Markets rise after Trump says a China deal could come soon

Dow shot up 162 (closing near session highs), advancers over decliners about 2-1 & NAZ soared 83.  The MLP index fell 1+ to the 235s & the REIT index went up 1+ to the 408s.  Junk.bond funds inched higher & Treasuries tumbled, raising Treasury yields.  Oil dipped lower to the 56s & gold sank 28 to 1511 while stocks were being purchased (more below).

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Pres Trump said the US may reach a trade deal with China “sooner than you think,” sending stock markets to the highest levels of today's trading session.  “We have created the greatest economy in the history of our country, the greatest economy in the world,” Trump said, referring to his administration's loosening of corp regulations & GOP-led tax cuts.  “Had my opponent won, China would right now be the No. 1 economy by far," Trump added.  "Right now, China is way behind us, and they’ll never catch us if we have smart leadership. We've picked up trillions dollars, and they’ve lost trillions of dollars. And they want to make a deal very badly and it could happen sooner than you think.”  The pres has imposed tariffs on Bs of $s in Chinese imports, which he says will force Beijing to negotiate a pact ending decades of trade-secret theft & giving US companies greater access to the world's 2nd-largest economy.  American businesses have repeatedly complained, however, that they're paying the import duties & their costs are rising as a result.

TRUMP ON CHINA: 'THEY WANT TO MAKE A DEAL VERY BADLY'

Pres Trump said that he’s unsure if House Speaker Nancy Pelosi will have a chance to sign the administration’s landmark trade agreement with Mexico & Canada amid a Dem-led impeachment inquiry.  “I don’t know if Nancy Pelosi’s going to have any time to sign it,” the pres said, adding that he believes the House leader is wasting her time on a “manufactured crisis.”  Pelosi anounced a formal impeachment inquiry yesterday as a growing number of Dems concerned over Trump's alleged abuses of power overwhelmed her initial reluctance.  The most recent Dem outcry comes amid accusations that Trump tried to coerce Ukraine's pres to investigate the family of former VP Joe Biden.  “I don’t think they can do any deals,” Trump said during a meeting with Japanese Prime Minister Shinzo Abe in NY.  Later, appearing to reference impeachment proceedings, the pres said what all Dems are talking about is “nonsense.”  Trump released today notes of his now-controversial call with Ukrainian Pres Volodymyr Zelensky.  In the rough transcript, Trump asks his counterpart “if you can look into” presidential challenger Joe Biden's son, Hunter Biden.  “There’s a lot of talk about Biden’s son, that Biden stopped the prosecution and a lot of people want to find out about that, so whatever you can do with the attorney general would be great,”  Trump said in the Jul 25 call.  Policy analysts fear the impeachment inquiry could stall a potential trade deal with China & an already agreed-upon deal with Canada & Mexico.  Several brokerages rushed to tell clients that Pelosi's decision to move forward with the inquiry could mire several of Trump's key trade initiatives, including the passage of the US-Mexcio-Canada Agreement & talks with Beijing.  Markets appeared at first relieved by the fact that the memorandum did not appear to show an explicit quid pro quo, though more details about the White House's contact with Ukraine are expected.  Trump took to Twitter to proclaim his innocence & wrote that Dems should “apologize” in light of the memo's release.

Trump casts doubt on USMCA, says Pelosi may not have time to sign it

In the days, weeks, months & probably years ahead, the Federal Reserve will be conducting operations that look & sound a lot like what it did to pull the economy out of the financial crisis.  However, the process this time around will be different in the details.  Where the Fed under the quantitative easing of a decade ago was buying assets to pull the economy out of the 2007-2009 recession, this time it will be looking to meet demand for cash as it tries to calibrate the proper level of reserves that banks need.  It's an important distinction as markets recover from a recent liquidity crunch that was reminiscent of those dark days more than a decade ago.  Last week, overnight repurchase, or repo, markets froze up and sent short-term yields soaring, a move that included the benchmark funds rate trading out of the range that the Fed's trading desk targets.  The Fed is in the process now of conducting overnight repurchase, or repo, operations to make sure that funding for overnight loans stays constant & the funds rate trades within its targeted range of 1.75%-2%.  In announcing the program, officials noted that the last time such a process happened was 11 years ago, amid the dark days of the crisis when liquidity dried up & caused a panic in the stock market.  That facility has involved a series of repos where the Fed provides cash for safe assets, like Treasuries & agency debt, that will continue through at least Oct 14.  There has been such demand for the daily offerings that the NY Fed announced today that it will up the amount of the offering to financial institutions.  Beyond that, the Fed will be looking to further expand its asset purchase programs & grow the balance sheet in what Chair Jerome Powell described last week as an “organic” process rather than QE4, or a 4th round of QE.  Regardless of how it’s done, markets will be looking to see the Fed undo what became known as “quantitative tightening” as it contracted its asset holdings, & to become less restrictive in monetary policy beyond lower interest rates.  During the tightening process, the Fed allowed more than $600B of assets to roll off.  Correspondingly, reserves fell to $1.47T, the lowest since Mar 2011.  Fed officials say they’re continuing to try to gauge the amount of reserves banks need to function properly;  Powell said the issue and the potential for balance sheet expansion likely will be taken up at the next FOMC meeting in late Oct.

The Fed will be growing its balance sheet again, but don’t call it ‘QE4’

Nike's (NKE), a Dow's stock surged to an all-time high today, on the heels of the company's better-than-expected earnings report.  Designing new high-tech sneakers & fashion-forward apparel, adding stores & selling fewer products in discount outlets are clearly paying off for NKE.  “The global shift towards more active lifestyles continues to accelerate, and demand for athletic product is high,” CEO Mark Parker said.  “The opportunities ahead are as bright as I’ve ever seen them.”  He also said the women's line, which grew at a double-digit rate in the latest qtr, will continue to be a “high priority.”  Traders are also noticing compnay's recent slew of acquisitions of tech start-ups, signaling it has been thinking outside the box & ahead of many of its peers.  In Aug, NKE acquired predictive analytics company Celect for an undisclosed amount to be able to better predict what styles of sneakers & apparel customers want, when they want it & where they want to buy it from.  That came after it already acquired consumer data analytics firm Zodiac, in a bid to speed its “digital transformation,” & a computer vision company Invertex.  “The digital capabilities that we’re creating and investing in are really going to make us a better innovation company — understanding the consumer, serving the consumer, leveraging the innovation that we invest in,” Parker said. “It’s all making us better.”  The stock rose 3.62.
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Nike surges to all-time high after the company’s earnings ‘crushed it’

St Louis Fed Pres James Bullard said that he thinks the central bank should continue cutting interest rates.  “We’ve made a big move. I think we could still do a little bit more,”  he added.

James Bullard says the Fed still has a ‘little more to go’ with rate cuts

Gold prices logged their biggest daily decline in nearly 3 weeks , pressured by strength in the $ & a climb in US stock indices, as the market weighed House Speaker Nancy Pelosi's decision to launch a formal impeachment inquiry against Pres Trump.  Pelosi announced the impeachment inquiry into Trump yesterday following a chorus of criticism in the wake of reports that the pres pressed Ukraine's head of state to investigate Dem presidential candidate Joseph Biden & his son Hunter.  Trump asked Ukrainian Pres Volodymyr Zelensky to “look into” former Vice President Joe Biden & his son, according to a summary of a Jul telephone call released by the White House today.  Meanwhile, Trump turned up pressure on China in a UN's speech yesterday as DC & Beijing seek a trade deal.  The US pres also called on all countries to act to counter Iran’s regime, which DC has placed sanctions on.  So far this week, political developments in the US, along with continuing tensions in the Middle East between Iran & Saudi Arabia, as well as persistent China-US tariff conflicts & worries about slowing global economic growth, all have helped to support gold prices.  Prices for gold moved up in electronic trading today after the news, which pressured US benchmark stock indices.  But the haven commodity fell in regular trading as the ICE $ Index traded up by 0.7% & benchmark stock indices climbed.  Gold for Dec dropped $27 (1.8%) to settle at $1512 an ounce, after it finished at its highest yesterday for a most-active contract since Sep 4.

Gold posts biggest daily loss in nearly 3 weeks on firmer dollar, U.S. stock gains

Trump spoke & the markets listened.  Stocks rallied after his comments about a China deal coming soon.  Less attention was paid to comments that the US-Mexico-Canada trade deal might get bogged down in congress.  And caution was thrown to the wind concerning the commotion over impeachment.  Investors were buying risk assets & selling safe haven assets today.

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