Dow ended up 36 in a volatile day of trading, decliners over advancers better than 3-2 & NAZ fell 8. The MLP index rose in price, going over 241, & the REIT index was off 1+ to the 406s. Junk bond funds had modest gains & Treasuries edged higher. Oil dropped 1+ to 58 & gold was off 17 to 1495 although it finished above 1500 in electronic trading (more below).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
The Federal Reserve approved a much-anticipated qtr-point interest rate cut but offered few indications that further reductions are ahead as members split on what to do next. Following its 2-day policy meeting, the central bank announced that it would take down its benchmark overnight lending rate to 1.75-2%. That comes nearly 2 months after the FOMC went ahead with its first cut in 11 years. Major US stock exchanges dropped after the decision was announced. In addition to the reduction, the Fed cut the interest it pays on excess reserves by 30 basis points, greater than the funds rate cut, amid a breakdown this week in the overnight repurchase lending market. The move was aimed at keeping the funds rate within its target range; the interest on excessive reserves (IOER) historically has acted as a guardrail for the funds rate, which traded 5 basis points above the target. While the committee as a whole has not pointed to further cuts, divisions remain among individual policymakers. 3 Fed regional members — Esther George of Kansas City, Eric Rosengren of Boston & James Bullard of St Louis — each voted no. George & Rosengren have said they prefer to keep the funds rate steady while Bullard has advocated for a 50 basis point cut. That was the most dissents for a Fed decision since 2014. Pres Trump, who has called Fed policymakers “boneheads” for not cutting rates enough, tore into the decision, saying Chairman Jay Powell and his colleagues have “no ‘guts.’” Trump says the Fed is risking US competitiveness by keeping rates substantially higher than most of the rest of the developed world. The policy statement offered almost no language difference from the Jul statement. The committee again cited “the implications of global developments for the economic outlook as well as muted inflation pressures” as the primary rationale for the cut. As for its economic assessment, the Fed tweaked language to indicate that household spending is “rising at a strong pace” while “business fixed investment and exports have weakened.” According to the Fed's “dot plot” of individual expectations, 5 members thought the FOMC should have held its previous range of 2-2.25%, 5 approved of the 25 basis point cut but keeping rates there thru the rest of the year & 7 favored at least one more cut this year.
Fed approves quarter-point rate cut but is divided on further action this year
Federal Reserve Chair Jerome Powell said that the Fed may have to resume regular balance sheet growth to help ease liquidity markets. “Going forward, we’re going to be very closely monitoring market developments and assessing their implications for the appropriate level of reserves,” Powell said. “And we’re going to be assessing the question of when it will appropriate to resume the organic growth of our balance sheet.”
Powell says it’s possible the Fed will have to resume balance sheet growth
The Federal Reserve sees no further rate cuts in 2019 & 2020. Federal Reserve Chair Powell had said the Jul cut was a “midcycle adjustment” to support the economy amid flagging global growth & to boost inflation, suggesting that further cuts this year were not guaranteed. But Powell, speaking at the central bank’s Aug summit in Jackson Hole, said the Fed “will act as appropriate to sustain the expansion” as the global economy slows due to uncertainty caused by the US-China trade war. The Fed has adjusted its policy this year after raising rates 7 times during the Trump administration. The pres has repeatedly slammed the Fed for those rate increases, calling for the central bank to slash rates to zero.
Fed forecasts no further rate cuts in 2019 and 2020, but members are divided
The central bank now expects GDP to grow at a 2.2% pace for 2019, versus the 2.1% forecast in Jun. The unemployment rate is expected to rise to 3.7% this year, slightly above the 3.6% projection in Jun. The GDP outlook for 2020 stayed unchanged at 2%. The Fed still expects the headline inflation to grow at 1.5% this year, while its expectations for core inflation, which excludes volatile food & energy prices, stayed at 1.8%. The economy grew at a 2.0% annualized rate in Q2, slower than a 3.1% growth in the Jan-Mar qtr. The unemployment rate stayed at a historic low of 3.7% in Aug.
Fed ups its GDP forecast for 2019 slightly to 2.2%
Gold futures ended higher for a 3rd session in a row, then moved lower in electronic trading after the Federal Reserve announced a qtr-percentage point cut to a key interest rate, lifting the $ & pressuring prices for the $-denominated yellow metal. Gold pulled back slightly as the qtr-point rate cut offered no assurance of more cuts down the road, Ahead of the Fed news, Dec gold rose $2.40 (0.2%) to settle at $1515 an ounce, tallying a 3rd straight session climb & highest finish since Sep 5. Prices for the most-active contract traded about 1% higher this week. Shortly after the Fed decision, gold futures edged down to $1506 in electronic trading. Gold futures had already settled when the FOMC announced a widely anticipated qtr percentage point cut to the fed funds interest rate to 1.75-2%.
Secretary of State Mike Pompeo called the weekend drone strikes on a Saudi oil facility an "act of war" & an "Iranian attack." Pompeo made the comments from Jeddah, Saudi Arabia. Pres Trump ramped up the pressure on Iran after an attack on a key Saudi oil facility, telling the Treasury Dept to "substantially increase" sanctions on Iran. "I have just instructed the Secretary of the Treasury to substantially increase Sanctions on the country of Iran!" he tweeted. The weekend attacks on the oil field, conducted via drone, caused oil prices to surge yesterday & raised tensions in the Middle East. The US has blamed Iran for the attack, while Saudi Arabia said today it was "unquestionably sponsored" by Iran. Iran told the US that it would respond "immediately" to "any action" against Iran, according to a state-run news agency. "If any action takes place against Iran, the action will be faced by Iran's answer immediately," Iran wrote in a note, according to its news agency. Iran has denied responsibility for the attack, which knocked out around 5% of the world's oil supply. Saudi Arabia that its oil production would be back to normal levels by the end of Sep.
Trading was choppy today. After trading in the red, the Dow sank 175 following the rate cut announcement. Then relatively calming words from Powell, brought back buyers, who brought it into the black. Oil dropped again today as the MidEast story has become increasingly uncertain. News will drive the stock market tomorrow.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
The Federal Reserve approved a much-anticipated qtr-point interest rate cut but offered few indications that further reductions are ahead as members split on what to do next. Following its 2-day policy meeting, the central bank announced that it would take down its benchmark overnight lending rate to 1.75-2%. That comes nearly 2 months after the FOMC went ahead with its first cut in 11 years. Major US stock exchanges dropped after the decision was announced. In addition to the reduction, the Fed cut the interest it pays on excess reserves by 30 basis points, greater than the funds rate cut, amid a breakdown this week in the overnight repurchase lending market. The move was aimed at keeping the funds rate within its target range; the interest on excessive reserves (IOER) historically has acted as a guardrail for the funds rate, which traded 5 basis points above the target. While the committee as a whole has not pointed to further cuts, divisions remain among individual policymakers. 3 Fed regional members — Esther George of Kansas City, Eric Rosengren of Boston & James Bullard of St Louis — each voted no. George & Rosengren have said they prefer to keep the funds rate steady while Bullard has advocated for a 50 basis point cut. That was the most dissents for a Fed decision since 2014. Pres Trump, who has called Fed policymakers “boneheads” for not cutting rates enough, tore into the decision, saying Chairman Jay Powell and his colleagues have “no ‘guts.’” Trump says the Fed is risking US competitiveness by keeping rates substantially higher than most of the rest of the developed world. The policy statement offered almost no language difference from the Jul statement. The committee again cited “the implications of global developments for the economic outlook as well as muted inflation pressures” as the primary rationale for the cut. As for its economic assessment, the Fed tweaked language to indicate that household spending is “rising at a strong pace” while “business fixed investment and exports have weakened.” According to the Fed's “dot plot” of individual expectations, 5 members thought the FOMC should have held its previous range of 2-2.25%, 5 approved of the 25 basis point cut but keeping rates there thru the rest of the year & 7 favored at least one more cut this year.
Fed approves quarter-point rate cut but is divided on further action this year
Federal Reserve Chair Jerome Powell said that the Fed may have to resume regular balance sheet growth to help ease liquidity markets. “Going forward, we’re going to be very closely monitoring market developments and assessing their implications for the appropriate level of reserves,” Powell said. “And we’re going to be assessing the question of when it will appropriate to resume the organic growth of our balance sheet.”
Powell says it’s possible the Fed will have to resume balance sheet growth
The Federal Reserve sees no further rate cuts in 2019 & 2020. Federal Reserve Chair Powell had said the Jul cut was a “midcycle adjustment” to support the economy amid flagging global growth & to boost inflation, suggesting that further cuts this year were not guaranteed. But Powell, speaking at the central bank’s Aug summit in Jackson Hole, said the Fed “will act as appropriate to sustain the expansion” as the global economy slows due to uncertainty caused by the US-China trade war. The Fed has adjusted its policy this year after raising rates 7 times during the Trump administration. The pres has repeatedly slammed the Fed for those rate increases, calling for the central bank to slash rates to zero.
Fed forecasts no further rate cuts in 2019 and 2020, but members are divided
The central bank now expects GDP to grow at a 2.2% pace for 2019, versus the 2.1% forecast in Jun. The unemployment rate is expected to rise to 3.7% this year, slightly above the 3.6% projection in Jun. The GDP outlook for 2020 stayed unchanged at 2%. The Fed still expects the headline inflation to grow at 1.5% this year, while its expectations for core inflation, which excludes volatile food & energy prices, stayed at 1.8%. The economy grew at a 2.0% annualized rate in Q2, slower than a 3.1% growth in the Jan-Mar qtr. The unemployment rate stayed at a historic low of 3.7% in Aug.
Fed ups its GDP forecast for 2019 slightly to 2.2%
Gold futures ended higher for a 3rd session in a row, then moved lower in electronic trading after the Federal Reserve announced a qtr-percentage point cut to a key interest rate, lifting the $ & pressuring prices for the $-denominated yellow metal. Gold pulled back slightly as the qtr-point rate cut offered no assurance of more cuts down the road, Ahead of the Fed news, Dec gold rose $2.40 (0.2%) to settle at $1515 an ounce, tallying a 3rd straight session climb & highest finish since Sep 5. Prices for the most-active contract traded about 1% higher this week. Shortly after the Fed decision, gold futures edged down to $1506 in electronic trading. Gold futures had already settled when the FOMC announced a widely anticipated qtr percentage point cut to the fed funds interest rate to 1.75-2%.
Gold ends higher, heads lower in electronic trade after Fed cuts key interest rate
Secretary of State Mike Pompeo called the weekend drone strikes on a Saudi oil facility an "act of war" & an "Iranian attack." Pompeo made the comments from Jeddah, Saudi Arabia. Pres Trump ramped up the pressure on Iran after an attack on a key Saudi oil facility, telling the Treasury Dept to "substantially increase" sanctions on Iran. "I have just instructed the Secretary of the Treasury to substantially increase Sanctions on the country of Iran!" he tweeted. The weekend attacks on the oil field, conducted via drone, caused oil prices to surge yesterday & raised tensions in the Middle East. The US has blamed Iran for the attack, while Saudi Arabia said today it was "unquestionably sponsored" by Iran. Iran told the US that it would respond "immediately" to "any action" against Iran, according to a state-run news agency. "If any action takes place against Iran, the action will be faced by Iran's answer immediately," Iran wrote in a note, according to its news agency. Iran has denied responsibility for the attack, which knocked out around 5% of the world's oil supply. Saudi Arabia that its oil production would be back to normal levels by the end of Sep.
POMPEO: SAUDI OIL ATTACKS WERE 'ACT OF WAR'
Trading was choppy today. After trading in the red, the Dow sank 175 following the rate cut announcement. Then relatively calming words from Powell, brought back buyers, who brought it into the black. Oil dropped again today as the MidEast story has become increasingly uncertain. News will drive the stock market tomorrow.
Dow Jones Industrials
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