Dow inched up 4, advancers over advancers better than 3-2 & NAZ dropped a big 120. The MLP index gained 1+ to the 245s. Junk bond funds continued lower & Treasuries rose, bringing the yield on the 10 year Treasury down to 2.08%. Oil declined to the 52s to a more than 3 month low & gold soared 21 to 1321.
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
Spending on US construction projects was unchanged in Apr as another decline in home construction was offset by a big gain in gov spending on projects like highways & hospitals. The Commerce Dept said that the flat reading followed a small increase of 0.1% in Mar, which was revised higher from an initial estimate that showed a sharp decline. Construction spending rose 1% in Feb. The data suggests that Americans cut back on home renovations in Apr & spending on new home construction was flat. Higher mortgage rates have weighed on home sales this year, though in recent weeks rates have dropped below 4%, potentially reviving sales. Commercial construction fell sharply in Apr, driven by a steep decline in construction of factories. Construction spending in the private sector plunged 1.7%, the steepest in 6 years. Residential construction spending has fallen for 4 straight months. Those declines were offset by a 4.8% surge in gov construction spending to a record high of $299B, led by big gains in state & local gov spending, which also rose to a record high. Spending on highways & streets jumped 6.8%, while school construction rose 2.1%. Federal spending rose to $24.5B, the highest since 2013.
A US interest rate cut “may be warranted soon” given the rising risk to economic growth posed by global trade tensions as well as weak US inflation, St Louis Federal Reserve pres James Bullard said, the first Fed official to say recent events may require a central bank response. Bullard said that while the Fed cannot respond to every change in the rapidly evolving trade feud between the US & other top trading nations, recent events like the unexpected announcement of new tariffs on Mexican imports have created “an environment of elevated uncertainty...that could feed back to US macroeconomic performance” as the global economy slows. The Fed “faces an economy that is expected to grow more slowly going forward, with some risk that the slowdown could be sharper than expected due to ongoing global trade regime uncertainty,” he said. In addition, both inflation & inflation expectations remain below target, & signals from the Treasury yield curve seem to suggest that the current policy rate setting is inappropriately high. Along with weak inflation & warning signs from the bond market, “a downward policy rate adjustment may be warranted soon” to help boost inflation expectations & help ease fears that have emerged in bond prices of a sharper-than-expected US slowdown. Several earlier rounds of Trump administration trade actions against China & other countries left Fed officials largely unmoved, saying there was no need to react unless trade tensions persisted or began changing the US growth outlook. For Bullard, a voting member of the central bank's rate-setting committee this year, that moment may have arrived. Along with trade, he has been among the more concerned at the Fed about the fact that rates on 10-year bonds have fallen below 3-month yields as well as below the federal funds rates itself. This “inversion” of the yield curve, he feels, has become pronounced enough to bolster the case for a rate cut. “A downward adjustment of the policy rate may help re-center inflation and inflation expectations at the 2 percent target,” as well as provide “insurance” against a sharper than expected economic slowdown, Bullard said, comparable to rate cuts the Fed made in the mid-1990s to nudge along that expansion. Many of his colleagues have been reluctant to endorse such a move, arguing that the Fed did not need to move rates from the current 2.25-2.5% until some economic shock caused them to reconsider. However, since the Fed last met, Pres Trump extended 25% tariffs to a host of Chinese goods & announced targeted policies aimed at Chinese telecoms giant Huawei. These moves triggered a sharp sell-off in the stock markets.
Fed’s Bullard says a rate cut may be ‘warranted soon’
Boeing (BA), a Dow stock, CEO Dennis Muilenburg said it is conducting simulated flights with air-safety regulators this week & plans to fly its 737 Max aircraft with the FAA “very soon” to get the grounded planes cleared to return to airline service. Aviation officials worldwide grounded the planes in mid-Mar in the wake of 2 deadly crashes of the aircraft within 5 months of one another. The 2 crashes killed 346. Muilenburg said he expects that the planes will get a green light to fly again by the end of the year, but declined to provide a timeline. The FAA is participating in simulated flights with BA this week, Muilenburg said. After that step, the company plans to schedule actual test flights. BA has completed a software update for an anti-stall system that has been implicated in the crashes. Airlines that have purchased the 737 max have canceled thousands of flights due to the grounding & have scrambled to meet demand during the peak summer travel season. The manufacturer will have to repair “damaged trust” of the flying public, Muilenburg said. Some airlines have said they won't charge passengers skittish about the planes to switch to flights operated with other aircraft. The stock lost 2.72 (near the lows for 2019).
If you would like to learn more about BA, click on this link:
club.ino.com/trend/analysis/stock/BA?a_aid=CD3289&a_bid=6ae5b6f7
Boeing CEO says troubled 737 Max jets should be flying by the end of the year
While big tech stocks (prominent in the NAZ) were sold on fears of regulation, chaos in the trade scene is the major driver for selling. And there is no qujck fix for that. Early strength in the Dow faded in the PM, although there more more advancing stocks than decliners aid by buying into the close. Stocks are looking at another dreary month without fixes for the multiple trade wars. Meanwhile, as expected, gold & Treasuries are at recent highs.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
Pres Trump announced that he intends to impose 5% tariffs on goods from Mexico in Jun, over the large number of illegal immigrants crossing into the US at the southern border. US
goods & services trade with Mexico totaled $671B last year,
including $372B in imports & $299B in exports. The US trade deficit for the year was
$72.7B. Mexico was the 3rd-largest goods trading partner for the US in 2018 & its 2nd-largest export market. A number of business groups have come out in opposition
to the tariffs, which they say will be paid for by American families
when companies are forced to pass on increased costs. The
Chamber of Commerce is among several groups that are exploring
potential legal action against the threatened tariffs. Here's the top items the US imported from Mexico in 2018:
Vehicles: $93B worth of imports
Car production facilities rely on trade with Mexico for parts in order to complete final assembly.
Electrical machinery: $64B worth of imports
Machinery: $63B worth of imports
The US imports heavy equipment, like tractors.
Mineral fuels: $16B worth of imports
Optical & medical instruments: $15B worth of imports
Agricultural products: $26B worth of imports, including:
- Fresh vegetables: $5.9B including tomatoes, eggplant & cucumbers
- Fresh fruit: $5.8B. (including 80% of the avocados consumed in the US).
- Wine & beer: $3.6B. 773M gallons of beer in 2018, an increase of 8.6% from the year prior & more than it receives from any other country. In the first 11 months of 2018, the US imported 172M liters of tequila & a large amount of wine.
Snack foods: $2.2B
Processed fruits & vegetables: $1.7B
Service imports, including travel, transport & technical, totaled $25.3B.
Trump's Mexico tariffs will impact these US imports the most
Spending on US construction projects was unchanged in Apr as another decline in home construction was offset by a big gain in gov spending on projects like highways & hospitals. The Commerce Dept said that the flat reading followed a small increase of 0.1% in Mar, which was revised higher from an initial estimate that showed a sharp decline. Construction spending rose 1% in Feb. The data suggests that Americans cut back on home renovations in Apr & spending on new home construction was flat. Higher mortgage rates have weighed on home sales this year, though in recent weeks rates have dropped below 4%, potentially reviving sales. Commercial construction fell sharply in Apr, driven by a steep decline in construction of factories. Construction spending in the private sector plunged 1.7%, the steepest in 6 years. Residential construction spending has fallen for 4 straight months. Those declines were offset by a 4.8% surge in gov construction spending to a record high of $299B, led by big gains in state & local gov spending, which also rose to a record high. Spending on highways & streets jumped 6.8%, while school construction rose 2.1%. Federal spending rose to $24.5B, the highest since 2013.
US construction spending was flat in April as housing fell
A US interest rate cut “may be warranted soon” given the rising risk to economic growth posed by global trade tensions as well as weak US inflation, St Louis Federal Reserve pres James Bullard said, the first Fed official to say recent events may require a central bank response. Bullard said that while the Fed cannot respond to every change in the rapidly evolving trade feud between the US & other top trading nations, recent events like the unexpected announcement of new tariffs on Mexican imports have created “an environment of elevated uncertainty...that could feed back to US macroeconomic performance” as the global economy slows. The Fed “faces an economy that is expected to grow more slowly going forward, with some risk that the slowdown could be sharper than expected due to ongoing global trade regime uncertainty,” he said. In addition, both inflation & inflation expectations remain below target, & signals from the Treasury yield curve seem to suggest that the current policy rate setting is inappropriately high. Along with weak inflation & warning signs from the bond market, “a downward policy rate adjustment may be warranted soon” to help boost inflation expectations & help ease fears that have emerged in bond prices of a sharper-than-expected US slowdown. Several earlier rounds of Trump administration trade actions against China & other countries left Fed officials largely unmoved, saying there was no need to react unless trade tensions persisted or began changing the US growth outlook. For Bullard, a voting member of the central bank's rate-setting committee this year, that moment may have arrived. Along with trade, he has been among the more concerned at the Fed about the fact that rates on 10-year bonds have fallen below 3-month yields as well as below the federal funds rates itself. This “inversion” of the yield curve, he feels, has become pronounced enough to bolster the case for a rate cut. “A downward adjustment of the policy rate may help re-center inflation and inflation expectations at the 2 percent target,” as well as provide “insurance” against a sharper than expected economic slowdown, Bullard said, comparable to rate cuts the Fed made in the mid-1990s to nudge along that expansion. Many of his colleagues have been reluctant to endorse such a move, arguing that the Fed did not need to move rates from the current 2.25-2.5% until some economic shock caused them to reconsider. However, since the Fed last met, Pres Trump extended 25% tariffs to a host of Chinese goods & announced targeted policies aimed at Chinese telecoms giant Huawei. These moves triggered a sharp sell-off in the stock markets.
Fed’s Bullard says a rate cut may be ‘warranted soon’
Boeing (BA), a Dow stock, CEO Dennis Muilenburg said it is conducting simulated flights with air-safety regulators this week & plans to fly its 737 Max aircraft with the FAA “very soon” to get the grounded planes cleared to return to airline service. Aviation officials worldwide grounded the planes in mid-Mar in the wake of 2 deadly crashes of the aircraft within 5 months of one another. The 2 crashes killed 346. Muilenburg said he expects that the planes will get a green light to fly again by the end of the year, but declined to provide a timeline. The FAA is participating in simulated flights with BA this week, Muilenburg said. After that step, the company plans to schedule actual test flights. BA has completed a software update for an anti-stall system that has been implicated in the crashes. Airlines that have purchased the 737 max have canceled thousands of flights due to the grounding & have scrambled to meet demand during the peak summer travel season. The manufacturer will have to repair “damaged trust” of the flying public, Muilenburg said. Some airlines have said they won't charge passengers skittish about the planes to switch to flights operated with other aircraft. The stock lost 2.72 (near the lows for 2019).
If you would like to learn more about BA, click on this link:
club.ino.com/trend/analysis/stock/BA?a_aid=CD3289&a_bid=6ae5b6f7
Boeing CEO says troubled 737 Max jets should be flying by the end of the year
While big tech stocks (prominent in the NAZ) were sold on fears of regulation, chaos in the trade scene is the major driver for selling. And there is no qujck fix for that. Early strength in the Dow faded in the PM, although there more more advancing stocks than decliners aid by buying into the close. Stocks are looking at another dreary month without fixes for the multiple trade wars. Meanwhile, as expected, gold & Treasuries are at recent highs.
Dow Jones Industrials
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