Dow fell 63 (but well above AM lows), decliners marginally ahead oF advancers 5-4 & NAZ went up 9. The MLP index fell 2+ to the 239s & the REIT index gained 3+ to the 367s. Junk bond funds did little today & Treasuries were purchased. Oil was about even in the 52s & gold rose 4 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)
With little apparent progress in US-China trade talks, the Trump administration could be about to open up a new front in the trade wars by taking on the European auto industry, & that could spook markets. US negotiators head to China next week, & while there are few signs any kind of deal is near, many strategists expect to see some signs that talks will continue & an eventual agreement will be reached, even if a Mar 1 deadline on new tariffs is pushed back. While the market has focused on those talks, another battle is brewing. The Commerce Dept by Feb 17 is expected to release a broad report on auto imports and national security, & experts say as part of that report could recommend tariffs on European autos. The White House would then have 90 days to respond. Some economists expect the administration to move on the auto tariffs, specifically on European cars. The administration then could grant exemptions to other countries that have cooperated, like Korea, Canada & Mexico, but the EU would not be exempted.
Trade war headlines could get much worse before they get better as the US looks to Europe
The US economy is naturally slowing to a more sustainable pace and this is welcome as it will help prevent a recession, San Francisco Fed Pres Mary Daly said. In 2018, the economy grew close to a 3% annual rate, “and that, by anyone’s estimate, is a full percentage point above what we can potentially grow at,” Daly added. The consensus forecast for 2019 is for growth at a 2% annual rate, about the consensus for the economy’s speed limit, she said. That suits the Fed, she said. “We want it to come back down,” she said. Daly's comments conflict with White House chief economist Kevin Hassett, who has predicted the economy can grow at a 3% annual rate thanks to the Trump administration's policy agenda. “What’s happened over the course of the last six months is the economy is self-bridling itself to come back down to a sustainable pace,” Daly said. “That will, if anything, help us prevent a recession,” she added. The Fed can’t guarantee there will not be future recessions, so the goal is try to make sure they are less likely “and that if we do slip, it is not a big slip like we just came through, but something more modest.” Daly continued. Since last fall, when she became pres of the San Francisco Fed, Daly said the Fed was fighting the market's fear that the economic expansion would “die of old age.” The current expansion began in Jun 2009. If it makes it to this summer it will be the longest in US history. The reason that stocks fell sharply over Q4 is that people started to react to that fear, despite the Fed's best efforts to persuade investors this was a fallacy, Daly added.
Baker Hughes reported that the number of active US rigs drilling for oil rose by 7 to 854 this week. That followed a decline of 15 in the oil-rig count a week earlier. The total active US rig count also edged up by 4 to 1049. Mar West Texas Intermediate crude was up 14¢ (0.3%) at $52.78 a barrel.
Buyers returned in the PM, trimming session losses. But the bigger picture looks grim. US-China trade talks are stuck in the mud & the border dispute needs more work as the Feb 15 deadline looms. The Dow finished above 25K & stretched its string of weekly advances to 7 this week with a meager gain of 40. Meanwhile REITs are in demand. The index above is within roughly 10 off its record highs in 2016.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
Federal Reserve Bank of Dallas Pres Robert Kaplan warned that slight global slowdown as a result of geopolitical
uncertainties could ultimately weigh on the US economy. “The
trade tensions and trade uncertainty, in general, I think is having an
effect, probably to some extent on weaker global growth,” Kaplan said. “And it’s
certainly, I can tell you... having a chilling effect on [businesses’]
decision of capex and expansion.” The Fed president also suggested the effects of
the nearly year-long trade battle between the US & China
will eventually start to impact US economic growth. The S&P 500,
for instance, receives more than 45% of its revenue from outside
of the US he noted. “My
concern is that when global growth decelerates, as we’ve seen in Italy
and Germany and underneath the surface in China, that typically is going
to spill over in the United States,” he added. “We’re not immune to
slowing global growth.” It’s the latest signal that policymakers at the central bank will be patient, & slightly dovish, in setting monetary policy in the year ahead as they watch for signs of an economic downturn. During
the FOMC's Jan meeting, Fed Chair Jerome
Powell echoed that sentiment. Strong economic data -- the unemployment
rate remains near historic lows, & inflation is still hovering around
the Fed's 2% goal, indicates the economy will grow at a "solid
pace" in the year ahead, Powell said, albeit slower than in 2018. But
Powell also said that cumulative effects from the US-China trade war;
uncertainties surrounding Brexit & economic fallout from a 35-day
partial gov shutdown warranted a "patient
wait-and-see approach" regarding future rate decisions. "We
still see sustained expansion of economic activity, strong labor
conditions and inflation near 2 percent," Powell said at the time. "But
the crosscurrents suggest a less favorable outlook."
Fed's Kaplan warns global slowdown could spill into US
With little apparent progress in US-China trade talks, the Trump administration could be about to open up a new front in the trade wars by taking on the European auto industry, & that could spook markets. US negotiators head to China next week, & while there are few signs any kind of deal is near, many strategists expect to see some signs that talks will continue & an eventual agreement will be reached, even if a Mar 1 deadline on new tariffs is pushed back. While the market has focused on those talks, another battle is brewing. The Commerce Dept by Feb 17 is expected to release a broad report on auto imports and national security, & experts say as part of that report could recommend tariffs on European autos. The White House would then have 90 days to respond. Some economists expect the administration to move on the auto tariffs, specifically on European cars. The administration then could grant exemptions to other countries that have cooperated, like Korea, Canada & Mexico, but the EU would not be exempted.
Trade war headlines could get much worse before they get better as the US looks to Europe
The US economy is naturally slowing to a more sustainable pace and this is welcome as it will help prevent a recession, San Francisco Fed Pres Mary Daly said. In 2018, the economy grew close to a 3% annual rate, “and that, by anyone’s estimate, is a full percentage point above what we can potentially grow at,” Daly added. The consensus forecast for 2019 is for growth at a 2% annual rate, about the consensus for the economy’s speed limit, she said. That suits the Fed, she said. “We want it to come back down,” she said. Daly's comments conflict with White House chief economist Kevin Hassett, who has predicted the economy can grow at a 3% annual rate thanks to the Trump administration's policy agenda. “What’s happened over the course of the last six months is the economy is self-bridling itself to come back down to a sustainable pace,” Daly said. “That will, if anything, help us prevent a recession,” she added. The Fed can’t guarantee there will not be future recessions, so the goal is try to make sure they are less likely “and that if we do slip, it is not a big slip like we just came through, but something more modest.” Daly continued. Since last fall, when she became pres of the San Francisco Fed, Daly said the Fed was fighting the market's fear that the economic expansion would “die of old age.” The current expansion began in Jun 2009. If it makes it to this summer it will be the longest in US history. The reason that stocks fell sharply over Q4 is that people started to react to that fear, despite the Fed's best efforts to persuade investors this was a fallacy, Daly added.
Fed’s Daly says it’s good news that economy is slowing to 2% pace
Baker Hughes reported that the number of active US rigs drilling for oil rose by 7 to 854 this week. That followed a decline of 15 in the oil-rig count a week earlier. The total active US rig count also edged up by 4 to 1049. Mar West Texas Intermediate crude was up 14¢ (0.3%) at $52.78 a barrel.
Baker Hughes data show U.S. oil-rig count up 7 for the week
Buyers returned in the PM, trimming session losses. But the bigger picture looks grim. US-China trade talks are stuck in the mud & the border dispute needs more work as the Feb 15 deadline looms. The Dow finished above 25K & stretched its string of weekly advances to 7 this week with a meager gain of 40. Meanwhile REITs are in demand. The index above is within roughly 10 off its record highs in 2016.
Dow Jones Industrials
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