Dow recovered 309, advancer over decliners 4-1 & NAZ gained 124. The MLP index added 2+ to the 227s & the REIT index went up 2+ to the 397s (close to setting a new record). Junk bond funds inched higher & Treasuries were sold on profit taking. Oil crawled higher in the 54s & gold fell 12 to 1518 after a very strong week.
AMJ (Alerian MLP Index tracking fund)
Stocks bounce back to end volatile week
Federal Reserve Bank of St Louis Pres James Bullard said that despite the stock market's wild week of selling, he sees no need to panic about the US economy. “I don’t think [we need an emergency session],” he said. “I think we can act appropriately … What matters is that you're in the right zone for interest rates.” Investors experienced extreme swings this week, with the Dow Jones Industrial Average dropping a whopping 800 points on Wed, its worst performance of 2019. This as the yield curve, an accurate predictor of recessions, inverted for the first time since 2007. Even with the selloff, the US economy (in Bullard's view) can keep growing "if we play our cards right," he added. Elsewhere around the globe, the situation is not as solid, with some investors worried about a global slowdown as China reported weaker-than-expected economic data & Germany's negative GDP raised the risk of Europe falling into a recession. “I think we're in the middle of a global slowdown and we're just going to have to assess how this is going to affect the U.S. economy,” Bullard said. But “it's not surprising to see a volatile stock market here, and then in bonds you've got a flight to safety going on is probably driving our yields somewhat lower." “It's very common [that] the trade war affects companies in the U.S. but it affects people outside the countries outside the U.S. a lot more," he added. "They're wondering what's going to happen. And because of that you create a lot of uncertainty outside the U.S. [and] that drives our yields lower.” But Bullard notes there's an upside: Lower rates in the US, which means “probably more cars being sold, probably more of more housing than otherwise. So there is a little bit of a silver lining.” Plus, the US opted to delay tariffs on certain Chinese goods & exempt some from tariffs altogether. Bullard still sees room for improvement on inflation, though, as he predicts a 1% or 1.1% inflation over the next 5 years, while the target is closer to 2%: “That’s something I'll definitely take into account if it's sustained going forward going into September … I want to hit the inflation target.”
US consumer sentiment fell to 92.1 in Aug, the lowest indicator readout since the start of 2019. The Univ of Mich's preliminary Aug print came in well below estimates. The forecast called for a preliminary read on Aug consumer sentiment to reach 97, down from 98.4 in Jul. The Aug losses spanned all index components. “Monetary and trade policies have heightened consumer uncertainty—but not pessimism—about their future financial prospects,” wrote Richard Curtin, chief economist of the Univ of Mich's Survey of Consumers. “Consumers strongly reacted to the proposed September increase in tariffs on Chinese imports, spontaneously cited by 33% of all consumers in early August, barely below the recent peak of 37%,” he wrote. Earlier this week, Pres Trump attempted to ease those concerns. On Tues, he announced the US would delay proposed tariffs on certain Chinese imports, including clothing, electronics & footwear. The news sent retail stocks surging. Trump said he delayed the tariffs in part over concerns about shopping during the holiday season. “Although the announced delay until Christmas postpones its negative impact on consumer prices, it still raises concerns about future price increases,” Curtin said. “The main takeaway for consumers from the first cut in interest rates in a decade was to increase apprehensions about a possible recession.”
US consumer sentiment for August comes in well below estimates
The Dow is down 350 in this tumultuous week which increased the monthly loss to almost 1K. Investors are unusually nervous with the highly publicized recession indicator flashing a warning signal. More wild swings lay ahead for stocks & commodities.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 54.55 | +0.08 | +0.2% |
| GC=F | Gold | 1,525.30 | -5.90 | -0.4% |
Stocks are bouncing back as investors are enthusiastic about possible stimulus measures in Europe. Markets are anticipating the ECB will cut rates in Sep & resume a bond buying program. The major European markets traded higher. Add Mexico as the latest country to cut interest rates overnight. On
the economic front, the Commerce Dept said homebuilding fell for a 3rd straight month in Jul amid a steep
decline in the construction of multi-family housing units, but permits
rose creating optimism. Housing starts dropped 4% to a seasonally
adjusted annual rate of 1.191M units last month. Investors
have suffered whiplash this week after the US yield curve, the
difference between yields on the 10-year & 2-year Treasury bonds, inverted for the first time since 2007. It has historically been an
accurate forecaster of a coming recession. The
major stock indices spent much of the day reacting to big moves in
gov bond yields, which fell sharply in the early going,
fluctuated for much of the day, & then recovered some of their decline
by mid-PM. The US-China trade war has hammered American
manufacturers & roiled global financial markets with fears that the
world's largest economy could slip into a recession. Yet many
expect the US economy to power thru the rough patch, at least in
the coming months, on the strength of solid consumer spending & a
resilient job market. Japan's Nikkei rebounded
from early losses to tiny gains, Hong Kong's Hang Seng added 0.9% & China's Shanghai Composite rose 0.3%.
Stocks bounce back to end volatile week
While consumer spending remains strong, manufacturing productivity tumbled at the fastest rate in nearly 2 years. Navarro said he's not worried about the American economy because of the jobs generated
during the Trump economy, & he was encouraged by James Bullard's latest interview regarding the economy as well. "The most important thing I think he said was that we're far, far away from tripping the Fed's inflation targets, so there's plenty of room to run in terms of lowering rates," Navarro said. In response to a question, he said, "The issue has never been, for us here
at the White House, a rate cut to stave off a recession."
"That's not it at all." He maintains the Federal Reserve raising rates too fast caused the trouble in the US economy. "The point of a 50-basis point cut is not to avoid a recession; it's to make a strong economy stronger," Navarro added. But when it comes to the economy impacted by the China tariff announcement, he,said tariffs on the first $250B of Chinese imports have
been in place for nearly a year now & insisted there has been no
inflation. "China has borne the entire burden
of those tariffs in a number of ways, through slashing their prices,
through slashing the value of their currency and through a hemorrhaging
of the supply chain out of China," Navarro said. He reiterated an idea of how companies can shift the tariffs onto
China but did admit he agreed with Trump's decision to delay the 2nd
round of tariffs to Dec 15 as to not affect the Christmas shopping
season.
China paying for tariffs, not America, Peter Navarro insists
Federal Reserve Bank of St Louis Pres James Bullard said that despite the stock market's wild week of selling, he sees no need to panic about the US economy. “I don’t think [we need an emergency session],” he said. “I think we can act appropriately … What matters is that you're in the right zone for interest rates.” Investors experienced extreme swings this week, with the Dow Jones Industrial Average dropping a whopping 800 points on Wed, its worst performance of 2019. This as the yield curve, an accurate predictor of recessions, inverted for the first time since 2007. Even with the selloff, the US economy (in Bullard's view) can keep growing "if we play our cards right," he added. Elsewhere around the globe, the situation is not as solid, with some investors worried about a global slowdown as China reported weaker-than-expected economic data & Germany's negative GDP raised the risk of Europe falling into a recession. “I think we're in the middle of a global slowdown and we're just going to have to assess how this is going to affect the U.S. economy,” Bullard said. But “it's not surprising to see a volatile stock market here, and then in bonds you've got a flight to safety going on is probably driving our yields somewhat lower." “It's very common [that] the trade war affects companies in the U.S. but it affects people outside the countries outside the U.S. a lot more," he added. "They're wondering what's going to happen. And because of that you create a lot of uncertainty outside the U.S. [and] that drives our yields lower.” But Bullard notes there's an upside: Lower rates in the US, which means “probably more cars being sold, probably more of more housing than otherwise. So there is a little bit of a silver lining.” Plus, the US opted to delay tariffs on certain Chinese goods & exempt some from tariffs altogether. Bullard still sees room for improvement on inflation, though, as he predicts a 1% or 1.1% inflation over the next 5 years, while the target is closer to 2%: “That’s something I'll definitely take into account if it's sustained going forward going into September … I want to hit the inflation target.”
FED'S BULLARD SAYS NO NEED TO PANIC ABOUT STOCK GYRATIONS
US consumer sentiment fell to 92.1 in Aug, the lowest indicator readout since the start of 2019. The Univ of Mich's preliminary Aug print came in well below estimates. The forecast called for a preliminary read on Aug consumer sentiment to reach 97, down from 98.4 in Jul. The Aug losses spanned all index components. “Monetary and trade policies have heightened consumer uncertainty—but not pessimism—about their future financial prospects,” wrote Richard Curtin, chief economist of the Univ of Mich's Survey of Consumers. “Consumers strongly reacted to the proposed September increase in tariffs on Chinese imports, spontaneously cited by 33% of all consumers in early August, barely below the recent peak of 37%,” he wrote. Earlier this week, Pres Trump attempted to ease those concerns. On Tues, he announced the US would delay proposed tariffs on certain Chinese imports, including clothing, electronics & footwear. The news sent retail stocks surging. Trump said he delayed the tariffs in part over concerns about shopping during the holiday season. “Although the announced delay until Christmas postpones its negative impact on consumer prices, it still raises concerns about future price increases,” Curtin said. “The main takeaway for consumers from the first cut in interest rates in a decade was to increase apprehensions about a possible recession.”
US consumer sentiment for August comes in well below estimates
The Dow is down 350 in this tumultuous week which increased the monthly loss to almost 1K. Investors are unusually nervous with the highly publicized recession indicator flashing a warning signal. More wild swings lay ahead for stocks & commodities.
Dow Jones Industrials
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