Dow dropped 494 (not far from session lows), decliners over advancers better than 3-1 & NAZ gave back 123. The MLP index declined 2+ to the 228s & the REIT index fell 2 to 403. Junk bond funds remained weak today & Treasuries were in strong demand as stocks were sold. Oil fell 1 to the 52s (more below) & gold jumped up 16 to 1505.
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
So far, businesses in the services sector have been growing at a decent pace & withstanding the headwinds that have hit manufacturing. The service sector is expected to remain strong but at a slightly slower pace than last month. The next reading to gauge the progress of that sector is tomorrow AM with the release of the ISM nonmanufacturing index. The forecast is is calling for 55.3, a number that shows a healthy rate of expansion though that would be down from Aug's 56.4. Anything above 50 shows expansion. Earlier this week, the ISM US manufacturing purchasing managers' index dropped to a surprising 47.8 for Sep, the 2nd month of contraction, & a decade low. Following that report, ADP's private sector payroll data today was slightly softer than some expected at 135K & included revisions that cut 38K from Aug's payrolls report. The big report for the week comes Fri, when the monthly employment report is released, & it is expected to show 145K jobs were added in Sep. Both reports are being watched closely after yesterday's shockingly weak ISM manufacturing report set off new fears a manufacturing recession could spill into the broader economy. That sent stocks reeling & bond yields lower. The Dow was down 600, after a 343-point decline yesterday. As stocks sold off, the fed funds futures market began to indicate a greater chance of a Fed rate cut for the Oct 29-30 meeting. Before ISM manufacturing, the odds for a qtr point cut were about 40%, but they have since shot up more than 75%.
A key number on Thursday will reveal whether the economic slowdown is spreading
Williams says the Fed has the tools to fight a recession and can use them ‘more quickly’ next time
House Speaker Nancy Pelosi said that Dems are “making progress” on the trilateral trade deal with Mexico & Canada, known as USMCA, but need more assurances before they can approve the agreement. “We want to be sure that as we go forward, we are strengthening America’s working families and our farmers who are very affected by this,” Pelosi said at a news conference. “We’re on a path to yes,” Pelosi told reporters, while cautioning that “we can’t be there yet” on questions of enforceability. Trump, who was apparently watching Pelosi on television, quickly tweeted out a heated reply that accused her of being disingenuous about her desire to move forward on the legislation. “Nancy Pelosi just said that she is interested in lowering prescription drug prices & working on the desperately needed USMCA. She is incapable of working on either,” Trump tweeted.
“It is just camouflage for trying to win an election through impeachment. The Do Nothing Democrats are stuck in mud!” The Dem leader noted that House Ways & Means Committee Chairman Richard Neal had proposed a counteroffer last week in USMCA talks with Trade Representative Robert Lighthizer. “When we can arrive at a place where not only do we have our issues addressed but that we have enforceability that will make it real for America’s families and farmers, then we can go down that path,” Pelosi added.
Pelosi says Democrats are ‘making progress’ on the USMCA
Oil futures declined, with US & global benchmark prices logging their lowest finish in about 2 months, as downbeat economic data weighed on prospects for energy demand, & domestic crude stockpiles registered a 3rd straight weekly climb. The US added a modest 135K private-sector jobs in Sep, less than the forecast gain of 152K. That followed data from the Institute for Supply Management a day earlier that showed its manufacturing index fell to 47.8 last month from 49.1, marking the lowest level since 2009. A reading below 50 reflects deteriorating conditions. West Texas Intermediate crude for Nov delivery fell 98¢ (1.8%) to settle at $52.64 a barrel. Dec Brent, the global benchmark, declined by $1.20 (2%) to $57.69 a barrel. Both crude benchmarks marked the lowest front-month contract settlements since Aug 8. The Energy Information Administration reported that US crude supplies rose for a 3rd week in a row, by 3.1M barrels last week ended Sep 27. They were forecast to climb by 1.3M barrels. The American Petroleum Institute yesterday, however, reported a drop of 5.9M barrels. Discrepancies between the reports from the EIA, a gov agency, & the API, a trade group, aren't unusual, & are often attributed to the different ways the data are reported to the 2 groups.
Richmond Fed Pres Thomas Barkin said that it might be wise for the central bank to move cautiously given all the uncertainty surrounding the economic outlook. In an interview, Barkin noted there are “different schools of thought” on the Fed about how to steer policy when the outlook is unclear. “I think its hard to navigate with uncertainty and there’s different schools of thought about whether one should move faster so that you can get ahead of the uncertainty, or...the higher the uncertainty, the more the caution,” Barkin said. Federal Reserve Chair Jerome Powell has stressed more than once that “an ounce of prevention is worth a pound of cure” & it was appropriate for the central bank to preemptively cut interest rates. There is a split on the Fed policy setting committee about the way forward, with some officials wanting the central bank to hold off more interest rate cuts & others calling for a rate cut. The Richmond Fed pres, who is not a voting member of the Fed's interest-rate-setting committee this year, said he had not made up his mind about what the central bank should do at its next policy meeting at the end of the month. “There’s a lot of time,” he said. “My posture is very balanced. I’m looking at the data on the economy and I’m looking at the data on uncertainty,” he added. The Fed has cut rates by a qtr-point at each of its last 2 meetings. Barkin said these 2 moves were “insurance” & the Fed is watching to see what kind of impact they have.
This is starting off as a brutal month for stocks following a tough 12 months. The Dow chart below shows the Dow is in the red in the last 12 months. Times have been difficult for the global economy & that looks like it's finally bleeding thru to the US economy. Dysfunctional DC has not been a positive for the bulls. Trade talks keep dragging on, i.e. especially with China. China trade talks are expected to kick into high gear (once again) next week. However a final deal looks to be far down the road. However with all those problems, the Dow is still only about 4% below its record highs & up more than 40% since Trump's elections.. Oct has the makings of a memorable month!
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
So far, businesses in the services sector have been growing at a decent pace & withstanding the headwinds that have hit manufacturing. The service sector is expected to remain strong but at a slightly slower pace than last month. The next reading to gauge the progress of that sector is tomorrow AM with the release of the ISM nonmanufacturing index. The forecast is is calling for 55.3, a number that shows a healthy rate of expansion though that would be down from Aug's 56.4. Anything above 50 shows expansion. Earlier this week, the ISM US manufacturing purchasing managers' index dropped to a surprising 47.8 for Sep, the 2nd month of contraction, & a decade low. Following that report, ADP's private sector payroll data today was slightly softer than some expected at 135K & included revisions that cut 38K from Aug's payrolls report. The big report for the week comes Fri, when the monthly employment report is released, & it is expected to show 145K jobs were added in Sep. Both reports are being watched closely after yesterday's shockingly weak ISM manufacturing report set off new fears a manufacturing recession could spill into the broader economy. That sent stocks reeling & bond yields lower. The Dow was down 600, after a 343-point decline yesterday. As stocks sold off, the fed funds futures market began to indicate a greater chance of a Fed rate cut for the Oct 29-30 meeting. Before ISM manufacturing, the odds for a qtr point cut were about 40%, but they have since shot up more than 75%.
A key number on Thursday will reveal whether the economic slowdown is spreading
NY Federal Reserve Pres John Williams
said the central bank has the tools to fight another recession & could
deploy them even more aggressively next time around. Williams indicated the Fed has enough stimulative methods even as its benchmark interest rate is now below 2%, leaving little room for major cuts. Specifically,
he said monetary policymakers could use asset purchases, or
quantitative easing, as well as forward guidance, or public statements
on the intention to keep rates lower for an extended period time, both
of which helped pull the economy out of the last recession. “We have the same toolkit we had in the last
decade,” he added. “I think we learned a lot about the benefits and some of the
limitations. But we’ve also learned that some of the concerns about the
costs and the negative effects ended up being much smaller than some of
the fears. So I think that gives me more confidence that we could use
those tools more quickly and more effectively early on in a future
downturn if that happens.” He spoke as the stock market experienced an aggressive selloff amid inflation fears, ongoing geopolitical turmoil & worry over a global slowdown. While
he characterized the US economy as “in a good place,” Williams said
he's more worried about growth & low inflation in other parts of the
world. “Right now, my view is obviously we’ve got monetary policy
in the right place. I think we are taking into consideration all these
other issues,” Williams continued. The
Fed has cut rates twice this year & is now expected to approve a 3rd reduction at its Oct 29-30 meeting. The benchmark funds rate,
which banks charge to each other for overnight borrowing, is targeted at 1.75-2%. Williams briefly addressed the
recent funding issues in the overnight lending market, saying the NY Fed, which conducts the operations, is working to correct the
problems & “really understand what happened in the plumbing of the
financial system.”
Williams says the Fed has the tools to fight a recession and can use them ‘more quickly’ next time
House Speaker Nancy Pelosi said that Dems are “making progress” on the trilateral trade deal with Mexico & Canada, known as USMCA, but need more assurances before they can approve the agreement. “We want to be sure that as we go forward, we are strengthening America’s working families and our farmers who are very affected by this,” Pelosi said at a news conference. “We’re on a path to yes,” Pelosi told reporters, while cautioning that “we can’t be there yet” on questions of enforceability. Trump, who was apparently watching Pelosi on television, quickly tweeted out a heated reply that accused her of being disingenuous about her desire to move forward on the legislation. “Nancy Pelosi just said that she is interested in lowering prescription drug prices & working on the desperately needed USMCA. She is incapable of working on either,” Trump tweeted.
“It is just camouflage for trying to win an election through impeachment. The Do Nothing Democrats are stuck in mud!” The Dem leader noted that House Ways & Means Committee Chairman Richard Neal had proposed a counteroffer last week in USMCA talks with Trade Representative Robert Lighthizer. “When we can arrive at a place where not only do we have our issues addressed but that we have enforceability that will make it real for America’s families and farmers, then we can go down that path,” Pelosi added.
Pelosi says Democrats are ‘making progress’ on the USMCA
Oil futures declined, with US & global benchmark prices logging their lowest finish in about 2 months, as downbeat economic data weighed on prospects for energy demand, & domestic crude stockpiles registered a 3rd straight weekly climb. The US added a modest 135K private-sector jobs in Sep, less than the forecast gain of 152K. That followed data from the Institute for Supply Management a day earlier that showed its manufacturing index fell to 47.8 last month from 49.1, marking the lowest level since 2009. A reading below 50 reflects deteriorating conditions. West Texas Intermediate crude for Nov delivery fell 98¢ (1.8%) to settle at $52.64 a barrel. Dec Brent, the global benchmark, declined by $1.20 (2%) to $57.69 a barrel. Both crude benchmarks marked the lowest front-month contract settlements since Aug 8. The Energy Information Administration reported that US crude supplies rose for a 3rd week in a row, by 3.1M barrels last week ended Sep 27. They were forecast to climb by 1.3M barrels. The American Petroleum Institute yesterday, however, reported a drop of 5.9M barrels. Discrepancies between the reports from the EIA, a gov agency, & the API, a trade group, aren't unusual, & are often attributed to the different ways the data are reported to the 2 groups.
Oil drops to 2-month low on economic woes, as U.S. crude stocks climb a third straight week
Richmond Fed Pres Thomas Barkin said that it might be wise for the central bank to move cautiously given all the uncertainty surrounding the economic outlook. In an interview, Barkin noted there are “different schools of thought” on the Fed about how to steer policy when the outlook is unclear. “I think its hard to navigate with uncertainty and there’s different schools of thought about whether one should move faster so that you can get ahead of the uncertainty, or...the higher the uncertainty, the more the caution,” Barkin said. Federal Reserve Chair Jerome Powell has stressed more than once that “an ounce of prevention is worth a pound of cure” & it was appropriate for the central bank to preemptively cut interest rates. There is a split on the Fed policy setting committee about the way forward, with some officials wanting the central bank to hold off more interest rate cuts & others calling for a rate cut. The Richmond Fed pres, who is not a voting member of the Fed's interest-rate-setting committee this year, said he had not made up his mind about what the central bank should do at its next policy meeting at the end of the month. “There’s a lot of time,” he said. “My posture is very balanced. I’m looking at the data on the economy and I’m looking at the data on uncertainty,” he added. The Fed has cut rates by a qtr-point at each of its last 2 meetings. Barkin said these 2 moves were “insurance” & the Fed is watching to see what kind of impact they have.
Fed’s Barkin says now might be time for caution
This is starting off as a brutal month for stocks following a tough 12 months. The Dow chart below shows the Dow is in the red in the last 12 months. Times have been difficult for the global economy & that looks like it's finally bleeding thru to the US economy. Dysfunctional DC has not been a positive for the bulls. Trade talks keep dragging on, i.e. especially with China. China trade talks are expected to kick into high gear (once again) next week. However a final deal looks to be far down the road. However with all those problems, the Dow is still only about 4% below its record highs & up more than 40% since Trump's elections.. Oct has the makings of a memorable month!
Dow Jones Industrials
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