Markets pull back as they grapple with weak economic data

Dow slumped 159, decliners over advancers 4-3 & NAZ fell 38.  The MLP index was about even in the 248s & the REIT index lost 1 to the 364s.  Junk bond funds were mixed & Treasuries rose in price.  Oil climbed higher to the 56s & gold tumbled a big 11 to 1287 (more below).

AMJ (Alerian MLP Index tracking fund

CL=F

Crude Oil

56.75

+0.95

+1.7%

GC=F

Gold

1,285.50

-13.70

-1.1%

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Stocks rose at the opening oni optimism that a trade deal between the US & China is drawing closer.  Beijing has offered to lower tariffs & other restrictions on American farm, chemical, auto & other products, & DC considering removing most, if not all, sanctions levied against Chinese products since last year.  The talks have, however, progressed to the extent that a formal agreement could be reached at a summit between Pres Trump & Chinese Pres Xi Jinping, probably around Mar 27, after Xi finishes a trip to Italy & France, according to leakers.  The Commerce Dept said that construction spending decreased 0.6% from a month earlier to a seasonally adjusted annual rate of $1.293T. An increase had been expected.  In Asian markets, China's Shanghai Composite index was up 1.1% & Hong Kong's Hang Seng added 0.5% to an 8-month high.  Japan's Nikkei rose 1% to a 3-month high.  In Europe, London's FTSE was up 0.7%, Germany's DAX added 0.2% & France's CAC rose 0.7%.

Stocks rise on US-China trade deal hopes

The US & China are getting closer to inking a trade deal Opens a New Window. .  Beijing has offered to lower tariffs & other restrictions on American farm, chemical, auto & other products & the US is considering removing most, if not all, sanctions levied against Chinese products since last year.  Apparently, hurdles still remain & each side faces possible resistance at home that the terms are too favorable to the other side.  The talks have however progressed to the extent that a formal agreement could be reached at a summit between Pres Trump & Chinese Pres Xi Jinping, probably in late Mar.  Among issues that may be resolved include, speeding up the timetable for removing foreign-ownership limitations on car ventures & reducing tariffs on imported vehicles to below the current auto tariff of 15%.  Beijing would also step up purchases of US goods, a tactic designed to appeal to Pres Trump, who campaigned on closing the bilateral trade deficit with China.  Also mentioned would be an $18B natural-gas purchase from Cheniere Energy, leakers said.  The 2 sides continue to negotiate over issues involving Chinese industrial policy the US argues gives Chinese domestic firms an advantage, especially state-owned enterprises.  Last week, US Trade Representative Robert Lighthizer said the provisions involving protecting intellectual property total nearly 30 pages out of a working document of more than 100 pages.

US, China closing in on a trade deal

US construction spending unexpectedly fell in Dec as investment in both private & public projects dropped, further evidence the economy lost momentum at the tail end of 2018.  The Commerce Dept said that construction spending declined 0.6% after an unrevised 0.8% increase in Nov.  The forecast called for construction spending rising 0.2% in Dec.  The report extended the run of weak economic Dec data, that has included retail sales, housing starts, trade & home sales.  Construction spending increased 1.6% on a year-on-year basis in Dec.  It rose 4.1% in 2018, the weakest reading since 2011.  Dec's weak construction spending data could have an impact onQ4 GDP estimate published Fri.  The economy grew at a 2.6% annualized rate in the Oct-Dec period, slowing from Q3's brisk 3.4% pace.  In Dec, spending on private construction projects fell 0.6% after surging 1.3% in Nov.  Investment in private residential projects tumbled 1.4% after rebounding 3.4% in Nov.  The housing market has been weighed down by higher mortgage rates, expensive building materials as well as land & labor shortages.  Residential investment contracted 0.2% in 2018.  Spending on private nonresidential structures, which includes manufacturing & power plants, gained 0.4% in Dec after declining 1.1% in Nov.  Spending on nonresidential structures contracted in both the 3rd & 4th qtrs.  Investment in public construction projects fell 0.6% to an 8-month low after decreasing 1.0% in Nov.  Spending on federal gov construction projects plunged 2.2% after rising 0.3% in Nov.  Investment in state & local gov construction projects fell 0.5% in Dec to an 8-month low after dropping 1.1% in the prior month.

US construction spending unexpectedly falls in December

Gold futures deepened their retreat below the closely watched $1300 line with a fresh move lower, driven there by gains in risk-on markets as trade-pact optimism grew.  Futures dropped below $1300 on Fri to settle at their lowest in 6 weeks, down over 2% for the week (the sharpest weekly fall since Aug).  Broad risk-on sentiment, which boosted US & global stocks, as well as strength in the $, worked to dull demand for the haven precious metal then & again today.  Apr gold is down $12.60 (1%) at $1286 an ounce, with the most-active contract poised for its lowest finish since Jan 24.  For last week, bullion was down about 2.5%, which was the steepest weekly percentage decline since Aug.

Gold’s retreat deepens as stocks, dollar move up amid trade-pact progress

Stocks started the day higher, but that enthusiasm faded fast.  Disappointing economic data & worries about a trade deal which still needs more work brought out the sellers.  The Dow has dropped 250 from its opening high & the outlook for the rest of the day looks grim.

Dow Jones Industrials