Dow dropped 124, decliners slightly ahead of advancers & NAZ gave back 18. The MLP index added 2+ to 251 & the REIT index went up 1+ to the 367s. Junk bond funds drifted lower & Treasuries rose in price, taking the yield on the 10 year Treasury note down 5 basis points to 2.66%. Oil slid lower in the 53s & gold fell 4 to 1311.
AMJ (Alerian MLP Index tracking fund)
US retail sales post biggest drop in 9 years in December
Congress prepares to vote on border security bill
The retail sales report was a major shocker for an economy that has had a series of favorable reports. The bulls are hoping it is not representative of the longer term economic growth pattern. Meanwhile US-China trade talks are lumbering along, they need a lot more work. Then there is the gov shutdown & that situation is unclear. It looks like congress will approve what was decided even though they allowed for very little time to read & digest the agreement. Trump's signature is another story. Presently he may not sign if he does not approve of the complex agreement. It looks like traders are pricing in a "done deal" ahead of tomorrow's midnight deadline.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 53.29 | -0.61 | -1.1% |
| GC=F | Gold | 1,314.60 | -0.50 | -0.0% |
Stocks traded lower after the US retail sales report for Dec showed a decline. Retail
sales recorded their biggest drop in more than 9 years in Dec,
tumbling 1.2% when the forecast expectation was for an
increase of 0.2%. The report was one of the data points that was
delayed by a 35-day partial shutdown. Producers prices fell for a 2nd straight month in Jan, leading to the smallest
annual increase in 1½ years. With inflation being held at bay it
could keep the Fed on hold concerning interest rates. Prices dipped 0.1% , putting PPI for 12 months at 2%. Initial claims for jobless benefits rose last week by 4K to a seasonally adjusted 239K. Investors are also keeping an eye on trade talks
between the US & China being held in Beijing. Optimism that a deal
can be struck by the Mar 1 deadline has helped to send the S&P &
NAZ to 4 days of gains. Congress is also taking up the spending bill on border security that will prevent another partial- gov shutdown. The proposal still does not meet Pres Trump's request for $5.7B to help build a wall on the southern border. The Senate & House of Representatives aimed to pass the legislation later today. Then it is up to Trump to review & sign it into law. In Asian markets, China's
Shanghai Composite slid down a tad & Hong Kong's Hang
Seng was off 0.2%. Japan's Nikkei finished the day flat. In Europe, London's FTSE added 0.2%, Germany's DAX slipped 0.2% & France's CAC rose 0.3%.
Stocks trade down following weak retail sales report
US retail sales recorded their biggest drop in
more than 9 years in Dec as receipts fell across the board,
suggesting a sharp slowdown in economic activity at the end of 2018. The
Commerce Dept said retail sales tumbled 1.2%,
the largest decline since 2009 when the economy was emerging
from recession. Data for Nov was revised slightly down to show
retail sales edging up 0.1% instead of gaining 0.2% as
previously reported. The Dec retail sales report was delayed by a
35-day partial shutdown of the federal gov that ended in Jan.
No date has been set for the release of the Jan retail sales
report, which was scheduled for publication on Fri. Excluding
automobiles, gasoline, building materials & food services, retail
sales dropped 1.7% last month after a slightly upwardly revised
1.0% surge in Nov. Core retail sales
correspond most closely with the consumer spending component of GDP. They were previously reported to have jumped 0.9% in Nov. Dec's sharp drop in
core retail sales suggested a moderation in the pace of consumer
spending in Q4. Consumer spending, which accounts for
more than 2/3 of the economy, increased at a 3.5%
annualized rate in Q3. In Dec, online & mail-order retail sales dropped 3.9%, the
biggest drop since 2008, after increasing 2.8% in
Nov. Receipts at service stations dived 5.1%, the biggest
fall since 2016, reflecting cheaper gasoline prices.
US retail sales post biggest drop in 9 years in December
Congress will take up the spending bill on border security that will prevent another partial-gov-shutdown. The proposal still does not meet Pres Trump's request for $5.7B to help build a wall on the US-Mexico border. The legislation would fund the Dept of Homeland Security thru Sep 30, end of the fiscal year. Lawmakers are racing against a Fri midnight deadline for passage. The Senate & House of Representatives aimed to pass the legislation later today. Then it is up to Trump to review & sign it into law. The final version of legislation would reportedly
give the Trump administration $1.37B in new money to help build
55 miles of new physical barriers on the southwest border, far less than
what Trump had been demanding. There is always a chance that Trump will seek more funds for wall construction by declaring a national emergency.
Congress prepares to vote on border security bill
Federal Reserve Governor Lael Brainard said she's
growing more concerned about economic growth, particularly the impact
that the global slowdown will have on the US. Speaking the same morning that retail sales numbers came up well short of market expectations, the
central bank policymaker said she's watching the developments in an
economy that has otherwise look strong. "Downside risks have
definitely increased relative to that modal outlook for continued solid
growth," she said. The Fed said after its Jan
meeting that it would be "patient" regarding further interest rate
hikes. Brainard endorsed that approach, particularly considering
"crosscurrents" that are building up for growth, especially in the
global economy outside the US. "Back in December, I had
already noted that crosscurrents were increasing and that tailwinds were
dying down, and I think that is even more true today because of those
downside risks that are gathering," she added. On the Fed's "patient"
policy, she said, "I think we're in a good place today. I'm comfortable
waiting and learning. We want to see the data as it comes in, but you
know in terms of let's be on hold for now while we learn about what's
going on in the economy, I think it's the right place to be." The Fed hiked its benchmark interest rate 4 times in 2018 & has signaled 2 more increases this year. However, Brainard &
others have said that they want to wait to see how conditions transpire
before following thru. Brainard said she would weigh "what move, if
any, later in the year" would be appropriate. She also indicated that
the Fed probably should be nearing the end of the program to reduce the
bond holdings on its balance sheet, which had once stood at $4.5T & is now closer to $4T. "My own view is that the balance sheet normalization process should probably come to an end later this year," she said. Looking at specific areas
of concern, Brainard cited the US-China trade conflict as well as the
uncertain future for Brexit negotiations & China's economy, though she
said in "domestic momentum has been pretty solid." "We are a very
international economy," she said. "Our financial system in particular
has shown itself to be very responsive to earnings abroad, to financial
conditions and volatility abroad. So, yeah, I'm very attentive to the
international outlook."
Fed Gov. Brainard: ‘Downside risks have definitely increased’ on the economys
The retail sales report was a major shocker for an economy that has had a series of favorable reports. The bulls are hoping it is not representative of the longer term economic growth pattern. Meanwhile US-China trade talks are lumbering along, they need a lot more work. Then there is the gov shutdown & that situation is unclear. It looks like congress will approve what was decided even though they allowed for very little time to read & digest the agreement. Trump's signature is another story. Presently he may not sign if he does not approve of the complex agreement. It looks like traders are pricing in a "done deal" ahead of tomorrow's midnight deadline.
Dow Jones Industrials
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