for a 7th session in a row

Gold futures finished the sessioin with a loss as gains in the US stock market & strength in the $ helped to dull the appeal of the haven metal, at least in the short term.  Feb gold fell $4 (0.3%) to settle at $1286 an ounce, giving back all but a dime of its gain from a day earlier.  Gold also pulled back amid some disappointment that the Feb contract didn't clear the closely watched $1300 area as interest switches to the Apr contract.  The Dow climbed as gold futures settled, with bullish investors hoping for a 3rd straight session of wins backed by optimism over trade talks.  Additionally, one measure of the buck, the ICE US Dollar Index was up 0.3% at 95.917, cooling demand for the metals complex.  Softness in the $ had offered a runway for gold to rise late in 2018.  Commodities priced in $s often trade inversely with the $, as moves in the US unit can influence the attractiveness of those commodities to holders of other currencies.

Gold prices end with a loss as stocks, dollar advance

Between Trump's talk tonight & results from the US-China trade talks, there will be a lot to impact trading tomorrow.  The Dow has rebounded 160 from the lows earlier & closed near the  session highs.  The markets are pricing in a lot of good news.  We'll have to wait to see how that works out.

Dow Jones Industrials

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