Wednesday, January 9, 2019

Markets rise cautiously on hopes for US-China trade talks

Dow gained 27, advancers modestly ahead of decliners & NAZ went up 11.  The MLP index added 2 to 251 & the REIT index rose 6+ to the 335s.  Junk bond funds are still in demand & Treasuries were a tad lower in price.  Oil jumped up to the 51s, continuing its recent strength from the low 40s, & gold rose 6 to 1292 (another multi month high).

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil51.44

GC=FGold   1,289.80

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Stocks opened higher, headed for their 4th straight session of gains, as trade negotiators for the US & China extended talks for an unscheduled 3rd day.  The decision to keep negotiating fueled optimism the world's largest economies can strike a trade deal & avoid disrupting the global economy.  The US trade delegation was set to return to the US later  after what a US official called a "good few days."  A positive close today would be the longest winning streak in 4 months for the S&P 500 & 2 months for the  Dow.  Oil prices extended their gains as the Energy Information Administration on expectations that crude stockpiles fell by 2.8M barrels last week.  West Texas Intermediate, the American benchmark crude oil, was trading above $51 for the first time since Dec 17 on optimism about US-China trade talks and reduced production from OPEC members.  Crude oil prices are higher for their 8th consecutive session, the longest winning streak since Jul 2017. In Asian markets, China's Shanghai Composite ended the day higher by 0.7%.  Japan's Nikkei closed up 1%.  In Europe, London's FTSE opened up 1%, Germany's DAX gained 1.4% & France's CAC added 1.4%.  Stocks rose yesterday, the market's 3rd consecutive day of gains, on optimism that China & the US are close to settling an economically damaging trade dispute.  All the major equity indices closed at or near 1% higher.

Stocks rise on optimism about trade talks

The US trade delegation that met with Chinese officials in Beijing, will return to the US after what a US official called a "good few days."  Asian stock markets jumped after the talks were extended for an unscheduled third day, fueling optimism that the world's largest economies can strike a trade deal & avoid disrupting the global economy.  This week's meetings are the first face-to-face talks since Pres & Chinese Pres Xi Jinping agreed in Dec to a 90-day truce in a trade war that has roiled global financial markets.  Originally scheduled for Mon-Tues, the negotiations were extended by a day amid signs of progress on issues including purchases of US farm and energy commodities & increased access to China's markets.  However, people familiar with the talks said that the 2 sides were further apart on Chinese structural reforms that the Trump administration is demanding in order to stop alleged theft & forced transfer of US technology, & on how Beijing will be held to its promises.  In what is widely seen as a goodwill gesture, China issued long-awaited approvals for the import of 5 genetically modified crops, which could boost its purchases of US grains as farmers decide which crops to plant in the spring.  On Mon, Chinese importers made another large purchase of US soybeans, their 3rd in the past month.

Trade meetings conclude in China as hopes of a deal build

Apple (AAPL), a Dow & NAZ stock, has reduced production for its 3 new iPhone models by about 10% for the Jan-Mar qtr, according to the Nikkei Asian Review.  This comes after AAPL slashed its quarterly sales forecast last week.  China is cited as the reason for weakening iPhone sales as that country's economy slows, which has been impacted by a trade war with the US.  The higher price for the new iPhones has been a concern for analysts & consumers.  AAPL asked its suppliers late last month to produce fewer-than-planned units of its XS, XS Max & XR models.  Overall planned production volume of both old & new iPhones is likely to be cut to 40-43M units in Q1, from an earlier projection of 47-48M units.  The stock rose 1.72.
If you would like to learn more about AAPL, click on this link:

Apple cuts 1Q iPhone production: Report

St. Louis Fed Pres James Bullard thinks interest rates have gone high enough & could endanger an otherwise strong economy if they rise more.  Coming off a year in which the Fed hiked rates four times, he said that further policy tightening could jeopardize an otherwise strong economy.  The central bank is “bordering on going too far and possibly tipping the economy into recession,” he added.  “We’ve got a good level of the policy rate today,” he continued.  Bullard was not a voting member on the Federal Open Market Committee during its rate-hiking campaign last year.  He takes a voting position this year & indicated that with inflation contained & financial markets concerned about more rate increases, it's time for the Fed to pause.  At the Dec meeting, FOMC officials indicated 2 more increases could be coming this year to the benchmark funds rate target, which currently sits at 2.25-2.5%.  However, markets are pricing in no hikes this year & possibly a rate cut in 2020, which Bullard said he would be open to if conditions deteriorate.  Bullard estimated that ”the committee is coming to my view on this, but we’ll have to see how things play out going forward.”

Fed’s Bullard takes stand against more interest rate hikes

The Dow is off 150 from its highs at the opening on nervousness about what will come from the US-China trade talks.  Additionally the gov partial shutdown is still lumbering along with no resolution in sight.  Safe have gold continues strong as it nears the important 1300 ceiling.  Today has the makings of another wild day for trading.

Dow Jones Industrials

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