Dow shot up 357, advancers over decliners about 4-1 & NAZ rose 95. The MLP index went up 1+ to the 246s. Junk bond funds inched higher & Treasuries remain in demand with the yield on the 10 Treasury dropping 2 basis points to 2.12%. Oil slid lower in the 53s & gold was flattish at 1327.
AMJ (Alerian MLP Index tracking fund)
Federal Reserve Chairman Jerome Powell said the central bank is watching current economic developments & will do what it must to keep the near-record expansion going. Financial markets have been nervous lately over an escalating trade war that has spread from China & now could include Mexico. At the same, gov bond yields are behaving in a way that in the past has been a reliable recession indicator. Powell began today by addressing “recent developments involving trade negotiations and other matters.” “We do not know how or when these issues will be resolved,” he said in prepared remarks. “We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2 percent objective.” Powell’s comments came at the “Conference on Monetary Strategy, Tools and Communications Practices,” a kickoff for an examination the Fed is conducting this year about the tools it has to meet its goals as well as the way it is communicating its actions to the public. He did not address any other specific issues relating to current conditions. Market are broadly expecting the policy making FOMC to cut the benchmark rate twice before the end of the year in response to current conditions. For his part, Powell has stuck to the position that the Fed remains data dependent. The most recent statement from the May meeting, indicated that the committee is taking a patient stance toward policy changes at conditions evolve. In his speech, Powell took a longer view, outlining the challenges the Fed faces ahead for when the next crisis hits. The current low rate environment leaves the Fed little room before it hits the zero lower bound, or the point where the Fed's nominal benchmark rate can’t be lowered much more. “In short, the proximity of interest rates to the ELB has become the preeminent monetary policy challenge of our time, tainting all manner of issues with ELB risk and imbuing many old challenges with greater significance,” he said. The Fed faces a problem with inflation, which has yet to sustain at the central bank's 2% goal. Powell said persistently low inflation could lead to “a difficult-to-arrest downward drift” in expectations.
Powell says the Fed will ‘act as appropriate to sustain the expansion’
China Commerce Ministry: US trade dispute will need to be solved with dialogue and m…
Relatively soothing words out of China & thoughts of rate cuts by the Fed brought out buyers. Adding to buyer enthusiasm is the oversold conditions of the stock market, shown in the Dow chart below. However trade issues are far from settled & monthly US economic data coming out this week may be bland at best. The stock market will remain highly volatile.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 52.76 | -0.49 | -0.9% |
| GC=F | Gold | 1,328.90 | +1.00 | +0.1% |
Pres Trump promised during a press conference with
outgoing British Prime Minister Theresa May to double or triple trade
between the US & the UK. Earlier
in the day, during a business roundtable, Trump told May that the US
would strike a substantial post-Brexit trade deal with the UK. “We're
going to be working on that today and even a little bit tomorrow and
probably into the next couple of weeks. But I think we’ll have a very,
very substantial trade deal. It’ll be a very fair deal, and I think it’s
something we both want to do,” Trump said. May is set to resign on Fri as prime minister
after repeatedly failing to get Parliament to pass her Brexit plan. But she will continue as a member of
Parliament after she steps down. Trump thanked May for doing a “fantastic job” & asked her to “stick around” as a prime minister. “I don’t know exactly what your timing is, but stick around,” he said. “Let’s do this deal.” Trump's
assurances on a trans-Atlantic trade deal will likely provide a boon to
pro-Brexiters, who have touted the possibility of a deal with the US
as one of the biggest rewards of Brexit. Britain
is scheduled to leave the EU on Oct 31, after pushing its
original departure date back by several months because of a lack of
agreement about what the deal should look like. Trump said the next British prime minister should refuse to pay the $50B divorce bill & “walk away” if the EU doesn't bow to its
demands.
Trump tells Theresa May a 'very fair' trade deal coming after Brexit
Federal Reserve Chairman Jerome Powell said the central bank is watching current economic developments & will do what it must to keep the near-record expansion going. Financial markets have been nervous lately over an escalating trade war that has spread from China & now could include Mexico. At the same, gov bond yields are behaving in a way that in the past has been a reliable recession indicator. Powell began today by addressing “recent developments involving trade negotiations and other matters.” “We do not know how or when these issues will be resolved,” he said in prepared remarks. “We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2 percent objective.” Powell’s comments came at the “Conference on Monetary Strategy, Tools and Communications Practices,” a kickoff for an examination the Fed is conducting this year about the tools it has to meet its goals as well as the way it is communicating its actions to the public. He did not address any other specific issues relating to current conditions. Market are broadly expecting the policy making FOMC to cut the benchmark rate twice before the end of the year in response to current conditions. For his part, Powell has stuck to the position that the Fed remains data dependent. The most recent statement from the May meeting, indicated that the committee is taking a patient stance toward policy changes at conditions evolve. In his speech, Powell took a longer view, outlining the challenges the Fed faces ahead for when the next crisis hits. The current low rate environment leaves the Fed little room before it hits the zero lower bound, or the point where the Fed's nominal benchmark rate can’t be lowered much more. “In short, the proximity of interest rates to the ELB has become the preeminent monetary policy challenge of our time, tainting all manner of issues with ELB risk and imbuing many old challenges with greater significance,” he said. The Fed faces a problem with inflation, which has yet to sustain at the central bank's 2% goal. Powell said persistently low inflation could lead to “a difficult-to-arrest downward drift” in expectations.
Powell says the Fed will ‘act as appropriate to sustain the expansion’
China Ministry of Commerce said that the trade conflict with the US will need to be resolved thru further talks. “The Chinese side always believes that the differences and frictions
between the two sides in the economic and trade field will ultimately
need to be resolved through dialogue and consultation,” a spokesperson
from the Ministry of Commerce said. “However, consultations are principled and need to be based on mutual
respect, equality and mutual benefit. ... It is hoped that the US will
abandon its wrong practices and work in tandem with the Chinese side. In
the spirit of mutual respect, equality and mutual benefit, we will
control differences and strengthen cooperation to jointly safeguard the
healthy and stable development of China-US economic and trade
relations,” the statement added. The comments came after both sides ramped up threats in the ongoing
trade war since the negotiations fell through in early May. China reportedly stopped purchases of US soybeans and threatened to blacklisted Chinese telecom giant Huawei. China issued a white paper on Sun illustrating a widening gap between the 2 sides, claiming
that the US is an untrustworthy negotiator & has backtracked on the
proposed deal. The claim contradicted the reports from US media
several weeks ago saying Beijing backed out from basically all negotiating points during talks. “The Chinese side has always carried the greatest patience and
sincerity to promote China-US economic and trade consultations,” today's statement said. “The US side accused China of ‘reversing the
car’ during the consultations, which is completely nonsense. In the
course of the consultation, it is the usual practice of trade
negotiations to propose amendments and make adjustments to the text
content and related expressions.” Stocks rebounded following the statement from China. China also said last week it will establish a list of unreliable entities of foreign companies & people that “seriously damage” the interests of domestic firms.
China Commerce Ministry: US trade dispute will need to be solved with dialogue and m…
Relatively soothing words out of China & thoughts of rate cuts by the Fed brought out buyers. Adding to buyer enthusiasm is the oversold conditions of the stock market, shown in the Dow chart below. However trade issues are far from settled & monthly US economic data coming out this week may be bland at best. The stock market will remain highly volatile.
Dow Jones Industrials
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