Dow jumped up 172 (closing at its highs), advancers over decliners roughly 2-1 & NAZ went up 54. The MLP index was off 1 to 51 & the REIT index rose 2+ to the 3644s. Junk bond funds were mixed & Treasuries continued in demand today. Oil dropped to the 53s & gold slid back 1 to 1318.
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
Retail sales growth in the US could be cooling off in 2019, as a trade war with China & spillover effects from the recent partial gov shutdown hang like a dark cloud over the industry. The National Retail Federation (NRF) is calling for retail sales, excluding automobile dealers, gasoline stations & restaurants, to climb 3.8-4.4% this year, amounting to as much as $3.84T. That would be less than growth of 4.6% in 2018, which NRF says is its preliminary estimate for retail sales last year, pending the release of Dec data from the Commerce Dept that was stalled from being announced during the gov shutdown. NRF in Aug of last year said it expected 2018 retail sales to be up at least 4.5%. Still, "despite threats from an ongoing trade war, the volatile stock market and the effects of the government shutdown," according to NRF CEO Matt Shay, "the underlying state of the economy is sound." "The biggest priority is to ensure that our economy continues to grow and to avoid self-inflicted wounds," Shay added. He continued, "We shouldn't talk ourselves into a recession." NRF said that online & other nonstore sales were up 10.4% in 2018, amounting to $683B. And the group is calling for the same 10-12% growth online in 2019, i.e. $764.8B. There are a number of uncertainties at play in the retail industry today that could impede some of this growth, though. A pending trade war with China has many companies on their toes, not knowing if another wave of tariffs could go into effect later this year on goods like cotton-based apparel. There's fear that the US economy is starting to cool off, which could lead to shoppers pulling back on spending. Tax refunds could also be delayed, which could further hamper some consumers' willingness to go out & spend. "Most important for the year ahead will be the ongoing strength in the job market, which will support the consumer income and spending that are both key drivers of the economy," the NRF said. The NRF didn't expect another round of tariffs would materialize. "If it does happen, I think it would be a surprise to many," it added. NRF's 2019 sales forecast also comes on the heels of a handful of retailers having already released holiday sales results ahead of their quarterly earnings reports. And many announcements were underwhelming, prompting analysts to temper expectations for the year. In addition to potential trade & economic issues, retailers are spending heavily on their supply chains, labor & other tech initiatives to compete online retailers. So far, many companies have benefited from tail winds like low unemployment & low gas prices. But they could be challenged if these trends reverse. "We are [still] waiting on data from the shutdown," the NRF said. "We will take it one day at a time as the data comes through."
Retail sales growth might not be as robust this year, with trade, government shutdown concerns
The pres of the Dallas Fed preached “the value of patience,” in the latest sign the central bank is content to sit back a few months before making a move on interest rates. Dallas Fed Pres Robert Kaplan, in an essay released by the regional central bank, said decelerating global growth as well as weakness from domestic interest-sensitive industries are reasons the Fed should hold steady. “I am particularly mindful of the fact that approximately 45% of S&P 500 company revenues come from outside the US & that a variety of US industries rely heavily on exports to China, Europe & other regions of the world,” Kaplan wrote. On the domestic side, Kaplan pointed to slowing single-family building permits & existing home sales as well as weaker readings in manufacturing & consumer confidence surveys. While the gov shutdown just ended, there’s also the possibility of a new one, he pointed out. Kaplan added that he expects inflation to be “somewhat muted” this year, as he thinks the structural forces of automation, technological disruption & globalization will offset cyclical pressures of a tighter labor market.
Service-oriented companies such as restaurants, banks & high-tech outfits grew in Jan at the slowest pace in 6 months, but they are expanding rapidly enough to suggest the economy is still quite healthy. An index of businesses minus the manufacturing sector slipped to 56.7% in Jan from 58%, the Institute for Supply Management (ISM) said. The latest reading fell short of the forecast & marked the lowest reading since Jul. The ISM's manufacturing survey, issued last week, rebounded in Jan to 56.6% from 54.3%. But it’s also tapered off after a hitting a 14-year high last summer. Numbers over 50% are viewed as positive for the economy, however, & anything over 55% is considered exceptional. 9 industries said business improved in Jan, but 8 reported a decline. Companies reported slower growth in new orders, production & employment, but each of these sub-indexes were all north of the 55%. Some execs expressed worries about the partial gov shutdown, but they remained “mostly optimistic about overall business conditions,” said Anthony Nieves, chairman of the survey. The US appears to have slowed in the past few months, but strong job creation & steady consumer spending suggest the economy is still in good shape nearly 10 years after the current expansion began. The ISM index is compiled from a survey of execs who order raw materials & other supplies for their companies. The gauge tends to rise or fall in tandem with the health of the economy.
The world of monetary policy that the Federal Reserve has just entered into is where St Louis Fed Pres James Bullard has been for some time. While little is known about the Fed's internal deliberations, Bullard has for years stressed the need for the Fed to be cautious about raising interest rates. He said the US was stuck in a low-growth, low-inflation rut & it didn't make sense for the Fed to keep penciling in future rate hikes. Bullard's views now dovetail with policies laid out by Fed Chairman Jerome Powell & his colleagues last week. The central bank dropped its guidance that more interest rate increases were likely, suggesting the next interest rate move could either be an increase or a decline. Bullard, who became a voter in Jan, has dismissed the view of this majority that tight labor markets would ultimately result in higher inflation. He also said the central bank should admit it doesn't know where a “neutral” level of interest rates is. And he warned the Fed not to ignore the yield curve that was flattening even as the central bank tightened monetary policy. That the Fed has adopted this more dovish tone doesn't, of course, mean that it was Bullard who persuaded them. And Minneapolis Pres Neel Kashkari has been another consistent dovish voice on the central bank since he joined in 2016.
Oil futures fell with US benchmark prices settling at their lowest in a week as investors weighed concerns about global energy demand against the price-supportive news from the political crisis in Venezuela. West Texas Intermediate crude oil for Mar delivery fell 90¢ (1.7%) to settle at $53.66 a barrel after trading as high as $55.21. Apr Brent shed 53¢ (0.9%) to $61.98 a barrel on ICE Futures Europe (after trading above $63 early today). On average, however, analysts expected the EIA to report a rise of 3.7M barrels in crude stockpiles for last week. Additionally, they also expect that gasoline & distillate inventories each posted gains of 1.7M barrels. OPEC & 10 partner producers outside the cartel agreed late last year to hold back crude output by 1.2M barrels a day in H1, in an effort to soak up a global supply glut & rebalance the market. OPEC, excluding Iran, Libya & Venezuela, agreed to handle 800K barrels a day of those cuts. Today, it was reported that OPEC officials said Saudi Arabia & its Persian Gulf allies were looking to create a formal partnership with a 10-nation group led by Russia to manage the world's oil market. The officials also said those oil-producing nations would debate the proposal during the week of Feb 18 in Vienna, with the potential for a final deal when they meet in Apr.
Stocks continued on their winnings ways as investors are willing to throw caution to the wind. The volatility index (VIX) is under 15½, near its low area 6 months ago. Trump's speech tonight will move markets tomorrow. The Dow is doing quite well, only 1400 below its recent record high. But gold & Treasuries, considered safe haven investments, are also in demand. That disparity will not last.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
Retail sales growth in the US could be cooling off in 2019, as a trade war with China & spillover effects from the recent partial gov shutdown hang like a dark cloud over the industry. The National Retail Federation (NRF) is calling for retail sales, excluding automobile dealers, gasoline stations & restaurants, to climb 3.8-4.4% this year, amounting to as much as $3.84T. That would be less than growth of 4.6% in 2018, which NRF says is its preliminary estimate for retail sales last year, pending the release of Dec data from the Commerce Dept that was stalled from being announced during the gov shutdown. NRF in Aug of last year said it expected 2018 retail sales to be up at least 4.5%. Still, "despite threats from an ongoing trade war, the volatile stock market and the effects of the government shutdown," according to NRF CEO Matt Shay, "the underlying state of the economy is sound." "The biggest priority is to ensure that our economy continues to grow and to avoid self-inflicted wounds," Shay added. He continued, "We shouldn't talk ourselves into a recession." NRF said that online & other nonstore sales were up 10.4% in 2018, amounting to $683B. And the group is calling for the same 10-12% growth online in 2019, i.e. $764.8B. There are a number of uncertainties at play in the retail industry today that could impede some of this growth, though. A pending trade war with China has many companies on their toes, not knowing if another wave of tariffs could go into effect later this year on goods like cotton-based apparel. There's fear that the US economy is starting to cool off, which could lead to shoppers pulling back on spending. Tax refunds could also be delayed, which could further hamper some consumers' willingness to go out & spend. "Most important for the year ahead will be the ongoing strength in the job market, which will support the consumer income and spending that are both key drivers of the economy," the NRF said. The NRF didn't expect another round of tariffs would materialize. "If it does happen, I think it would be a surprise to many," it added. NRF's 2019 sales forecast also comes on the heels of a handful of retailers having already released holiday sales results ahead of their quarterly earnings reports. And many announcements were underwhelming, prompting analysts to temper expectations for the year. In addition to potential trade & economic issues, retailers are spending heavily on their supply chains, labor & other tech initiatives to compete online retailers. So far, many companies have benefited from tail winds like low unemployment & low gas prices. But they could be challenged if these trends reverse. "We are [still] waiting on data from the shutdown," the NRF said. "We will take it one day at a time as the data comes through."
Retail sales growth might not be as robust this year, with trade, government shutdown concerns
The pres of the Dallas Fed preached “the value of patience,” in the latest sign the central bank is content to sit back a few months before making a move on interest rates. Dallas Fed Pres Robert Kaplan, in an essay released by the regional central bank, said decelerating global growth as well as weakness from domestic interest-sensitive industries are reasons the Fed should hold steady. “I am particularly mindful of the fact that approximately 45% of S&P 500 company revenues come from outside the US & that a variety of US industries rely heavily on exports to China, Europe & other regions of the world,” Kaplan wrote. On the domestic side, Kaplan pointed to slowing single-family building permits & existing home sales as well as weaker readings in manufacturing & consumer confidence surveys. While the gov shutdown just ended, there’s also the possibility of a new one, he pointed out. Kaplan added that he expects inflation to be “somewhat muted” this year, as he thinks the structural forces of automation, technological disruption & globalization will offset cyclical pressures of a tighter labor market.
Dallas Fed president preaches the ‘value of patience’ on interest rates amid economic headwinds
Service-oriented companies such as restaurants, banks & high-tech outfits grew in Jan at the slowest pace in 6 months, but they are expanding rapidly enough to suggest the economy is still quite healthy. An index of businesses minus the manufacturing sector slipped to 56.7% in Jan from 58%, the Institute for Supply Management (ISM) said. The latest reading fell short of the forecast & marked the lowest reading since Jul. The ISM's manufacturing survey, issued last week, rebounded in Jan to 56.6% from 54.3%. But it’s also tapered off after a hitting a 14-year high last summer. Numbers over 50% are viewed as positive for the economy, however, & anything over 55% is considered exceptional. 9 industries said business improved in Jan, but 8 reported a decline. Companies reported slower growth in new orders, production & employment, but each of these sub-indexes were all north of the 55%. Some execs expressed worries about the partial gov shutdown, but they remained “mostly optimistic about overall business conditions,” said Anthony Nieves, chairman of the survey. The US appears to have slowed in the past few months, but strong job creation & steady consumer spending suggest the economy is still in good shape nearly 10 years after the current expansion began. The ISM index is compiled from a survey of execs who order raw materials & other supplies for their companies. The gauge tends to rise or fall in tandem with the health of the economy.
Service-oriented companies grow at slowest pace in six months, ISM finds
The world of monetary policy that the Federal Reserve has just entered into is where St Louis Fed Pres James Bullard has been for some time. While little is known about the Fed's internal deliberations, Bullard has for years stressed the need for the Fed to be cautious about raising interest rates. He said the US was stuck in a low-growth, low-inflation rut & it didn't make sense for the Fed to keep penciling in future rate hikes. Bullard's views now dovetail with policies laid out by Fed Chairman Jerome Powell & his colleagues last week. The central bank dropped its guidance that more interest rate increases were likely, suggesting the next interest rate move could either be an increase or a decline. Bullard, who became a voter in Jan, has dismissed the view of this majority that tight labor markets would ultimately result in higher inflation. He also said the central bank should admit it doesn't know where a “neutral” level of interest rates is. And he warned the Fed not to ignore the yield curve that was flattening even as the central bank tightened monetary policy. That the Fed has adopted this more dovish tone doesn't, of course, mean that it was Bullard who persuaded them. And Minneapolis Pres Neel Kashkari has been another consistent dovish voice on the central bank since he joined in 2016.
Fed shifts to Jim Bullard’s world after new interest-rate strategy
Oil futures fell with US benchmark prices settling at their lowest in a week as investors weighed concerns about global energy demand against the price-supportive news from the political crisis in Venezuela. West Texas Intermediate crude oil for Mar delivery fell 90¢ (1.7%) to settle at $53.66 a barrel after trading as high as $55.21. Apr Brent shed 53¢ (0.9%) to $61.98 a barrel on ICE Futures Europe (after trading above $63 early today). On average, however, analysts expected the EIA to report a rise of 3.7M barrels in crude stockpiles for last week. Additionally, they also expect that gasoline & distillate inventories each posted gains of 1.7M barrels. OPEC & 10 partner producers outside the cartel agreed late last year to hold back crude output by 1.2M barrels a day in H1, in an effort to soak up a global supply glut & rebalance the market. OPEC, excluding Iran, Libya & Venezuela, agreed to handle 800K barrels a day of those cuts. Today, it was reported that OPEC officials said Saudi Arabia & its Persian Gulf allies were looking to create a formal partnership with a 10-nation group led by Russia to manage the world's oil market. The officials also said those oil-producing nations would debate the proposal during the week of Feb 18 in Vienna, with the potential for a final deal when they meet in Apr.
Oil futures fall, with U.S. benchmark settling at a one-week low
Stocks continued on their winnings ways as investors are willing to throw caution to the wind. The volatility index (VIX) is under 15½, near its low area 6 months ago. Trump's speech tonight will move markets tomorrow. The Dow is doing quite well, only 1400 below its recent record high. But gold & Treasuries, considered safe haven investments, are also in demand. That disparity will not last.
Dow Jones Industrials
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