Tuesday, January 29, 2019

Market rise cautiously as the Fed gathers for its policy meeting

Dow advanced 110, advancers over decliners better than 3-2 & NAZ fell 32.  The MLP index added 2+ to the 249s & the REIT index went up 3+ t the 355s.  Junk bond funds gained in price & Treasuries crawled higher.  Oil added 1+ to the 53 & gold jumped up 7 to 1310, another multi month high.

AMJ (Alerian MLP Index tracking fund

CL=FCrude Oil53.41

GC=FGold   1,306.10

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Stocks are trading higher following mixed earnings results.  Xerox (XRX) shares are rising in trading after beating profit estimates, while shares of Pfizer (PFE), a Dow stock, & Harley-Davidson (HOG) fell.  In a potential setback to the progress in US-China trade talks, the Justice Dept brought charges against China's telecom giant Huawei days before a high-level meeting between the 2 countries in DC, aimed at easing the tariff war.  In Asian markets, China's Shanghai Composite ended the session roughly flat & Hong Kong's Hang Seng index settled 0.2% lower.  Japan's Nikkei  average ended the day up less a smidgen.  European markets are trading higher.   London's FTSE jumped 1.3%, Germany's DAX added 0.2% & France's CAC gained 1%.

Stocks gain, shaking off trade concerns

The Trump adminnistration slapped sanctions on Venezuela’s state-owned oil company, a decision intended to protect the country’s assets for opposition leader Juan Guaidó, who the White House recognizes as the legitimate leader of the country, according to Treasury Secretary Steve Mnuchin.  “There’s no question that what we’re trying to do is cut off the money to the regime that should not be in power, and make sure that President Guaidó has access to funds and has access to the assets of the country, and to make sure we protect these assets for the people of Venezuela,” Mnuchin said.  Proceeds from PDVSA, the Venezuelan state-owned oil company that also owns US oil refiner & petroleum product retailer Citgo, will now be withheld from disputed Pres Nicolas Maduro.  Guaidó is regarded as Venezuela's real leader by the US & the EU, while Russia & China have thrown their support behind Maduro.  “I think, on the one hand, we’ve been able to cut off Venezuela oil going forward, but we’re managing this with the U.S. refineries,” he added.  The Trump administration has issued licenses to US refineries that continue to operate in Venezuela; if Caracas wants to continue to sell the US oil -- “which we’d like to buy” -- the money would go into blocked accounts that would be protected for the Venezuelan people, according to Mnuchin.  During the previous fiscal year, the US imported roughly 505K barrels per day from Venezuela, about 6.4% of its total oil imports.  Last week, Trump announced the “full weight” of US power behind Guaidó, who invoked a protocol whereby the head of the assembly can become national leader if the office of the president has been wrongfully taken.  He promised to retain control of the office until free elections are held.  Maduro, in response, said he was breaking ties with the US, giving diplomatic personnel 72 hours to leave the country.

Tough oil sanctions on Venezuela aims to cut off Maduro, Mnuchin says

Top White House economic advisor Larry Kudlow said that Pres Trump is “moderately optimistic” about the US reaching a trade deal with China before their mutual tariff cease-fire expires in Mar.  Kudlow said that “it’s very important” that progress is made tomorrow & Thurs when US Trade Representative Robert Lighthizer leads trade discussions at the White House with Chinese representatives.  In addition to Kudlow, Steve Mnuchin, Commerce Secretary Wilbur Ross & trade advisor Peter Navarro, round out the US delegation in those talks.  “I think everybody, including the president, is basically moderately optimistic” about resolving the trade disputes between the world’s two largest economies, Kudlow said.  “The president believes that he and [Chinese] President Xi will probably be the ultimate negotiators. And the work being done tomorrow and Thursday is vitally important to lay out options,” Kudlow added.  Kudlow, director of the National Economic Council, said Trump has been saying in meetings that he wants to be involved in these latest talks.  Meanwhile, Mnuchin said earlier the US expects to make "significant progress" in this week's China trade war negotiations.  Among the concessions the Trump administration hopes to get are measures to reduce the massive US trade deficit & to address forced technology transfers from US companies operating in China.

Larry Kudlow: Trump is 'moderately optimistic' about a China trade deal before the March deadline

The 35-day partial gov shutdown helped triggered a sharp drop in consumer confidence in Jan & signaled growing worries about the future, a fresh survey shows, though optimism has typically rebounded after similar episodes in the past.  The consumer confidence index fell to 120.2 in this month from 126.6 in Dec according to the Conference Board.  The forecast was for a reading of 124.0.  The index has declined 3 straight months after hitting an 18-year high of 137.9 in Oct.   An index that tracks how Americans feel about the economy right now barely fell, slipping to 169.6 from 169.9.  The still-high reading indicates consumers think the economy is doing fine.  An index that looks 6 months ahead, however, tumbled to 87.3 from 97.7, a sign that Americans are somewhat more pessimistic about the near future.  That’s the lowest level since the month before Trump won the presidential election.  Confidence has fallen during past shutdowns & gov standoffs, but it usually rebounds after the crisis is over.  The same pattern played out in 2013 during a 17-day shutdown in a dispute over the US debt ceiling.  The US economy is still expanding at a moderate pace despite the recent gov shutdown & festering concerns about a weakening global economy.  The labor market is the strongest in decades, the biggest bulwark against the threat of recession. The gov shutdown cost economy $11B in short run, CBO estimates.  “Shock events such as government shutdowns tend to have sharp, but temporary, impacts on consumer confidence,” said Lynn Franco, director of economic indicators at the Conference Board.  “Thus, it appears that this month’s decline is more the result of a temporary shock than a precursor to a significant slowdown in the coming months.”

Consumer confidence falls to 18-month low due to government shutdown

The Fed begins its meeting with mixed earnings & US-China trade talks stuck in the mud.  They should leave interest rates alone, but comments on the what to expect later this year will be eagerly watched tomorrow.  As has been the case for several weeks while markets have been rising, gold (for investors with negative thoughts on the stock market) continues to be in demand.  Currently it's well above the important 1300 level.

Dow Jones Industrials

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