Dow soared 249, advancers over decliners 3-1 & NAZ shot up 106. The MLP index recovered 3+ to the 231s & the REIT index jumped 3+ to the 402s for a new record. Junk bond funds were purchased & Treasuries went higher, taking the yield on the 10 year bond to almost 1.6% & ending the inverted yield curve period. Oil jumped 1+ to the 56s on hopes for a trade deal & gold fell 11 to 1500.
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
Recession red flags may be cropping up in the stock & bond markets as the trade war rages on. But it seems the American consumer hasn’t gotten the message — at least not yet. This holds particularly true when it comes to spending at restaurants. Sales at eating & drinking establishments are up more than 4% this year, according to data from the Census Bureau, surpassing grocery sales at just 3% year-over-year growth. The National Restaurant Association projects overall industry sales will hit a high of $863B in 2019, up 3.6% from last year. 2 big factors helping to bolster consumer sentiment — a strong jobs market & tax cuts. The compound annual growth rate for restaurant sales since 1970 is 6%, but the pace dropped to 4% in the decade since the last recession, according to the restaurant association. Despite that slower growth, more cash spent on food is being allocated to restaurant spending. In 1955, 25¢ of every $1 spent on food went to restaurants. Today, it’s more than ½. And while restaurant operators face many challenges, from a tight labor pool to rising wage costs, the consumer outlook for spending is strong. “There are two important drivers for the industry from a consumer perspective — convenience and socialization,” said Hudson Riehle, the association’s senior VP of research. “Particularly looking at quick service, which has grown much more quickly than table service. There’s a greater focus on the off-premise market including carryout, drive-through, delivery, curbside and even food trucks.” Restaurant operators are moving quickly to erase friction for customers, helping to enhance the experience whether on or off site. Nearly every major restaurant player is either expanding its technology platform, upgrading stores or adding delivery. “Demographics of younger restaurant patrons are dramatically different than baby boomers. Their expectation of restaurant experience basically incorporates some aspect of technology,” said Riehle. “One of the most important developments over past few years has been rapid integration of tech into delivery and ordering experience.” Strength in consumer spending at restaurants, being supported by digital growth & delivery, can be seen in a slew of restaurants that recently reported earnings. These are not hot new restaurants. They are established American brands seeing major growth, thanks in part to technological upgrades from store to mobile app, which is better at engaging customers & meeting their needs for speed & convenience. Analysts say it’s likely to continue, even if the economy does take a leg lower. But there’s one thing that could lead to slower sales growth — a downturn in the job market.
Restaurant spending set to hit high in 2019 as consumers spend more of their budget on dining out
Boston Fed Pres Eric Rosengren said the central bank should be careful not to cut interest rates too much now because it would push homeowners & businesses to take on more debt, thus making any recession more painful. Lower interest rates cut the cost of debt, making it more attractive to households & firms. “And if they get leveraged right before the economy has significant problems, we’re actually in much worse shape,” Rosengren said. “We have to think about...how much we want households and firms to be leveraged going into whenever we actually do have a significant downturn,” he added. Rosengren was one of 2 dissenters from the Fed decision to cut interest rates in Jul. Most economists think the Fed will cut interest rates by a ¼ percentage point at its next meeting on Sep 17-18. Rosengren downplayed fears of an imminent recession, saying he expected moderate GDP growth around a 2% rate over the rest of the year. While global economies are weak, the answer is not for the Fed to ease, he said. The cure for global weakness is for foreign countries to stimulate their own countries “rather than just the United States to be doing the easing,” Rosengren added. Rosengren said he would make up his mind about monetary policy just before the Sep meeting. “I think that we really can’t be determining monetary policy too far in advance,” he said. The Boston Fed pres said he could change his mind & support a rate cut if there are signs that consumer spending is slowing down. Many investors are hoping that the Fed Chairman Jerome Powell signals a desire to cut rates by a ½ point during his speech at the end of the week from Jackson Hole.
Investors are willing to take on risky investments again (i.e. stocks). But that emotion has been highly volatile in Aug & should continue until Labor Day. The Dow & NAZ jumped up out of the gate stayed there for the rest of the day. While interest rates are getting a lot of attention, US-trade is the 800 pound gorilla in the room & that remains stuck in the mud as it has for more than a year. The bulls have a lot of work to keep this rally going.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
China's Foreign Ministry said the US must halt the sale of Lockheed Martin (LMT) F-16 V fighter jets to Taiwan or “bear all consequences.” The Dept of State is seeking approval for a deal with Taiwan worth $8B. It has been reported that Taiwan asked to buy 66 jets. The deal would be “highly harmful” & would violate the “one China” principle, a Foreign Ministry spokesman said. “China will take necessary measures to safeguard
its interests in accordance with the development of the situation,” he
said. Members of Congress on both sides of the aisle cheered the proposed arms deal, which has not been officially confirmed by the State Dept. The
potential sale “sends a strong message about the U.S. commitment to
security and democracy in the Indo-Pacific,” House Foreign Affairs
Committee Chairman Eliot Engel & top committee Rep Michael
McCaul said in a joint statement. The news comes as the US & China continue to duke it out in a trade war, & some have speculated that the arms deal could be used as a bargaining chip in trade negotiations. Since 1979, the US has sold arms of various kinds to Taiwan, which broke away from China in 1949.
US will 'bear all consequences' if it closes $8B fighter jet deal with Taiwan, China says
Recession red flags may be cropping up in the stock & bond markets as the trade war rages on. But it seems the American consumer hasn’t gotten the message — at least not yet. This holds particularly true when it comes to spending at restaurants. Sales at eating & drinking establishments are up more than 4% this year, according to data from the Census Bureau, surpassing grocery sales at just 3% year-over-year growth. The National Restaurant Association projects overall industry sales will hit a high of $863B in 2019, up 3.6% from last year. 2 big factors helping to bolster consumer sentiment — a strong jobs market & tax cuts. The compound annual growth rate for restaurant sales since 1970 is 6%, but the pace dropped to 4% in the decade since the last recession, according to the restaurant association. Despite that slower growth, more cash spent on food is being allocated to restaurant spending. In 1955, 25¢ of every $1 spent on food went to restaurants. Today, it’s more than ½. And while restaurant operators face many challenges, from a tight labor pool to rising wage costs, the consumer outlook for spending is strong. “There are two important drivers for the industry from a consumer perspective — convenience and socialization,” said Hudson Riehle, the association’s senior VP of research. “Particularly looking at quick service, which has grown much more quickly than table service. There’s a greater focus on the off-premise market including carryout, drive-through, delivery, curbside and even food trucks.” Restaurant operators are moving quickly to erase friction for customers, helping to enhance the experience whether on or off site. Nearly every major restaurant player is either expanding its technology platform, upgrading stores or adding delivery. “Demographics of younger restaurant patrons are dramatically different than baby boomers. Their expectation of restaurant experience basically incorporates some aspect of technology,” said Riehle. “One of the most important developments over past few years has been rapid integration of tech into delivery and ordering experience.” Strength in consumer spending at restaurants, being supported by digital growth & delivery, can be seen in a slew of restaurants that recently reported earnings. These are not hot new restaurants. They are established American brands seeing major growth, thanks in part to technological upgrades from store to mobile app, which is better at engaging customers & meeting their needs for speed & convenience. Analysts say it’s likely to continue, even if the economy does take a leg lower. But there’s one thing that could lead to slower sales growth — a downturn in the job market.
Restaurant spending set to hit high in 2019 as consumers spend more of their budget on dining out
Boston Fed Pres Eric Rosengren said the central bank should be careful not to cut interest rates too much now because it would push homeowners & businesses to take on more debt, thus making any recession more painful. Lower interest rates cut the cost of debt, making it more attractive to households & firms. “And if they get leveraged right before the economy has significant problems, we’re actually in much worse shape,” Rosengren said. “We have to think about...how much we want households and firms to be leveraged going into whenever we actually do have a significant downturn,” he added. Rosengren was one of 2 dissenters from the Fed decision to cut interest rates in Jul. Most economists think the Fed will cut interest rates by a ¼ percentage point at its next meeting on Sep 17-18. Rosengren downplayed fears of an imminent recession, saying he expected moderate GDP growth around a 2% rate over the rest of the year. While global economies are weak, the answer is not for the Fed to ease, he said. The cure for global weakness is for foreign countries to stimulate their own countries “rather than just the United States to be doing the easing,” Rosengren added. Rosengren said he would make up his mind about monetary policy just before the Sep meeting. “I think that we really can’t be determining monetary policy too far in advance,” he said. The Boston Fed pres said he could change his mind & support a rate cut if there are signs that consumer spending is slowing down. Many investors are hoping that the Fed Chairman Jerome Powell signals a desire to cut rates by a ½ point during his speech at the end of the week from Jackson Hole.
Fed’s Rosengren says cutting interest rates now would make next recession worse
Investors are willing to take on risky investments again (i.e. stocks). But that emotion has been highly volatile in Aug & should continue until Labor Day. The Dow & NAZ jumped up out of the gate stayed there for the rest of the day. While interest rates are getting a lot of attention, US-trade is the 800 pound gorilla in the room & that remains stuck in the mud as it has for more than a year. The bulls have a lot of work to keep this rally going.
Dow Jones Industrials
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