Dow rose 140 (after a 300 advance at AM highs), advancers over decliners better than 2-1 & NAZ went up 53. The MLP index adeded 1 to the 254s & the REIT index was steady in the 375s. Junk bond funds were little changed in price & Treasuries crawled higher with yields on the 10 year Treasury at lows not seen since late 2017. Oil recovered 1+ to the high 59s & gold pulled back 7 to 1315.
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
With the unemployment rate so low, why is inflation so muted? Globalization, at least in part, is the answer, said San Francisco Fed Pres Mary Daly. Daly said that both workers & businesses are finding it hard to set prices in the new global marketplace. For their part, workers have suffered from a loss of bargaining power, Daly added. “Declining unionization—along with increased automation and globalization—have made it harder for workers to push for higher pay, even in very healthy job markets.” At the same time, many firms have lost pricing power in the global competition, Daly said.
“This means they have a harder time passing along rising costs, such as wages, to final goods prices,” she added. These factors are “wedges” that complicate the simple theory that higher employment leads to rising wages & prices. The Fed said last week that low inflation readings mean the central bank can be “patient” before raising its benchmark interest rates again. The median forecast of Fed officials was for one more rate hike coming next year. Financial markets now think the next move by the central bank will be to ease monetary policy. They are pricing in a 25% chance of 2 rate cuts by early in 2020. The yield on the 10-year Treasury n&ote has slumped to 2.41%, close to lows not seen since Dec 2017. Daly is not a voting member of the Fed's interest-rate setting committee this year. Daly added that another “wedge” in the theory is that employees are demanding alternative forms of compensation, including free transportation & unlimited time off. These new forms of compensation aren't being captured in traditional measures of wages & salaries & muting the signal the Fed is receiving about the strength of the economy. The Fed itself is also a wedge because it has a 2% inflation target that helps keep inflation expectations in check, Daly noted. She felt a “little less” than good about where inflation stands at the moment. “We’ve grazed 2% here and there, including briefly last year, but it hasn’t been sustainable,” she said added that too low inflation is concerning because it makes the chance of deflation, or negative inflation, more likely & harder for the Fed to adjust interest rates in the face of economic shocks. Readings of the Fed's favorite inflation indicator, the personal consumption expenditure price index, have been sparse so far this year after the gov shutdown. `The consumer price index is running at a 1.5% annual rate as of Feb, down from almost 3% last summer. The core CPI index, which excludes food & energy costs, has slowed to a 2.1% annual rate.
The S&P CoreLogic Case-Shiller 20-city index inched up a seasonally adjusted 0.1% increase in Jan compared to Dec. Price gains were 3.6% higher compared to a year ago, but that was the slowest pace of annual growth since 2012. The broader national Case-Shiller index rose 4.3% for the 3 months ending in Jan. The forecast called for a 4.2% yearly increase for the closely-watched 20-city index. The housing market has hit an inflection point. After years of runaway price growth, home values are braking hard. More cities saw a monthly decline in Jan than saw gains. Amid the slowdown in expensive West Coast cities — San Diego & San Francisco were among the slowest annual price gainers in Jan — a new contender cracked the top 3. Price growth in Minneapolis, when taken to the 3rd decimal place, was just higher than Charlotte — & Minneapolis was among the metros that experienced a monthly decline.
Construction on new homes, known as housing starts, fell almost 9% in Feb & remained well below year-ago levels, offering more evidence of a broad slowdown in the housing market that still isn't showing much spark. Housing starts slowed to an annual pace of 1.16m, according to a delayed Cojmmerce Dept report. The forecast called for a seasonally adjusted 1.21M rate. Permits to build new homes, fell a smaller 1.6% to an annual rate of 1.3M. Work on new construction plunged 30% in the Northeast, 19% in the West & 7% in the South. The Midwest was the lone bright spot, with starts rising 27%. Single-family starts tumbled 17% in Feb to a 805K rate. Single-family homes account for most new construction. In Jan, the gov revised its estimate of new starts to 1.27M from 1.23M. Housing starts are volatile & subject to constant & sometimes large revisions. Tumbling interest rates could bring more buyers into the market & spur builders to ramp up construction, but don't expect a housing boomlet. Prices are still relatively high despite recent declines & builders face an array of obstacles, such as tighter regulations, the expensive cost of land &and a shortage of labor made worse by a crackdown on immigration.
British lawmakers were preparing to blow open the Brexit process & put a host of rejected options back on the table — including keeping the UK close to the EU or even remaining a member — as Prime Minister Theresa May defiantly insisted today that Parliament should approve her twice-defeated divorce deal instead. Lawmakers are scheduled to vote tomorrow on multiple flavors of Brexit, after the House of Commons voted to wrest the parliamentary timetable away from May's weakened gov & hold votes on alternatives to her rejected withdrawal agreement. The largely pro-EU legislators behind the unprecedented move hope to find a form of Brexit that can command a majority in Parliament. Votes are due to be held tomorrow on options that could include remaining in the EU's single market and customs union, calling a new membership referendum & canceling Brexit, all ideas that May has repeatedly rejected. They plan to see which ideas have the most support, & then hold another day of votes next week to try to find agreement on a proposal. The gov, which usually controls the scheduling of votes in Parliament, said the lawmakers' move "upends the balance between our democratic institutions and sets a dangerous, unpredictable precedent for the future." The votes will not be legally binding, & Health Secretary Matt Hancock said that the gov wouldn't "pre-commit" to accepting the option backed by lawmakers because they may come up with a plan that is impractical. It's also possible lawmakers could support contradictory options, or none at all. "If the Commons voted for the sun to rise in the west, the government would not be able to implement that," he added. "The best way through this impasse is the one deal that has been negotiated with the EU that can be delivered quickly now," Hancock said, referring to the prime minister's agreement. But gov officials acknowledged they were no longer in control of Brexit. May's authority was hanging by a thread after 30 members of her Conservative Party defied her instructions & voted late yeaterday for Parliament to take control of the process. 3 gov ministers resigned rather than vote with the gov.
The bulls returned in the AM, but their enthusiasm did not last. Economic data keeps coming in soft & trade talks are not being finalized. Sellers returned at midday & trimmed early.gains, The Dow continues going sideways. Another way to look at the trend, the Dow is down 300 with the month near its end.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
American consumers were feeling less confident this month amid continued volatility in the financial markets. The
Conference Board reported that its
consumer confidence index fell to 124.1 in Mar from 131.4 in Feb. The
index, covering thru Mar 14, measures consumers' assessment of
current economic conditions & their expectations for the next 6
months. Both declined in Mar. The index had
climbed in Feb amid a rebound in the stock market after Christmas & an end to the shutdown of the federal gov, as well as
signs of progress toward ending the trade standoff between the US &
China. Economists pay close attention to the
Conference Board index because consumer spending accounts for about 70% of US economic activity. "Consumers
remain confident that the economy will continue expanding in the near
term," said Lynn Franco, the Conference Board's senior director of
economic indicators. "However, the overall trend in confidence has been
softening since last summer, pointing to a moderation in economic
growth." In addition to the markets' swings,
consumer confidence was suppressed in Mar by a weak employment report
for Feb, showing that hiring
tumbled last month, with US employers adding just 20K jobs, the
smallest monthly gain in nearly a year & a half. The
hiring slowdown came amid signs that growth is slowing because of a
weaker global economy & the trade war between the US & China. Pres Trump is sending US officials to China this week in an effort
to resolve the trade dispute. Following the meetings in Beijing, the
US will host a delegation from China led by Vice Premier Liu He early
next month. A slowdown in manufacturing & global pressures,
including the ongoing trade war with China, have dampened expectations
for economic growth. Reflecting the dimmer view
of the economy as growth slows in the US & abroad, the Federal
Reserve last week left its key interest rate unchanged, & signaled
that it won't be raising rates anytime soon. The
nation's business economists, in a survey yesterday, foresee a sharp
slowdown in US economic growth over the next 2 years. The finding
from the National Association for Business Economics contrasts starkly
with the administration's predictions that growth will accelerate
this year & next. Still, the economy remains on strong ground as its expansion, the 2nd-longest on record, continues.
US consumer confidence weakens in March
With the unemployment rate so low, why is inflation so muted? Globalization, at least in part, is the answer, said San Francisco Fed Pres Mary Daly. Daly said that both workers & businesses are finding it hard to set prices in the new global marketplace. For their part, workers have suffered from a loss of bargaining power, Daly added. “Declining unionization—along with increased automation and globalization—have made it harder for workers to push for higher pay, even in very healthy job markets.” At the same time, many firms have lost pricing power in the global competition, Daly said.
“This means they have a harder time passing along rising costs, such as wages, to final goods prices,” she added. These factors are “wedges” that complicate the simple theory that higher employment leads to rising wages & prices. The Fed said last week that low inflation readings mean the central bank can be “patient” before raising its benchmark interest rates again. The median forecast of Fed officials was for one more rate hike coming next year. Financial markets now think the next move by the central bank will be to ease monetary policy. They are pricing in a 25% chance of 2 rate cuts by early in 2020. The yield on the 10-year Treasury n&ote has slumped to 2.41%, close to lows not seen since Dec 2017. Daly is not a voting member of the Fed's interest-rate setting committee this year. Daly added that another “wedge” in the theory is that employees are demanding alternative forms of compensation, including free transportation & unlimited time off. These new forms of compensation aren't being captured in traditional measures of wages & salaries & muting the signal the Fed is receiving about the strength of the economy. The Fed itself is also a wedge because it has a 2% inflation target that helps keep inflation expectations in check, Daly noted. She felt a “little less” than good about where inflation stands at the moment. “We’ve grazed 2% here and there, including briefly last year, but it hasn’t been sustainable,” she said added that too low inflation is concerning because it makes the chance of deflation, or negative inflation, more likely & harder for the Fed to adjust interest rates in the face of economic shocks. Readings of the Fed's favorite inflation indicator, the personal consumption expenditure price index, have been sparse so far this year after the gov shutdown. `The consumer price index is running at a 1.5% annual rate as of Feb, down from almost 3% last summer. The core CPI index, which excludes food & energy costs, has slowed to a 2.1% annual rate.
Fed’s Daly says globalization is a key reason why inflation is so low
The S&P CoreLogic Case-Shiller 20-city index inched up a seasonally adjusted 0.1% increase in Jan compared to Dec. Price gains were 3.6% higher compared to a year ago, but that was the slowest pace of annual growth since 2012. The broader national Case-Shiller index rose 4.3% for the 3 months ending in Jan. The forecast called for a 4.2% yearly increase for the closely-watched 20-city index. The housing market has hit an inflection point. After years of runaway price growth, home values are braking hard. More cities saw a monthly decline in Jan than saw gains. Amid the slowdown in expensive West Coast cities — San Diego & San Francisco were among the slowest annual price gainers in Jan — a new contender cracked the top 3. Price growth in Minneapolis, when taken to the 3rd decimal place, was just higher than Charlotte — & Minneapolis was among the metros that experienced a monthly decline.
Home price gains slow to a 6 1/2-year low, Case-Shiller says
Construction on new homes, known as housing starts, fell almost 9% in Feb & remained well below year-ago levels, offering more evidence of a broad slowdown in the housing market that still isn't showing much spark. Housing starts slowed to an annual pace of 1.16m, according to a delayed Cojmmerce Dept report. The forecast called for a seasonally adjusted 1.21M rate. Permits to build new homes, fell a smaller 1.6% to an annual rate of 1.3M. Work on new construction plunged 30% in the Northeast, 19% in the West & 7% in the South. The Midwest was the lone bright spot, with starts rising 27%. Single-family starts tumbled 17% in Feb to a 805K rate. Single-family homes account for most new construction. In Jan, the gov revised its estimate of new starts to 1.27M from 1.23M. Housing starts are volatile & subject to constant & sometimes large revisions. Tumbling interest rates could bring more buyers into the market & spur builders to ramp up construction, but don't expect a housing boomlet. Prices are still relatively high despite recent declines & builders face an array of obstacles, such as tighter regulations, the expensive cost of land &and a shortage of labor made worse by a crackdown on immigration.
Housing starts drop 9% in February and show little sign of perking up
British lawmakers were preparing to blow open the Brexit process & put a host of rejected options back on the table — including keeping the UK close to the EU or even remaining a member — as Prime Minister Theresa May defiantly insisted today that Parliament should approve her twice-defeated divorce deal instead. Lawmakers are scheduled to vote tomorrow on multiple flavors of Brexit, after the House of Commons voted to wrest the parliamentary timetable away from May's weakened gov & hold votes on alternatives to her rejected withdrawal agreement. The largely pro-EU legislators behind the unprecedented move hope to find a form of Brexit that can command a majority in Parliament. Votes are due to be held tomorrow on options that could include remaining in the EU's single market and customs union, calling a new membership referendum & canceling Brexit, all ideas that May has repeatedly rejected. They plan to see which ideas have the most support, & then hold another day of votes next week to try to find agreement on a proposal. The gov, which usually controls the scheduling of votes in Parliament, said the lawmakers' move "upends the balance between our democratic institutions and sets a dangerous, unpredictable precedent for the future." The votes will not be legally binding, & Health Secretary Matt Hancock said that the gov wouldn't "pre-commit" to accepting the option backed by lawmakers because they may come up with a plan that is impractical. It's also possible lawmakers could support contradictory options, or none at all. "If the Commons voted for the sun to rise in the west, the government would not be able to implement that," he added. "The best way through this impasse is the one deal that has been negotiated with the EU that can be delivered quickly now," Hancock said, referring to the prime minister's agreement. But gov officials acknowledged they were no longer in control of Brexit. May's authority was hanging by a thread after 30 members of her Conservative Party defied her instructions & voted late yeaterday for Parliament to take control of the process. 3 gov ministers resigned rather than vote with the gov.
UK government defiant as Parliament takes control of Bsrexit
The bulls returned in the AM, but their enthusiasm did not last. Economic data keeps coming in soft & trade talks are not being finalized. Sellers returned at midday & trimmed early.gains, The Dow continues going sideways. Another way to look at the trend, the Dow is down 300 with the month near its end.
Dow Jones Industrials
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