Dow fell 53 (closing near session lows), advancers over decliners 3-2 & NAZ went up 9. The MLP inched was fractionally higher to 241 & the REIT index was little changed in the 267s. Junk bond funds rose in price & Treasuries remained weak. Oil fell to the 52s (but above session lows) & gold was off 6 to 1312 (more on both below).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
In her first speech since joining the central bank in Nov, Fed Governor Michelle Bowman said that the health of the community banking sector has “improved significantly” since the financial crisis as she also raised concerns about commercial real estate & the agricultural sector. Bowman noted that there were no community bank failures in 2018. “Our job now is to ensure that community banks continue to remain strong,” Bowman said. “We...want bankers to actively manage concentrations of credit risk, and be mindful that strong lending activity can strain liquidity,” she added. During a question-&-answer session, Bowman said both the economy & Fed interest-rate policy are “in a good place.” “I voted for our current policy. Inflation is close to the Fed’s 2% target and I am comfortable with the current stance,” Bowman said. Bowman is the first Fed governor to fill the role created by Congress for someone with community banking experience to serve on the central bank's board. Prior to her appointment, Bowman was the state bank commissioner of Kansas. She also was a senior exec of Farmers & Drovers Bank in Kan that her great-great grandfather helped charter in 1882. Bowman said she would travel widely in her new post & urged community bankers to voice their concerns about regulation. “This dialogue is especially important as we continue to work to tailor our supervision and regulation to the size and risk profile of the institutions we oversee,” she said. The Fed is trying to reduce regulatory burdens on the sector, while maintaining safety & soundness, she noted. Bowman noted that concentrations of commercial real estate are rising at some banks & the Fed is reminding bankers “of the difficulties that such concentrations presented in the past.” Another focus will be on concentrations of agricultural credit, she added. Farm debt is increasing & delinquency rates on loans for both production & farm real estate have continued to edge higher, according to Jan report by the Kansas City Fed. This has led to an upward trend in farm bankruptcy filings. While there is no legal definition of a community bank, the FDIC said a $10B size limit has come to be used to define the sector. 3 out of 4 community banks hold assets of less than $500M, Bowman said. While they hold just 17% of financial industry assets, the are responsible for about 53% of bank lending to small businesses, she added.
Gold prices ended the session with a loss as a leading $ index traded at its highest levels since Dec, cutting demand for investors buying precious metals using other currencies. Apr gold lost $6.60 (0.5%) to settle at $1312 an ounce after falling 0.3% last week (but has climbed 2.9% since the end of last year based on the most-active contract as uneasy trade progress, grouped with a series of global growth downgrades, sent investors to seek cover in lower-risk pockets of the financial markets). Investors were also looking ahead to trade talks this week with a delegation of US officials traveling to China for the next round. Pres Trump said last week that he had no plans to meet with Chinese Pres Xi Jinping before a Mar 1 deadline to achieve a trade deal. Trump has vowed to increase tariffs on $200B of Chinese imports to 25% from 10% if the 2 sides cannot reach a deal. That action is seen aggravating economic growth at a time when a late-cycle recovery is already showing signs of sputtering.
Benchmark US oil prices logged their lowest finish in 2 weeks, weighed down by worries about energy demand & a stronger $. Prices, however, finished off session's worst levels. In oil-related news, a report said that eastern Libyan military forces took control over the country's largest oilfield from protesting state guards, a move that could lead to a resumption of oil production. Mar West Texas Intermediate oil shed 31¢ (0.6%) to settle at $52.41 a barrel after trading as low as $51.23
The $ added to its recent winning streak, strengthening against rivals across the board, despite the chance of the renewed partial gov shutdown looming in the background. The ICE Dollar Index rose 0.5% at 97.084, a level not seen since Dec, extending a strong updraft last week that helped the gauge to mark its best weekly percentage jump, up 1.1%, since Aug. Meanwhile, another partial shutdown of the gov is in the cards, after talks between Dems & Reps broke down over the weekend. Among major currency pairs, the greenback was strongest against the ¥, climbing 0.6% to ¥-110.41, its best level since late Dec. Japanese markets are closed for the National Foundation Day holiday today. This limited liquidity during Asian market hours & hurt the Swiss franc, which fell prey to a mini ‘flash-crash.’ The franc since recovered some, while the greenback remained stronger. One $ last bought 1.0042 francs, compared with 0.9986 francs late Fri. The $'s main rival, the € was slightly weaker at $1.1273, down from $1.1326 late Fri. The £ was also notably weaker against its US rival, after many economic data further highlighted weakness in the UK economy. GDP for the final qtr of 2018 fell to 1.3% year-over-year, undercutting expectations. Qtr-on-qtr, GDP growth slowed to 0.2%, also lower than expected. Business investments were down in Q4, & construction output & industrial production fell in Dec. The only data points that outperformed expectations were preliminary Q4 reads of imports & exports. The £ fell to $1.2859, down from $1.2942 late Fri. On the Brexit front, Prime Minister Theresa May is expected to ask Parliament for more time to hammer out her alternative deal. Elsewhere, Chinese markets are back from the Lunar New Year holiday & the yuan was weaker versus the buck, along with most emerging-markets currencies.
The gov shutdown is getting close. If nothing is resolved today it may be difficult to stop a shutdown Fri night because of the lead time needed to get legislation passed & then signed. Meanwhile the China trade talks are stumbling along. Those talks will need more work, but higher tariffs may be delayed to allow for more talking. Earnings reports this week probably will not be a major factor influencing the stock markets.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
In her first speech since joining the central bank in Nov, Fed Governor Michelle Bowman said that the health of the community banking sector has “improved significantly” since the financial crisis as she also raised concerns about commercial real estate & the agricultural sector. Bowman noted that there were no community bank failures in 2018. “Our job now is to ensure that community banks continue to remain strong,” Bowman said. “We...want bankers to actively manage concentrations of credit risk, and be mindful that strong lending activity can strain liquidity,” she added. During a question-&-answer session, Bowman said both the economy & Fed interest-rate policy are “in a good place.” “I voted for our current policy. Inflation is close to the Fed’s 2% target and I am comfortable with the current stance,” Bowman said. Bowman is the first Fed governor to fill the role created by Congress for someone with community banking experience to serve on the central bank's board. Prior to her appointment, Bowman was the state bank commissioner of Kansas. She also was a senior exec of Farmers & Drovers Bank in Kan that her great-great grandfather helped charter in 1882. Bowman said she would travel widely in her new post & urged community bankers to voice their concerns about regulation. “This dialogue is especially important as we continue to work to tailor our supervision and regulation to the size and risk profile of the institutions we oversee,” she said. The Fed is trying to reduce regulatory burdens on the sector, while maintaining safety & soundness, she noted. Bowman noted that concentrations of commercial real estate are rising at some banks & the Fed is reminding bankers “of the difficulties that such concentrations presented in the past.” Another focus will be on concentrations of agricultural credit, she added. Farm debt is increasing & delinquency rates on loans for both production & farm real estate have continued to edge higher, according to Jan report by the Kansas City Fed. This has led to an upward trend in farm bankruptcy filings. While there is no legal definition of a community bank, the FDIC said a $10B size limit has come to be used to define the sector. 3 out of 4 community banks hold assets of less than $500M, Bowman said. While they hold just 17% of financial industry assets, the are responsible for about 53% of bank lending to small businesses, she added.
Fed’s Bowman talks up community bank resilience as she notes pressures from commercial real estate, agriculture
Gold prices ended the session with a loss as a leading $ index traded at its highest levels since Dec, cutting demand for investors buying precious metals using other currencies. Apr gold lost $6.60 (0.5%) to settle at $1312 an ounce after falling 0.3% last week (but has climbed 2.9% since the end of last year based on the most-active contract as uneasy trade progress, grouped with a series of global growth downgrades, sent investors to seek cover in lower-risk pockets of the financial markets). Investors were also looking ahead to trade talks this week with a delegation of US officials traveling to China for the next round. Pres Trump said last week that he had no plans to meet with Chinese Pres Xi Jinping before a Mar 1 deadline to achieve a trade deal. Trump has vowed to increase tariffs on $200B of Chinese imports to 25% from 10% if the 2 sides cannot reach a deal. That action is seen aggravating economic growth at a time when a late-cycle recovery is already showing signs of sputtering.
Gold ends lower as dollar climbs, with U.S.-China trade talks holding market’s attention
Benchmark US oil prices logged their lowest finish in 2 weeks, weighed down by worries about energy demand & a stronger $. Prices, however, finished off session's worst levels. In oil-related news, a report said that eastern Libyan military forces took control over the country's largest oilfield from protesting state guards, a move that could lead to a resumption of oil production. Mar West Texas Intermediate oil shed 31¢ (0.6%) to settle at $52.41 a barrel after trading as low as $51.23
U.S. oil pares much of its losses by the finish, but still settle at a 2-week low
The $ added to its recent winning streak, strengthening against rivals across the board, despite the chance of the renewed partial gov shutdown looming in the background. The ICE Dollar Index rose 0.5% at 97.084, a level not seen since Dec, extending a strong updraft last week that helped the gauge to mark its best weekly percentage jump, up 1.1%, since Aug. Meanwhile, another partial shutdown of the gov is in the cards, after talks between Dems & Reps broke down over the weekend. Among major currency pairs, the greenback was strongest against the ¥, climbing 0.6% to ¥-110.41, its best level since late Dec. Japanese markets are closed for the National Foundation Day holiday today. This limited liquidity during Asian market hours & hurt the Swiss franc, which fell prey to a mini ‘flash-crash.’ The franc since recovered some, while the greenback remained stronger. One $ last bought 1.0042 francs, compared with 0.9986 francs late Fri. The $'s main rival, the € was slightly weaker at $1.1273, down from $1.1326 late Fri. The £ was also notably weaker against its US rival, after many economic data further highlighted weakness in the UK economy. GDP for the final qtr of 2018 fell to 1.3% year-over-year, undercutting expectations. Qtr-on-qtr, GDP growth slowed to 0.2%, also lower than expected. Business investments were down in Q4, & construction output & industrial production fell in Dec. The only data points that outperformed expectations were preliminary Q4 reads of imports & exports. The £ fell to $1.2859, down from $1.2942 late Fri. On the Brexit front, Prime Minister Theresa May is expected to ask Parliament for more time to hammer out her alternative deal. Elsewhere, Chinese markets are back from the Lunar New Year holiday & the yuan was weaker versus the buck, along with most emerging-markets currencies.
Dollar extends climb to kick off week, with partial government shutdown looming
The gov shutdown is getting close. If nothing is resolved today it may be difficult to stop a shutdown Fri night because of the lead time needed to get legislation passed & then signed. Meanwhile the China trade talks are stumbling along. Those talks will need more work, but higher tariffs may be delayed to allow for more talking. Earnings reports this week probably will not be a major factor influencing the stock markets.
Dow Jones Industrials
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