Higher markets on earnings reports

Dow gained 129, advancers modestly ahead of decliners & NAZ went up 12.  The MLP index added 1 to the 245s & the REIT index was off a fraction to the 346s.  Junk  bond funds were mixed & Treasuries slipped lower in price.  Oil was flattish at 53 & gold fell 3 to 1280.

AMJ (Alerian MLP Index tracking fund)

CL=F

Crude Oil

52.93

-0.08

-0.2%

GC=F

Gold

1,278.90

-4.50

-0.4%

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Stocks are trading higher on better-than-expected results from Dow components IBM (IBM), United Technologies (UTX) & Procter & Gamble (PG).  Comcast (CMCSA) reported quarterly revenue & profit above estimates, as it lost fewer video subscribers than expected & grew its broadcast television & theme parks businesses.  UTX topped quarterly expectations & forecast 2019 earnings above estimates, boosted by the acquisition of aircraft parts maker Rockwell Collins.  PG raised its full-year sales forecast & beat estimates for quarterly revenue & profity, driven by price increases & robust demand for detergent & premium skin care brands.  In European trading, London's FTSE was off 0.3%, Germany's DAX was higher by 0.4% & France's CAC gained 0.5%.  In Asia, China’s Shanghai Composite Index inched up pennies.  Hong Kong's Hang Seng index ticked up slightly & Japan’s Nikkei ended down a tad.  Major US stock indices closed lower, snapping a 4-day winning streak, amid worries about global economic growth &and disappointing US home sales.  Intl & domestic concerns weighed on sentiment.  The IMF predicted the global economy would grow at 3.5% in 2019 & 3.6% in 2020, down 0.2 & 0.1 percentage point, respectively, from last Oct's forecasts.

Stocks rise on earnings strength

The US ecoiomy is expected to expand at a 3% rate in Q4 based on steady US manufacturing output growth, according to White House Council of Economic Advisors Chairman Kevin Hassett.  “We’ve been getting stronger numbers in the U.S., despite the government shutdown,” he said.  “I’m looking at a third quarter very close to three [percent], which gives us a year of about three.”  Last week, the Federal Reserve said manufacturing surged in Dec, pushing industrial production up 1.1%.  “There’s a lot of momentum going forward for the U.S., especially if we can get this government shutdown worked out,” Hassett added.  The partial gov shutdown is going into its 5th week as the administration & the Dem-led House battle over border security funding.  “The president made a fair and reasonable offer to move forward and I think the next thing we’ll see is an attempt to get that through to the Senate,” he said.  “I think that will be the next hurdle.”  Hassett said the White House is aware of the impact the gov shutdown has on the economy, as consumer sentiment fell last week to its lowest level since Pres Trump was elected.  “We are very cognizant at CEA (Council of Economic Advisers) that as this thing drags, that there are down risks to the economy,” he added.  When asked if the economy is expected to fall into a recession in 2020, Hassett said, “Right now we don’t see that in sight. We’re looking for 3 percent growth this year as well because of all the momentum.”  "Last year everyone said our 3 percent forecast was crazy. It looks like we’re going to be right in a tenth or two. I think that the model that gave us 3 percent last year is saying we’ll get 3 percent this year too, so we’re sticking with our forecast," he added.

US economy will grow at 3 percent rate in the fourth quarter: Kevin Hassett

Chinese VP Wang Qishan addressed intl heads of state at the World Economic Forum (Wef), saying confrontation between DC & Beijing “harms the interest of both sides.”  His eagerly-anticipated speech in snow-clad Davos comes ahead of a Mar 2 deadline for the US & China to strike a new trade deal.  “For the Chinese and U.S. economies, I believe they are in state of (being) mutually indispensable,” Wang said.  “This is a reality, either side can’t do without the other side. So, the conclusion is that there has to be a mutual benefit and win-win (relationship),” he added.  The annual gathering of the world's top political leaders was initially expected to provide a platform for both sides to hold talks on trade.  But, the White House abruptly canceled its delegation to the Jan get-together last week, citing the ongoing gov shutdown.  The next round of negotiations is scheduled to take place at the end of the month, when Vice-Premier Liu He travels to meet US officials in DC.  The US. has already put tariffs on $250B in Chinese goods, & has threatened duties on double that value of products.  Beijing has responded with tariffs on $110B in US goods targeting politically important industries such as agriculture.  After a Dec meeting between Pres Trump & Chinese Pres Xi Jinping, the leaders agreed to a temporary truce while they sought an agreement within 3 months.  Trump said he would not carry out a planned increase in the tariff rate on $200B in goods to 25% from 10%.  The Mar deadline is based on the meeting between the 2 leaders & could easily slip.

China urges US to seek 'win-win' relationship amid long-running trade war

IMF Managing Director Christine Lagarde said the IMF modestly cut its global growth forecast for 2019 to 3.5%  from 3.7%. Speaking at the WEF, she said the move was due to the high level of economic risks that are accelerating around the globe.  These include the US-China trade war, Brexit & China's slowing economy.  “Six months ago these were threats, but they were not at the level of magnitude we have now,” Lagarde said.  Now we are seeing the ripple effects these issues are having on the global economy, she added.  Among them: tariff increases that are shaking up markets & boosting volatility particularly in advanced economies.  “There is a compounding effect to all this. Market values have changed dramatically over the last few months,” she pointed out.  Right now there is uncertainty over when these risks will be resolved, Lagarde said.  Take Brexit, no one knows if the UK's withdrawal from the EU will be resolved by the Mar 11 deadline or if it will be a no-deal exit.  Last week Parliament overwhelmingly rejected British Prime Minister Theresa May's mproposal for a deal.  “This is a big uncertainty for Europe, and the role played by London as a key financial center,” she said.  On the trade front, the IMF chief noted there has been progress.  The new US-Mexico-Canada Agreement has been resolved & the TPP 11 (Trans-Pacific Partnership agreement) has been ratified by 7 members & is now in place.   “These are all positives, but you still have the big elephant in the room: the U.S. and China that have to resolve trade disputes over issues of intellectual property, state-owned entities, subsidies and the balance of trade.”   We don’t know how long it will take to resolve the issues in a satisfactory way between both countries.  Trade negotiations between the US & China have been ongoing for months, ever since both countries have started slapping Bs of $s of tariffs on a variety of goods.  They have set a March 2 deadline in their cease-fire for imposition of a new round of tariffs.  The trade war has an impact on how these large economies are growing.  China just announced that its official economic growth came in at 6.6%  in 2018, the slowest pace since 1990.  Q4 GDP growth was 6.4%, a sign the economy is decelerating.  So what is her advice for policymakers?  “Focus on the issues and how to resolve them. Address remaining vulnerabilities, and be ready if a serious slowdown were to materialize.”  “At this point, country policymakers need to harness the existing growth momentum in order to create more policy room to act.”

IMF Chair Christine Lagarde cuts global growth forecast for 2019 to 3.5 percent

Early earnings reports are looking good, but they represent history.  This is a new year which has a lot of headaches as Christine pointed out.  Drab market breadth shows there is not a lot of conviction in stock buying today.  The Dow remains overbought after the 4 week rally & is subject to more selling while gold continues to be in demand.

Dow Jones Industrials