Friday, July 19, 2019

Higher markets after clarification on Fed rate cut comments

Dow rose 45, advancers over decliners 4-3 & NAZ gained 4.  The MLP index was steady in the 253s & the REIT index dropped 2+ to the 386s.  Junk bond funds fluctuated & Treasuries slid back a tad.  Oil crawled higher in the 55s & gold rose 3 to 1431 (another 6 year high)..

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil55.41
 +0.11 +0.2%

GC=FGold  1,442.30

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Stocks opened with gains as new indications the Federal Reserve will cut interest rates and strong earnings overshadow ongoing concerns over the fate of US-China trade talks.  In a speech, Federal Reserve Pres John Williams urged the central bank to “act quickly” amid a slowdown in US economic growth.  The comments, which investors interpreted as a nod to the expected rate reductions at the end of Jul, took markets into positive territory after declines for much of the day.  A Fed spokesperson, however, later clarified that the speech was not meant to give any indication to the central bank's pending decision at the 2-day meeting beginning on Jul 30.  Later, Federal Reserve Vice Chair Richard Clarida backed a quick cut to interest rates.  While investors continue to guess at the Fed's future actions, the dashed hopes for a quick trade deal with China after negotiations broke down in May continued to be a drag on the top 3 equity benchmarks.

Wall Street opens higher as rate cut expectations grow

A US warship yesterday destroyed an Iranaian drone in the Strait of Hormuz after it threatened the ship, Pres Trump said.  The incident marked a new escalation of tensions between the countries less than one month after Iran downed an American drone & Trump came close to retaliating with a military strike.  In remarks at the White House, Trump blamed Iran for a "provocative and hostile" action & said the US responded in self-defense.  He said the Navy's USS Boxer, an amphibious assault ship, took defensive action after the Iranian aircraft closed to within 1K yards of the ship & ignored multiple calls to stand down.  "The United States reserves the right to defend our personnel, facilities and interests and calls upon all nations to condemn Iran's attempts to disrupt freedom of navigation and global commerce," Trump added.  The Pentagon said the incident happened while the Boxer was transiting the waterway to enter the Persian Gulf.  "A fixed-wing unmanned aerial system approached Boxer and closed within a threatening range," the Pentagon said in a written statement.  "The ship took defensive action against the UAS to ensure the safety of the ship and its crew."  It was the latest in a string of moves by the US & Iran that have brought them closer to armed conflict since early May when DC accused Tehran of threatening US forces & interests in Iraq & in the Gulf.  In response, the US accelerated the deployment of an aircraft carrier strike group to the Arabian Sea & deployed f4 B-52 long-range bombers to the Gulf state of Qatar.  It also has deployed additional Patriot air defense missile batteries in the Gulf region since then.

Trump says American warship destroyed Iranian drone

Microsoft (MSFT), a Dow stock, reported quarterly profit of $13.2B, boosted by a steadily growing cloud computing business that the company says now accounts for almost a 1/3 of its total revenue.  EPS adjusted for non-recurring gains, were $1.37.  The results exceeded expectations for $1.21.  The increase in net income was 49%, but was affected by a one-time tax benefit of $2.6B from transferring some properties from foreign subsidiaries to the US & Ireland.  The software maker also surpassed forecasts by posting revenue of $33.7B in the period, a 12% increase over the same time last year.  The forecast was for $32.7B.  The fastest-growing segment was what it calls the "intelligent cloud," which includes server products & its Azure cloud computing platform.  The segment's revenue was $11.4B, up 19% from a year ago.  Cloud business sales accounted for 30% of the $125.8B total revenue over the past year, up from 24% the previous year.  The stock went up 2.20.
If you would like to learn more about MSFT, click on this link:

Microsoft cloud growth beats expectations, lifts shares

NY Fed Pres John Williams' assertion that policymakers need to “act quickly” as economic growth slows was drawing from research, not hinting at what may happen at this month's FOMC meeting, a spokesperson for the central bank said.  “This was an academic speech on 20 years of research. It was not about potential policy actions at the upcoming FOMC meeting,” the spokesperson said in a statement.  In his speech at the annual meeting of the Central Bank Research Association, Williams said, “It’s better to take preventative measures than to wait for disaster to unfold.”  His comments came amid expectations that the central bank will cut its benchmark interest rate during the Jul 30-31 meeting.  After Williams’ remarks, market expectations for a 50 basis point rate cut leaped to about 59%.  Prior to his speech, predictions for a ½-point cut had hovered at 20-30%.  Later, Fed Vice Chair Richard Clarida said that cutting interest rates quickly is a good strategy.  Market expectations for a ½-point cut surged even higher to about 69%.  But after the clarification on Williams' comments, expectations for a 50 basis point cut fell to about 50% around.

NY Fed clarifies Williams speech that market took as signal of a rate cut

Stocks are treading water with a slight bias to the upside.  Earnings are mixed while trade disputes are nagging thoughts for traders to keep in mind.  But the Dow at 27.3K is keeping the bulls happy even though gold is in strong demand by investors with negative thoughts..

Dow Jones Industrials

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