Dow tumbles 318 (but higher in the last hour), decliners over advancers almost 3-1 & NAZ drops 29. The MLP index was off 4+ to the 228s & the REIT index drifted lower in the 387s. Junk bond funds declined & Treasuries continue to be in heavy demand for risk averse investors. Oil sinks 2+ to the 51s & gold surged 29 to 1513.
AMJ (Alerian MLP Index tracking fund)
Trump has been a persistent Fed critic even though it approved a qtr-point rate cut at its meeting a week ago. Markets expect another cut at the Sep meeting, then one or even 2 more before the end of the year. Waiting, though, isn't an option, Trump said, as he called on the Fed to act now. "Our problem is not China - We are stronger than ever, money is pouring into the U.S. while China is losing companies by the thousands to other countries, and their currency is under siege - Our problem is a Federal Reserve that is too.....proud to admit their mistake of acting too fast and tightening too much (and that I was right!)." Trump's tweet mistakenly implies that the Fed is still in the process of "quantitative tightening," a reference to reducing the amount of bonds the Fed is holding on its balance sheet by allowing a capped level of proceeds to roll off each month. The policymaking FOMC at last week's meeting voted to end the program as of this month. The pres also characterized the yield curve as "too wide" even though the gap between the 2-year & 10-year notes is at its narrowest since 2007 & the spread between other maturities continues to contract. Still, he said the Fed could take care of its problems "sooo easily. We will WIN anyway, but it would be much easier if the Fed understood, which they don't, that we are competing against other countries, all of whom want to do well at our expense!"
Trump calls for the Fed to cut rates 'bigger and faster' and says China is not the problem
Housing sentiment hits record high, as bidding wars vanish
Investors again rushed for the safety of gov bonds & dumped stocks, exacerbating the Aug exodus away from risk assets as traders around the world settled in for a US-China trade war without an end in sight. The flight to safety sent the yield on the 10-year Treasury note, used as a benchmark for mortgage rates & auto loans, falling to a low of 1.595%, the lowest since autumn 2016. The yield on the 30-year Treasury bond bottomed around 2.12%, near its all-time low reached in 2016. The 10-year Treasury rate is about 40 basis points below its level one month ago, down more than 35 basis points in Aug alone & representing a sizable move for the relative stable US bond market. The yield ended Jul above 2%. Bond yields move inversely to their prices; yields fall when investors demand Treasuries. European rates in Germany & the UK clinched record lows across the board today. The yield on the German 10-year bund hit a new all-time low of -0.6% while the 30-year bund also hit a record at -0.137%. The 2-year German yield touched -0.849%. The UK 10-year & 30-year yields both hit record lows at 0.432% & 1.081%, respectively. The Treasury yield curve also exacerbated its recent flattening & inversion, with the spread between the yield on the 3-month Treasury bill & that of the 10-year Treasury note close to -40 basis points. The spread between the 2-year Treasury yield & the 10-year yield, a longtime recession gauge, hit a low of 7.4 basis points, its lowest level since 2007.
10-year yield drops under 1.6%, 30-year yield nears record low as collapse in rates accelerates
Risk averse is the key investment goal for investors. Gold & Treasuries are in heavy demand. But after heavy selling at the opening, the popular stock averages are recovering to dome degree. Market breadth is less painful than yesterday's 10-1 ratio. But it's still one solid negative. Even with bargain hunting in the last hour, the Dow is down over 1K in Aug. One ugly start for what is supposed to be a quiet, summer month for stocks.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 51.58 | -2.05 | -3.8% |
| GC=F | Gold | 1,518.80 | +34.60 | +2.3% |
The Dow plunged 500 amid worries over the escalation in US-China trade war. Stocks
turned lower, giving up most of yesterday's gains after investors moved
money to safe-havens such as gold & US gov bonds. The 10-year Treasury yield tumbled to a fresh low of 1.622%, the lowest since Oct 4, 2016. 2 surprise interest rate cuts caught investor attention, raising concerns about global economic conditions. New
Zealand's central bank cut its official cash rate 50 basis points to a
record low of 1%, which was larger than expected. The Bank of Thailand followed suit, cutting its one-day repurchase rate by 25% points to 1.5%. US
stocks recouped some of their losses Tues after China backed off
from a further escalation in the country's trade and currency dispute
with DC, steadying financial markets. The Dow, S&P 500 & NAZ all rose at least 1.2%. Comments by St Louis Federal Reserve Bank Pres James Bullard may have been offset by those by White House economic advisor Larry Kudlow. Bullard said the US central bank may be stuck with a volatile global trade environment for years. Kudlow
said the Trump administration wants to continue trade talks with China & is still planning to host a Chinese delegation for talks in
Sep. Oil prices fell further as trade tensions eased. Brent crude dropped to a 7-month low.
DOW PLUNGES 500 PTS ON TRADE, ECONOMIC CONCERNS
Trump has been a persistent Fed critic even though it approved a qtr-point rate cut at its meeting a week ago. Markets expect another cut at the Sep meeting, then one or even 2 more before the end of the year. Waiting, though, isn't an option, Trump said, as he called on the Fed to act now. "Our problem is not China - We are stronger than ever, money is pouring into the U.S. while China is losing companies by the thousands to other countries, and their currency is under siege - Our problem is a Federal Reserve that is too.....proud to admit their mistake of acting too fast and tightening too much (and that I was right!)." Trump's tweet mistakenly implies that the Fed is still in the process of "quantitative tightening," a reference to reducing the amount of bonds the Fed is holding on its balance sheet by allowing a capped level of proceeds to roll off each month. The policymaking FOMC at last week's meeting voted to end the program as of this month. The pres also characterized the yield curve as "too wide" even though the gap between the 2-year & 10-year notes is at its narrowest since 2007 & the spread between other maturities continues to contract. Still, he said the Fed could take care of its problems "sooo easily. We will WIN anyway, but it would be much easier if the Fed understood, which they don't, that we are competing against other countries, all of whom want to do well at our expense!"
Trump calls for the Fed to cut rates 'bigger and faster' and says China is not the problem
Falling mortgage rates & strong employment drove
consumer confidence in housing to a record high in Jul, according to a
monthly index from Fannie Mae. At the same time, bidding wars eased
thanks to lower demand in some of the hottest markets. Of the
index's 5 components, “confidence about not losing job” &
“mortgage rates will go down” rose the most. The gains come despite a
very low supply of homes for sale & affordability challenges. Mortgage
rates have fallen dramatically this spring, down from a high of around
4.5% at the start of this year to 3.85% at the end of Jul. But rates have fallen even further this
week & the economic concerns driving those rates lower could actually
hurt housing sentiment going forward. Tensions over the
escalating trade war with China & falling bond yields around the world
have caused a sell-off in the US stock market. “Consumers
appear to have shaken off a winter slump in sentiment amid strong income
gains. Therefore, sentiment is positioned to take advantage of any
supply that comes to market, particularly in the affordable category.
However, recent financial market events following when the survey data
were collected could weigh on consumer views looking ahead,” said Fannie
Mae's chief economist Doug Duncan. As of Jul, more consumers
said it was a good time to buy a home & fewer said they expected home
prices to go up over the next year, according to the survey. Home
price gains have been moderating this year & bidding wars actually
fell to the lowest rate since 2011, according to a new report from
Redfin, a real estate brokerage. Just 11% of offers written by Redfin
agents faced a bidding war in Jul, down from more than 45% a year ago.
Housing sentiment hits record high, as bidding wars vanish
Investors again rushed for the safety of gov bonds & dumped stocks, exacerbating the Aug exodus away from risk assets as traders around the world settled in for a US-China trade war without an end in sight. The flight to safety sent the yield on the 10-year Treasury note, used as a benchmark for mortgage rates & auto loans, falling to a low of 1.595%, the lowest since autumn 2016. The yield on the 30-year Treasury bond bottomed around 2.12%, near its all-time low reached in 2016. The 10-year Treasury rate is about 40 basis points below its level one month ago, down more than 35 basis points in Aug alone & representing a sizable move for the relative stable US bond market. The yield ended Jul above 2%. Bond yields move inversely to their prices; yields fall when investors demand Treasuries. European rates in Germany & the UK clinched record lows across the board today. The yield on the German 10-year bund hit a new all-time low of -0.6% while the 30-year bund also hit a record at -0.137%. The 2-year German yield touched -0.849%. The UK 10-year & 30-year yields both hit record lows at 0.432% & 1.081%, respectively. The Treasury yield curve also exacerbated its recent flattening & inversion, with the spread between the yield on the 3-month Treasury bill & that of the 10-year Treasury note close to -40 basis points. The spread between the 2-year Treasury yield & the 10-year yield, a longtime recession gauge, hit a low of 7.4 basis points, its lowest level since 2007.
10-year yield drops under 1.6%, 30-year yield nears record low as collapse in rates accelerates
Risk averse is the key investment goal for investors. Gold & Treasuries are in heavy demand. But after heavy selling at the opening, the popular stock averages are recovering to dome degree. Market breadth is less painful than yesterday's 10-1 ratio. But it's still one solid negative. Even with bargain hunting in the last hour, the Dow is down over 1K in Aug. One ugly start for what is supposed to be a quiet, summer month for stocks.
Dow Jones Industrials
No comments:
Post a Comment