Markets jump on tentative deal to avoid a government shutdown

Dow surged 372 (closing essentially at the highs), advancers over decliners 3-1 & NAZ gained 106.  The MLP index rose 4+ to the 244s & the REIT index went up 1 to the 368s. Junk bond funds advanced & Treasuries continued weak.  Oil was fractionally higher to the 53s & gold gained 2 to 1314.

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US employers posted the most open jobs in Dec in the nearly 2 decades that records have been kept, evidence that the job market is strong despite several challenges facing the economy.  The Labor Dept said that job openings jumped 2.4% in Dec to 7.3M.  That is the most since records began in 2000.  It's also far greater than the number of unemployed, which stood at 6.3M that month.  Businesses have shrugged off a variety of potential troubles for the economy in the past 2 months & kept on hiring.  The 35-day partial gov shutdown began Dec 22, & growth in China, Europe & Japan has weakened, threatening US exports.  Still, employers added 304K jobs in Jan, the gov said earlier this month, the most in nearly a year.  The jump in openings in Dec suggests hiring will likely remain robust.  Openings are typically filled within 1-2 months.  The surge in available jobs indicates that businesses expect demand to remain healthy & that they will need more employees to meet it.  The data also showed that employers boosted hiring in Dec, while the number of people who quit remained unchanged at a healthy level of about 3.5M.  Higher quits are typically sign of a dynamic job market, as most people quit to take a new job.  The number of unemployed typically runs far ahead of job openings, but that switched early last year.  That could mean potentially stronger wage gains are in store in the months ahead.  With job postings so high at a time that the unemployment rate is at a very low 4%, businesses may be forced to pay more to attract the workers they need.  Paychecks are already increasing, though at a modest pace.  Average hourly pay rose 3.2% in Jan from a year earlier, near Dec's figure of 3.3%, which matched the best pay gain in almost a decade.  Still, wage increases typically top 4% when the unemployment rate is this low.  Many industries with the biggest increases in job openings include mostly lower-paying jobs.  Restaurants & hotels advertised more than 1M jobs, 84K more than in Nov.  Health care job postings rose 79K to 1.2M.  Some higher-paying industries also did well.  Professional & business services, which include jobs in fields such as architecture & engineering, rose 82K to 1.34M.  Available jobs in manufacturing, meanwhile, fell 67K to 428K.  They also dropped in retail & financial services.

US job openings jump to record high of 7.3 million

Pres Trump said he has reservations about a tentative federal spending deal, but he does not think parts of the gov will shut down for the 2nd time since Dec.  The pres did not immediately commit to signing the agreement reached late yesterday to prevent a partial government closure this weekend.  "The answer is no. ... I'm not happy" about the agreement, Trump said during a Cabinet meeting. However, he added, "I don't think you're going to see a shutdown."  Bipartisan appropriators emerged from a meeting yesterday saying they have a deal in principle to keep the gov running past a midnight Fri deadline.  The measure would put about $1.4B toward physical border barriers, but not a wall as the pres has demanded.  It includes money for 55 new miles of bollard fencing on the US-Mexico border.  Despite the apparent breakthrough in Congress, Trump's stance leaves the fate of gov funding uncertain as another shutdown draws closer.  While the his political motives for letting funding lapse have lessened since the last closure, there is no guarantee that he will sign what lawmakers approve.  Reps will nudge Trump to keep the gov open. Today, Senate Majority Leader Mitch McConnell told reporters that "it's not everything the president hoped to get, but I think it's a good step in the right direction.  I hope he'll decided to sign it."  Both Dems & Reps had some reservations about the plan.  House Appropriations Committee Chairman Rep. Nita Lowey said "it's not perfect. It's a bipartisan bill, and we have to govern."  Here's some of what the spending plan would include:

• The measure would put $1.375B toward physical barriers, including language limiting construction to structures already built on the border (which would rule out Trump's new border wall designs).
• It would aim to eventually bring the total number of Immigration & Customs Enforcement detention beds to 41K from 49K today, matching the level approved by Congress last year.
• The legislation would have funding to improve temporary holding facilities for migrants & bolster alternatives to detention & family case management programs, which aim to allow certain migrants to live outside of detention facilities during legal proceedings.

Trump: ‘I’m not happy’ with border security deal, but another shutdown looks unlikely

Federal Reserve Chairman Jerome Powell said the US economy looks strong, but the central bank is continuing to find ways to fight poverty.  Speaking in Mississippi, Powell said the central bank is looking at a number of ways to help rural communities, with a particular focus on banking & finance for areas of need.  "Today, data at the national level show a strong economy. Unemployment is near a half-century low, and economic output is growing at a solid pace. But we know that prosperity has not been felt as much in some areas, including many rural places," he said.  As he has in the recent past, the Fed chair focused on the importance of getting more Americans involved in the working population.  His remarks did not touch on monetary policy.  The US labor force participation rate is at 63.2% currently, about ½ a percentage point above where it was at the beginning of 2019, but lags behind most other industrialized countries.  The nation ranked 101st in the world in that category.  With an unemployment rate of 3.9%, Powell said the US is generally considered near "maximum employment."  But he said that's not the case everywhere.  "There are pockets of regions and demographics all over the country who are not at maximum employment," Powll added.  "So the obvious way to grow the size of the economy is to bring people into the economy are on the edge of it."  Powell pledged that the Fed is committed to programs like the Community Reinvestment Act that are aimed at getting development funds to areas in need. He also cited the importance of equal education opportunities & workforce training.  From the Fed's more immediate perspective, he said it is looking at tailoring regulations to make sure local banks aren't constrained in providing finance to those who need it, both personally & on an entrepreneurial level.  "Regulation and supervision need to be carefully tailored to suit the size and business model of different types of institutions. At the Fed, we have renewed our efforts to avoid unnecessary regulatory burden on community banks, which provide essential credit in their local communities," he said.

Fed’s Powell puts focus on spreading benefits of a strong economy

Pres Trump said that he would consider postponing the Mar 2 deadline for tariffs if the US & China can reach a trade deal soon.  Trump softened his stance on the trade battle with China, saying he's open to letting the deadline slide, but "would prefer not to."  He also said Beijing "very much wants to make a deal," & he has "a big team" in China trying to reach a resolution.  When asked if he will meet Chinese Pres Xi Jinping at the end of Mar, Trump said, "Not at this point."  The Mar 2 deadline is crucial in the negotiations as US tariffs on Chinese goods will increase if a deal is not struck before then.  Treasury Secretary Steve Mnuchin along with Trade Representative Robert Lighthizer headed to Beijing this week for another round of talks with Vice Premier Liu He.  The trade talks still seemed far apart as the 2 sides have not even drafted an accord specifying the matters they agree & disagree on.  White House economic advisor Larry Kudlow said Thurs that there is a "pretty sizable distance to go before China & the US reach a deal. Kudlow also indicated, however, that Trump is "optimistic with respect to a potential trade deal."  Mnuchin said last week the talks have been "very productive," although he noted that a "wide range of issues" remains to be worked out.

Trump says he may not stick to March deadline on China tariffs

Prime Minister Theresa May said she believed she could reach a Brexit deal that parliament could support, allowing Britain to leave the EU on Mar 29.  In a statement to parliament to update lawmakers on her negotiations with the EU to secure changes to the Brexit deal, May said again she did not see a customs union as proposed by the opposition Labour Party as the way to secure agreement.  "The talks are at a crucial stage and we now all need to hold our nerve to get the changes this House requires and deliver Brexit on time," she said.  "By getting the changes we need to the backstop; by protecting and enhancing workers' rights and environmental protections and by enhancing the role of parliament in the next phase of negotiations, I believe we can reach a deal that this House can support."

UK PM May: We can reach Brexit deal parliament can support

It looks like a gov shutdown will be avoided.  But until there is a signed agreement, the situation remains uncertain.  After all, this is DC & that's how DC works.  China trade talks are next & Trump may be flexible on extending the Mar 1 deadline if needed.  The Dow soared today finishing 5% under the record high reached last Oct.  The bulls are frothing at the mouth.  But gold is still being purchased.

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