Thursday, January 24, 2019

Markets rise cautiously on worries about global growth

Dow crawled up 10, advancers over decliners about 2-1 & NAZ added 33.  The MLP index was fractionally higher in the 244s & the REIT index did little today.  Junk  bond funds inched higher & Treasuries rose in price.  Oil climbed higher in the 52s & gold was off 2 to 1281.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil52.69

GC=FGold   1,282.60
 -1.40 -0.1%

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The number of Americans filing applications for unemployment benefits fell to more than a 49-year low last week, but the drop likely overstates the health of the labor market as claims for several states including California were estimated.  Initial claims for state unemployment benefits dropped 13K to a seasonally adjusted 199K for last week, the lowest level since 1969 when 197K applications were recorded, the Labor Dept said.  The had forecast called for claims rising to 220K.  Several states were estimated last week because of the Martin Luther King holiday.  This suggests last week's surprise decline in claims probably exaggerates the labor market's health.  The 4-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 5K to 215K last week.  An ongoing partial shutdown of the federal gov so far appears to be having a limited impact on the claims data.  The number of federal workers filing for jobless benefits rose 15K to 25K last week.  About ¼ of federal agencies have been shuttered since Dec 22, impacting 800K gov employees, with many working without pay & others furloughed.  All workers will be paid retroactively when the shutdown ends.  The longest shutdown in history may push the unemployment rate above 4.0%  in Jan as the furloughed workers would be considered unemployed.  The jobless rate rose two-tenths of a percentage point to 3.9% in Dec as strong labor market conditions attracted some unemployed people back into the labor force.  The claims report showed the number of people receiving benefits after an initial week of aid decreased 24K to 1.71M for last week & the 4-week moving average of continuing claims rose 1K to 1.73M.  The continuing claims data covered the week of the household survey from which Jan's unemployment rate will be calculated.  Continuing claims rose 5K between the Dec & Jan survey periods.  If there were no gov shutdown, the modest increase in continuing claims between the survey weeks would suggest little change in the unemployment rate this month.

US weekly jobless claims lowest since 1969

Commerce Secretary Wilbur Ross said the US is still "miles and miles" from a trade deal with China.  "Frankly, that shouldn't be too surprising," Ross said.  The US & China have "lots and lots of issues," he continued, & the Trump administration will need to create "structural reforms" & "penalties" in order to resume normal trade relations with Beijuing.  "We would like to make a deal but it has to be a deal that will work for both parties," he added.  "We're miles and miles from getting a resolution."  Ross listed the sticking points, starting with what he calls America's "intolerably big trade deficit" with China.  That deficit ballooned to $323B in 2018, according to Chinese government figures released earlier this month, the worst imbalance on record dating to 2006.  "The other problem is the future. That's the 2025 plan that they have to try to dominate world high tech industries. We have to protect that," Ross noted.  "The third area is American companies doing business in China should have market access, should have a level playing field, should not be subject to disrespect for their intellectual property rights."  Pres Trump & Chinese Pres Xi Jinping last month agreed to halt any new levies to give diplomacy a chance.  When asked whether the US would change its Mar deadline, Ross said, "it's difficult to prejudge where we'll be in that point in time. But as that date approaches, the president and those of us who are dealing with the trade issues will get together and have a very serious discussion on where we stand at that point."  Trump has said he will reinforce punitive tariffs on roughly ½ of all Chinese exports to the US should the 2 parties fail to agree on a permanent solution.  In the latest tariff moves, the US levied 10% duties on $200B worth of goods from China, prompting Beijing to put tariffs on $60B worth of US goods.  Trump has also threatened to put tariffs are all Chinese imports if a trade deal can't be reached.  According to recent reports, China has offered to buy more US products in the coming years to reduce the imbalance in goods.  Under the offer, China would increase its annual import of US goods by a combined value of over $1T over 6 years.

Wilbur Ross: The US is still 'miles and miles' from a trade deal with China

The boom in US oil & natural gas production will make the US a net energy exporter in 2020, a feat the country has not achieved in nearly 70 years, the Dept of Energy (EIA) said.  The US will start exporting more energy products than it imports as US crude output continues to grow & domestic oil consumption declines, the US Energy Information Administration said in its latest Annual Energy Outlook.  Shipments of liquefied natural gas will also boost the country's role as a major gas exporter.  The report, which makes projections for the next 50 years, marks the latest revision to EIA's expectations for net exporter status.  Last year, EIA forecast the US would become a net exporter by 2022.  In 2017, it said the nation would achieve the feat in 2026.  Last week, EIA said the US will start exporting more crude oil and petroleum products than it imports by Q4-2020. After that it would remain a net oil exporter for years to come.  Towards the end of its 50-year forecast period, EIA expects the US to once again start importing more petroleum products than it exports, as economic growth fuels demand for gasoline.  EIA expects US oil production to continue setting new records each year for nearly another decade.  The bureau sees American oil output hitting a new annual high through 2027, when booming production starts to level off.  Last year, the nation's drillers pumped an average 10.9M barrels a day, breaking the annual record going back to 1970.  Once production cracks 14M barrels a day in the coming years, EIA expects U.S output to stay above that level through 2040.  The US became a net exporter of natural gas in 2017.  EIA expects natural gas shipments to continue growing, driven by increased shipments of liquefied natural gas, a form of the fuel chilled to liquid form for transport by sea.  The country will remain a net coal exporter thru 2050, but EIA does not see shipments growing due to competition from other nations.

US to become a net energy exporter in 2020 for first time in nearly 70 years, Energy Dept says

The lack of progress in trade talks & the gov shutdown continue to dominate investors' thoughts.  The outcome of Trump's speech to congress is adding to investor frustration.  At least the bulls can point to a lack of selling during this volatile period.

Dow Jones Industrials

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