Friday, January 25, 2019

Market rally boosted by upbeat earnings

Dow jumped up 293, advancers over decliners a huge 5-1 & NAZ shot up 83.  The MLP index gained 2 to the 247s & the REIT index added 1 to the 347s.  Junk bond funds fluctuated & Treasuries wee sold as stocks were being purchased.  Oil was up pennies in the 53s & gold soared 16 to 1296.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil53.23

GC=FGold  1,293.50

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Stocks opened higher on expectations the Fed is willing to tolerate a much larger balance sheet of $3.5T.  That's well above previous estimates of $1.5-3T & is easing worries that shrinking the balance sheet through quantitative tapering would drain too much liquidity & tip the economy into recession.  Upbeat earnings reports are also helping life equities which have recently been hit by worries about global economic growth, US gov shutdown & uncertainty around US-China trade talks.  In Asian markets, China's Shanghai Composite gained 0.4% for the session & Hong Kong's Hang Seng added 0.4%.  Japan's Nikkei  average was slightly lower.  In European trading, London's FTSE added 0.2%, Germany's DAX gained 1.6% & France's CAC rose 1.1%.

Stocks trade higher as Fed considers larger balance sheet

Pres Trump's chief economic adviser Larry Kudlow said that raising taxes on wealthy Americans will hinder economic growth & raise the deficit.  “You could start raising tax rates on successful earners [but] you’ll get a slower economy and you’ll get lower revenue,” Kudlow added.  “The deficit will go up.”  Dem presidential hopeful Sen. Elizabeth Warren of Massachusetts is calling for a “wealth tax” proposal that slaps a 2% tax on Americans with $50M in assets & a 3% tax on billionaires.  "Right now, an heir with $500 million in yachts and fine art and a public school teacher with no savings can pay the same amount in federal taxes," Warren's exploratory committee said.  A current poll shows 70% of voters surveyed favor increased tax rates for families making over $10M & a 65% hike on those making over $1M.  “Let’s just tax rich people, that's somehow going to do what, equalize income?,” Kudlow said.  “There’s no such thing as income equalizer.”  Kudlow said Pres Trump's economic agenda that has slashed taxes on individuals, corps & small businesses along with rolling burdensome regulations has proven to be successful.  “We are running now 3 percent plus economic growth adjusted for inflation,” he said.  “Everybody said it couldn’t be done when we put this together.”

Larry Kudlow says taxing rich Americans stifles economic growth, hikes deficit

Federal Reserve officials are nearing a decision on when to end the reduction of the bonds it is holding on its balance sheet, a key consideration for investors watching how far the central bank will go in tightening monetary policy, according to reports.  The Fed began the balance sheet roll-off in Oct 2017 after it had reached more than $4.5T.  Traders have worried that the operation is adding to market pressure stemming from a series of interest rate hikes that began in 2015.  Further consideration of when to end the roll-off is likely to come up at next week's Federal Open Market Committee meeting.  The policymaking body has been weighing the balance sheet reduction during its last several meetings, with officials noting in Dec that the central bank's benchmark funds rate could become volatile as the operation proceeds.  “A lot of the heavy lifting has been done,” Kansas City Fed Pres Esther George said on Jan 15.  “We’re waiting for the committee to be satisfied that they have reached sufficient understanding of what all the moving pieces are.”

The Fed may be moving closer to ending its rally-killing balance sheet reduction

A shortage of air traffic controllers prompted the Federal Aviation Administration to halt flights into New York's LaGuardia Airport today, day 35 of the partial gov shutdown.  Flights were also delayed at several other major airports, including Newark Liberty Intl Airport.  Flights out of Philadelphia Intl Airport were delayed up to an hour & 15 minutes, & 45 minutes at Newark, the FAA said.  The disruptions came a day after airline execs warned that the partial govt shutdown could roil air travel.  During the shutdown, 420K federal workers, including Transportation Security Administration screeners & air traffic controllers, have been deemed essential & told to go to work even though they aren't receiving regular pay.  On Thurs, an FAA spokesman said the agency had seen “no unusual increased absenteeism & there are no operational disruptions due to staffing” because of the gov shutdown.

FAA halts flights into LaGuardia Airport amid shortage of air traffic control workers

Stocks are heading for a 5th straight week of gains with the Dow up a staggering 3K.  Earnings are coming in fairly good, but they represent history.  Meanwhile the gov shutdown is stumbling along with no resolution in sight & US-China are going nowhere even faster than before.  Airports are critical to a healthy economy & that story will get even gloomier next week with those clowns in DC unable to able to figure out how to just arrange a meeting for negotiations.  Their stupidity will hurt GDP growth & when that simple fact is realized, stocks will be sold.  Nervous investors keep buying gold.

Dow Jones Industrials

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