Dow went up 181 (close to session highs), advancers over decliners 5-2 & NAZ advanced 60. The MLP index was fractionally higher to the 251s & the REIT index hardly budged. Junk bond funds were mixed & Treasuries rose. Oil climbed to the 57s (more below) & gold added 2 to 1330.
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
The US & China are discussing a late Mar meeting between Pres Trump & Chinese Pres Xi Jinping in Florida, according to leakers. Sources said said that China has committed to buying up to $1.2T in US goods, though the 2 sides remain far apart on issues concerning the forced transfer of intellectual property. The summit would be at Trump's Mar-a-Lago golf club in Palm Beach, Fl. Representatives for the 2 nations resumed overall trade discussions on Tues & follow-up sessions at a higher level began yesterday. Current talks between the 2 nations are aimed at "achieving needed structural changes in China that affect trade between the United States and China," the White House said. The Trump administration is led by Trade Representative Robert Lighthizer, a vocal advocate of pressing China to end practices that the US says include intellectual property violations. Trump is scheduled to meet with Chinese Vice Premier Liu He today as China & the US end another week of trade talks. Liu has been named special envoy to China's Jinping, meaning he has the authority to negotiate directly on trade matters with the US. Any meeting between Trump & Xi in Mar would follow their dinner in Argentina in Dec & come amid a prolonged trade dispute between the 2 economies. Both nations have slapped tariffs on hundreds of Bs $s of goods, adding to global economic growth fears as well as worries about ripple effects in key supply chains & manufacturing.
Trump, Xi summit being discussed for late March as China commits to buying $1.2 trillion in US goods
The Federal Reserve stands ready to change the approach to its balance sheet should conditions warrant, the central bank's vice chair for supervision said. Fed Vice Chair Randal Quarles said at a conference that the central bank remains committed to its dual mandate of full employment & keeping inflation at a healthy level. "The normalization of the balance sheet is not a competing goal," he said. "If ever it appears that our plans for the balance sheet are running counter to the achievement of our dual-mandate objectives, we would quickly reassess our approach to the balance sheet." The Fed currently is in the process of reducing the level of bonds it is holding on the balance sheet. Allowing a capped level of proceeds to run off each month has reduced the total balance sheet to about $4T (nearly $400B less than when the process began). Determining where the process ends depends on what level of reserves banks feel comfortable with. The total reserves being stored at the Fed has fallen to about $1.6T & a survey the Fed conducted last year indicated a comfort level around $800B. However, most economists expect the reduction to end with more than $1T in reserves still on hand. Quarles said the Fed has found that banks want a higher level of reserves than has normally been the case. "It is probably safe to say that reserve demand is much higher than before the crisis," he said. "With so much uncertainty over the level and slope of the reserve demand curve, a degree of caution is warranted." He noted that the level of demand could be "uncertain" as conditions change. Fed officials indicated at their last meeting that they expect the balance sheet roll-off to conclude by the end of 2019. If that is the case, the final level probably would be in the $3.5T range. The current composition of the balance sheet entails about $2.2T in Treasuries & $1.6T in mortgage-backed securities, with other securities & gold making up the rest. The Fed is allowing up to $30T Treasuries & $20T in MBS to roll off each month, & Quarles said mortgages likely will be sold off completely at some point in the future but not as part of the current normalization process.
Fed’s Quarles: We’d ‘quickly reassess’ balance sheet plan if problems came up
The vice chairman of the Federal Reserve on Friday laid out the possibility the central bank will allow inflation to run above target if prices have grown too slowly. Richard Clarida, the vice chair of the Fed and its highest-ranking economist, laid out the possible inflation strategy as he described the communications review the central bank is undertaking. Speaking at a monetary policy conference, Clarida contrasted what amounts to the current strategy — treating persistent shortfalls of inflation from the 2% target as “bygones” — to “makeup” strategies, where the Fed could target average inflation over a multiyear period or target price levels. Inflation as measured by the Fed's preferred PCE price index gauge has rarely been above the 2% target since the end of the financial crisis. Clarida isn't the first Fed official to suggest such a strategy — New York Fed President John Williams, for instance, is an advocate of price level targeting — but his position gives the comments heft, even if he didn’t formally endorse them. Clarida pointed out the benefits of a makeup strategy would depend on whether households & firms believed they will be delivered when the time comes. “Thus, one of the most challenging questions is whether the Fed could, in practice, attain the benefits of makeup strategies that are possible in models,” he added.
The Federal Reserve said it will stick to its “patient” approach toward guiding the US economy owing to somewhat slower growth in 2019 & mild inflation, according to the central bank's annual report to Congress. The 63-page report includes few surprises & reinforces the Fed's decision last month to stop raising interest rates amid fresh worries about the economy. The report was released today ahead of Federal Reserve Chair Jerome Powell's testimony next week. The Fed pointed to slower consumer spending & business investment, softer home sales, trade tensions with China & a weaker global economy. Worries about the economy ignited a stock-market meltdown in Dec, though prices have mostly recovered. By & large, though, the Fed found little to be alarmed about. The labor market is strong and should encourage steady spending by consumers, the Fed said. Borrowing has “risen roughly in line with household incomes” & has been largely concentrated among the well-to-do. The recent decline in interest rates, meanwhile, should help home buyers & boost the housing market. The one caveat: The Fed said rural areas have recovered much more slowly than urban & suburban areas since the end of the last recession almost 10 years ago. Businesses, for their part, are likely to spend & invest at a slower but still moderate pace compared to last year. The Fed noted that smaller and riskier businesses have increased borrowing “significantly” & that debt-to-asset ratios remain near historic highs, but the level of borrowing slowed toward the end of 2018. Larger businesses are in better financial shape & the US financial sector as a whole is “substantially more resilient than in the decade preceding” the recession of 2007-2009. The Fed also sees little risk of a surge in inflation. The bank pointed out that rising wages have done little to stoke price pressures while the falling cost of energy has led to a general decline in inflation since last summer. Food prices have also been low, the Fed added. The central bank expects inflation to remain at or under 2% in the next year or so.
Crude-oil futures rallied to a high of more than 3 months, with gains padding the commodity's weekly advance, as US equities & other assets found traction against the backdrop of upbeat US-China trade talks. Apr West Texas Intermediate crude gained 30¢ (0.5%) to finish at $57.26 a barrel, marking its highest finish since Nov 12. For the week, WTI booked a 3% gain. The oil market had finished lower yesterday after a gov report revealed that domestic supplies climbed for a 5th straight week as production jumped to a record level, but ongoing evidence of declines in world-wide output capped price losses for the session. Today weekly rig-count data showed the rigs drilling for oil edged back by 4 to 853. News reports said Pres Trump would meet with China's top trade negotiator, Vice Premier Liu He, which has underscored optimism that a deal between China & the US will strike a trade deal soon. China is a big importer of oil & its tiff on tariffs with DC has been a drag on the commodity until recent signs of progress on talks emerged.
The Dow rose last week & is up an impressive 2.7K YTD. Overall this was the 9th straight week of gains for stocks. For those who remember the past, that kind of rise is scary. Markets are not meant to go up with hardly a hiccup along the way. Gold has also been attracting buyers. It's up 10% since the lows in mid Nov witih only a few minor setbacks along the way. That spells disconnect & they do not last.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
The US & China are discussing a late Mar meeting between Pres Trump & Chinese Pres Xi Jinping in Florida, according to leakers. Sources said said that China has committed to buying up to $1.2T in US goods, though the 2 sides remain far apart on issues concerning the forced transfer of intellectual property. The summit would be at Trump's Mar-a-Lago golf club in Palm Beach, Fl. Representatives for the 2 nations resumed overall trade discussions on Tues & follow-up sessions at a higher level began yesterday. Current talks between the 2 nations are aimed at "achieving needed structural changes in China that affect trade between the United States and China," the White House said. The Trump administration is led by Trade Representative Robert Lighthizer, a vocal advocate of pressing China to end practices that the US says include intellectual property violations. Trump is scheduled to meet with Chinese Vice Premier Liu He today as China & the US end another week of trade talks. Liu has been named special envoy to China's Jinping, meaning he has the authority to negotiate directly on trade matters with the US. Any meeting between Trump & Xi in Mar would follow their dinner in Argentina in Dec & come amid a prolonged trade dispute between the 2 economies. Both nations have slapped tariffs on hundreds of Bs $s of goods, adding to global economic growth fears as well as worries about ripple effects in key supply chains & manufacturing.
Trump, Xi summit being discussed for late March as China commits to buying $1.2 trillion in US goods
The Federal Reserve stands ready to change the approach to its balance sheet should conditions warrant, the central bank's vice chair for supervision said. Fed Vice Chair Randal Quarles said at a conference that the central bank remains committed to its dual mandate of full employment & keeping inflation at a healthy level. "The normalization of the balance sheet is not a competing goal," he said. "If ever it appears that our plans for the balance sheet are running counter to the achievement of our dual-mandate objectives, we would quickly reassess our approach to the balance sheet." The Fed currently is in the process of reducing the level of bonds it is holding on the balance sheet. Allowing a capped level of proceeds to run off each month has reduced the total balance sheet to about $4T (nearly $400B less than when the process began). Determining where the process ends depends on what level of reserves banks feel comfortable with. The total reserves being stored at the Fed has fallen to about $1.6T & a survey the Fed conducted last year indicated a comfort level around $800B. However, most economists expect the reduction to end with more than $1T in reserves still on hand. Quarles said the Fed has found that banks want a higher level of reserves than has normally been the case. "It is probably safe to say that reserve demand is much higher than before the crisis," he said. "With so much uncertainty over the level and slope of the reserve demand curve, a degree of caution is warranted." He noted that the level of demand could be "uncertain" as conditions change. Fed officials indicated at their last meeting that they expect the balance sheet roll-off to conclude by the end of 2019. If that is the case, the final level probably would be in the $3.5T range. The current composition of the balance sheet entails about $2.2T in Treasuries & $1.6T in mortgage-backed securities, with other securities & gold making up the rest. The Fed is allowing up to $30T Treasuries & $20T in MBS to roll off each month, & Quarles said mortgages likely will be sold off completely at some point in the future but not as part of the current normalization process.
Fed’s Quarles: We’d ‘quickly reassess’ balance sheet plan if problems came up
The vice chairman of the Federal Reserve on Friday laid out the possibility the central bank will allow inflation to run above target if prices have grown too slowly. Richard Clarida, the vice chair of the Fed and its highest-ranking economist, laid out the possible inflation strategy as he described the communications review the central bank is undertaking. Speaking at a monetary policy conference, Clarida contrasted what amounts to the current strategy — treating persistent shortfalls of inflation from the 2% target as “bygones” — to “makeup” strategies, where the Fed could target average inflation over a multiyear period or target price levels. Inflation as measured by the Fed's preferred PCE price index gauge has rarely been above the 2% target since the end of the financial crisis. Clarida isn't the first Fed official to suggest such a strategy — New York Fed President John Williams, for instance, is an advocate of price level targeting — but his position gives the comments heft, even if he didn’t formally endorse them. Clarida pointed out the benefits of a makeup strategy would depend on whether households & firms believed they will be delivered when the time comes. “Thus, one of the most challenging questions is whether the Fed could, in practice, attain the benefits of makeup strategies that are possible in models,” he added.
Fed’s Clarida says central bank may adopt ‘makeup’ strategy after inflation undershoots
The Federal Reserve said it will stick to its “patient” approach toward guiding the US economy owing to somewhat slower growth in 2019 & mild inflation, according to the central bank's annual report to Congress. The 63-page report includes few surprises & reinforces the Fed's decision last month to stop raising interest rates amid fresh worries about the economy. The report was released today ahead of Federal Reserve Chair Jerome Powell's testimony next week. The Fed pointed to slower consumer spending & business investment, softer home sales, trade tensions with China & a weaker global economy. Worries about the economy ignited a stock-market meltdown in Dec, though prices have mostly recovered. By & large, though, the Fed found little to be alarmed about. The labor market is strong and should encourage steady spending by consumers, the Fed said. Borrowing has “risen roughly in line with household incomes” & has been largely concentrated among the well-to-do. The recent decline in interest rates, meanwhile, should help home buyers & boost the housing market. The one caveat: The Fed said rural areas have recovered much more slowly than urban & suburban areas since the end of the last recession almost 10 years ago. Businesses, for their part, are likely to spend & invest at a slower but still moderate pace compared to last year. The Fed noted that smaller and riskier businesses have increased borrowing “significantly” & that debt-to-asset ratios remain near historic highs, but the level of borrowing slowed toward the end of 2018. Larger businesses are in better financial shape & the US financial sector as a whole is “substantially more resilient than in the decade preceding” the recession of 2007-2009. The Fed also sees little risk of a surge in inflation. The bank pointed out that rising wages have done little to stoke price pressures while the falling cost of energy has led to a general decline in inflation since last summer. Food prices have also been low, the Fed added. The central bank expects inflation to remain at or under 2% in the next year or so.
Fed sees steady but slower growth and stable inflation for U.S. economy in 2019
Crude-oil futures rallied to a high of more than 3 months, with gains padding the commodity's weekly advance, as US equities & other assets found traction against the backdrop of upbeat US-China trade talks. Apr West Texas Intermediate crude gained 30¢ (0.5%) to finish at $57.26 a barrel, marking its highest finish since Nov 12. For the week, WTI booked a 3% gain. The oil market had finished lower yesterday after a gov report revealed that domestic supplies climbed for a 5th straight week as production jumped to a record level, but ongoing evidence of declines in world-wide output capped price losses for the session. Today weekly rig-count data showed the rigs drilling for oil edged back by 4 to 853. News reports said Pres Trump would meet with China's top trade negotiator, Vice Premier Liu He, which has underscored optimism that a deal between China & the US will strike a trade deal soon. China is a big importer of oil & its tiff on tariffs with DC has been a drag on the commodity until recent signs of progress on talks emerged.
U.S. oil settles higher, carves out nearly 3 1/2-month peak as China tariff talks progress
The Dow rose last week & is up an impressive 2.7K YTD. Overall this was the 9th straight week of gains for stocks. For those who remember the past, that kind of rise is scary. Markets are not meant to go up with hardly a hiccup along the way. Gold has also been attracting buyers. It's up 10% since the lows in mid Nov witih only a few minor setbacks along the way. That spells disconnect & they do not last.
Dow Jones Industrials
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