Markets dip lower on concerns over US-China trade bill

Dow dropped 63, decliners were modestly ahead of advancers & NAZ lost 10.  The MLP index fell 1 to the 201s & the REIT index was steady in the 407s.  Junk bond funds fluctuated & Treasuries were weak.  Oil was off 2 to the 56s & gold went up 7 to 1468 (more below).

AMJ (Alerian MLP Index tracking fund)

CL=F

Crude Oil

56.48

-1.63

-2.8%

GC=F

Gold

1,464.30

+3.50

+0.2%

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Stocks kicked off the short session marginally lower on the final trading day of the month which will end at 1PM ET when markets close.  Trading is expected to be below average, which can up volatility, due to the holiday week.  Even so, Nov has been a solid one for investors, with all 3 of the major market averages registering monthly gains of 4-5%.  It has also been a month of milestones with stocks hitting multiple new record highs, with the Dow trading above the key psychological 28K level.  As for ongoing trade negotiations, with the US-Mexico-Canada agreement in limbo with Congress, the other countries are hoping to move the needle.  Mexico's Undersecretary for North America, Jesus Seade, is set to meet with Canadian Prime Minister Justin Trudeau shorly, followed by a meeting with Deputy Prime Minister Chrystia Freeland in Ottawa.  The US economic calendar is light, with just one report, the Chicago PMI, due.  In commodities news, Brent & WTI oil prices were modestly lower.

Stocks open session marginally lower, but heading for month of gains

The mad scramble between Thanksgiving & Christmas just got 6 days shorter.  Black Friday once again kicks off the start of the holiday shopping season.  But with 6 fewer days than last year, it will be the shortest season since 2013 because Thanksgiving fell on the 4th Thurs in Nov, the latest possible date it could be.  That means customers will have less time to shop & retailers will have less time to woo them.  Adobe Analytics predicts a loss of $1B in online revenue from a shortened season.  Still, it expects online sales will reach $143.7B , up 14.1% from last year's holiday season.  The National Retail Federation (NRF), the largest retail trade group, baked the shorter season into its forecast, but it says the real drivers will be the job market.  It forecasts that holiday sales will rise 3.8-4.2%, an increase from the disappointing 2.1% growth seen in the Nov & Dec 2018 period that came well short of the group's prediction.  Last year's holiday sales were hurt by turmoil over the White House trade policy with China & a delay in data collection by nearly a month because of a gov shutdown.  This year’s holiday forecast is above the average holiday sales growth of 3.7% over the previous 5 years.  NRF expects online & other non-store sales, which are included in the total, to increase 11-14%, for the holiday period.  Black Friday is expected to once again be the largest shopping day of the season, followed by the last Sat before Christmas, according to MasterCard SpendingPulse, which tracks spending across all types of payments including cash & check.  Thanksgiving Day isn't even on the top 10 holiday shopping days, according to MasterCard.  The 2019 holiday season will be a good measure of the US economy's health.  Many retail CEOs describe their customers has financially healthy, citing moderate wage growth & an unemployment rate hovering near a 50-year low.

Retailers scramble as Black Friday kicks off shorter holiday shopping season

Gold futures climbed slightly in light trading after the Thanksgiving holiday, as investors remained concerned about the deterioration of US-China trade relations after a bill supporting Hong Kong protesters was signed by Pres Trump Wed.   Gold for Feb delivery,  the most active contract on Comex, added $4.60 (0.3%) to $1470 an ounce.  Gold has been trading in a range of $1450-1485 for most of Nov, as major US stock indices pushed higher to new records on optimism about prospects for a US-China trade deal.  As of the Wed close, the most active contract for gold left the precious metal down 4% for the month, or on track for its worst month since Nov 2016.  Concerns around trade flared up again yesterday after Pres Trump signed legislation supporting Hong Kong protesters, a point of contention between the US & China.  In response, Chinese officials summoned the US ambassador & called the new law as interference in its domestic affairs.  Investors fear this could undermine chances for concluding a trade deal between the 2 countries ahead of a Dec 15 deadline for a new round of US tariffs on Chinese goods.  However, a report indicates that officials in Beijing are looking to separate geopolitics from trade & did not necessarily see the passage of the Hong Kong bill irrevocably harming the prospects for a phase one trade deal.

Gold gains in quiet trade as concerns about U.S-China trade deal rise

House Speaker Nancy Pelosi is "pleased" Pres Trump signed 2 bills to support human rights in Hong Kong.  The bills come after months of protests in Hong Kong that drew Ms of people started in Jun & centered on the democratic rights of Hong Kong citizens, including a since-withdrawn extradition bill that would have sent Hong Kong residents convicted of crimes to mainland China for trial.  “For six months, the people of Hong Kong have stirred the hearts of all freedom-loving people with their extraordinary outpouring of courage and their refusal to relinquish their demand for democracy and the rule of law, which was promised more than two decades ago," Pelosi said & continued to say that with the new laws, the US is sending a message to the world that it stands "in solidarity" with Hong Kong & its people.  "Democrats and Republicans have long stood united in the fight for freedoms in China, whether for the Tibetan community, the Uyghur community, the people of Hong Kong or the many brave journalists, human rights lawyers, Christians and democracy activists on the mainland. If America does not speak out for human rights in China because of commercial interests, we lose all moral authority to speak out elsewhere," Pelosi added.  "I am pleased that the President signed this legislation and look forward to its prompt enforcement," she concluded.  The bills also come after nearly 2 years of trade negotiations & high tensions between the US & China. The first phase of a potential trade deal was expected to be reached this month, but Trump suggested that signing the Hong Kong bill would further halt negotiations.

Pelosi 'pleased' Trump signed Hong Kong bill, China summons US ambassador

With many traders away for this semi-holiday weekend, the stock markets are not doing much.  However the markets had a very good month with the Dow up more than 1K, setting more record closes.  Dec should be another good month for stocks unless there are more problems with the US-China trade bill.

Dow Jones Industrials

Markets rise on new hope for USMCA trade deal next month

Dow went up 42, advancers over decliners better than 3-2 & NAZ gained 57.  The MLP index  fluctuated in the 202s & the REIT index rose 1+ to the 406s.  Junk bond funds crawled higher & Treasuries drifted lower in price.  Oil continued lower in the 58s & gold fell 5 to 1461.

AMJ (Alerian MLP Index tracking fund)

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Congress could vote on the US-Mexico-Canada trade agreement as soon as next week, sources have said.  Speaker of the House Nancy Pelosi suggested on Mon that House Dems & Trade Representative Robert Lighthizer are coming closer to an agreement to bring it to the floor.  The deal will "definitely" come up for a vote by the end of the year, according to sources.  “House Democrats have insisted that hard-working Americans need more from the USMCA than just the same broken NAFTA with better language but no real enforcement," Pelosi said.  "We are within range of a substantially improved agreement for America’s workers. Now, we need to see our progress in writing from the Trade Representative for final review.”  A White House source said that movement on the deal could happen quickly, though a vote next week would be an "aggressive" timetable.  A House Dem aide said that if an agreement were reached today, things would have to move quickly in order to have a floor vote on ratification next week.  Any changes to the agreement would need to be approved by Canada & Mexico.  "We are encouraged by progress in the United States," a Canadian gov official said, confirming conversations between Canadian & American trade officials this week.  Pres Trump has blamed Dems in Congress for stalling the deal.  Trump told reporters Mon that the USMCA has been "sitting on Nancy Pelosi's desk."  "She's incapable of moving it, it looks like she can't – everybody knows it's a great deal, she knows it's a great deal, she said it," Trump added.  "She keeps saying she wants to get it done, but we're talking about many, many months, sitting on her desk – no votes."  The administration has emphasized how the agreement could benefit autoworkers with decreased costs & more production in the US for materials & the immigration crisis by boosting job opportunities in Mexico.

Congress could vote on USMCA next week, 'definitely' by end of year: sources

US consumer spending rose in Oct for the 8th month in a row, a potentially good sign for the holiday shopping season that gets underway after Thanksgiving with Black Friday specials.  Consumer spending increased 0.3% last month, the gov said.  The forecast called for a 0.2% increase.  A key barometer of inflation, meanwhile, rose a few ticks in Oct.  Yet inflation has been muffled for the past year & shows little sign of becoming a problem for the economy.  Americans spent more on natural gas & electricity in Oct.  Outlays on other services also increased.  Consumers spent less on new autos & parts.  In somewhat of a surprise, incomes were were unchanged.  Farmers earned less & interest income also declined.  Incomes have only failed to rise 4 different times in the past 5 years.  Similarly, disposable income (take-home pay after tax) fell last month for the first time since 2015.  Yet by & large, incomes have been rising at a healthy pace & have supported steady consumer spending.  A high savings rate has also provided a cushion for Americans to spend.  The savings rate slipped last month to 7.8% from 8.1%, but it's still relatively high.  The Fed's preferred “PCE” inflation barometer, meanwhile, rose 0.2% in Oct.  The index showed prices rising at a meager 1.3% pace over the past year, unchanged from the prior month.  That's still well short of the central bank's 2% target.  The more closely followed core measure of inflation edged up 0.1% in Oct.  Over the past year it’s risen 1.6%, down a tick from the prior month.  Torrid consumer spending drove the economy in the spring & summer.   Rising incomes & a record stock market are likely to help keep spending on the high side in the final months of the year, but it probably won't be as strong as it was earlier in the year.  What will also help are low interest rates.  The Federal Reserve has cut the cost of borrowing in response to tepid inflation & the threat of lasting damage from the US trade war with China.

U.S. consumer spending climbs again in October even as incomes fall flat

The US economy expanded modestly from Oct to mid-Nov & the outlook for growth was generally positive while labor markets remained tight across the country, the Federal Reserve said in a report.  The latest temperature check of the economy, gathered from the central bank's discussions with business contacts around the country, also said prices had increased at a modest pace.  “Outlooks generally remained positive with some contacts expecting the current pace of growth to continue into next year,” the Fed said in its “Beige Book” report.  Several Fed districts reported “relatively strong job gains” in professional & technical services as well as in health care.  The picture was more mixed for manufacturing, with some districts noting rising headcounts while others said employment remained stable.  One district reported layoffs.  Overall, employment continued to rise, even as tight labor markets across the country made it difficult for employers to find the workers they needed.  Some contacts said their inability to fill vacancies was constraining business growth.  For example, employment agencies in the NY district said “almost all job candidates” already are employed & are not interested in changing positions at this time of year.  Agricultural conditions were largely unchanged & remained strained by weather & low crop prices.  In the Richmond district, farmers have been hesitant to invest in land or equipment.  Parts of the Atlanta district also experienced drought conditions.  The US-China trade war, now in its 16th month, has dragged on economic growth.  US manufacturing activity has softened & business investment has cooled as firms delay making decisions due to the uncertainty over tariffs.  Retailers mentioned higher costs, with contacts in some districts attributing the rises to tariffs.  Some firms said they were limited in their ability to raise prices, while others were more able to pass on the costs.  Most districts reported stable-to-moderately growing consumer spending, with several districts reporting increases in auto sales & tourism.  However, some areas reported pockets of weakness.  Retailers in the St Louis district said the outlook for future economic conditions had turned pessimistic & that sales have been the same or slightly lower than last year.  Attendance at Broadway shows in New York City dropped off during the first ½ of Nov & ticket prices were slightly lower than a year ago.  US consumer confidence fell in Nov for the 4th straight month amid concerns about current business conditions, but the index is still consistent with an economy growing at a moderate pace.

US economy growing modestly, labor market still tight, according to Fed’s Beige Book report

Orders for durable goods rose sharply in Oct, but most of the gain was tied to defense-related goods such as fighter jets & ships.  Bookings for civilian products barely rose, highlighting ongoing softness in the industrial side of the economy that's constraining US growth.  Orders climbed 0.6% last month, the gov said.  The forecast called for a 1.1% drop.  Yet if military hardware is stripped out, orders edged up just 0.1%.   Orders declined 1.9% for new autos &d parts, reflecting a month-long strike at General Motors  (GM) that hampered production in Oct.  The originally reported 1.2% decline in durable-goods orders in Sep was revised to show a 1.4% drop.  Businesses have cut back on spending, investment & hiring this year in response to the US trade fight with China & a slowing world economy.  They probably won’t cut investment much further, but they are also unlikely to become more aggressive until trade tensions are dialed down & global growth recovers.  Both nations say they are close to a “phase-one” deal to bridge some of the gap, but the most contentious issues remain.  The ongoing dispute is likely to continue to weigh on the economy in 2020 when Pres Trump is up for reelection.

U.S. durable-goods orders jump 0.6% in October, but mostly for military weapons

Oil prices turned lower after official US inventory data posted a rise in the latest week that defied predictions for a drawdown.  Earlier, oil prices for the US & global benchmarks had edged higher as cautious optimism for a trade pact between the US & China continued to prop up commodities prices, sending markets to records.  West Texas Intermediate crude futures for Jan delivery were down 20¢ (0.3%) at $58.22 a barrel.  Jan Brent the global marker, fell 19¢ (0.3%) at $64.08 a barrel.  US crude stocks rose last week as refineries cut output, while gasoline & distillate inventories rose, the Energy Information Administration reported.  Crude inventories rose by 1.6M  barrels last week.  Refinery crude runs fell by 101K barrels per day, EIA data showed & gasoline stocks rose by 5.1M  barrels.  The American Petroleum Institute (API) had reported yesterday that US crude supplies rose by roughly 3.6M barrels last week, according to sources, that result contradicted expectations & may have prepped the market for the build in the official data.  The API data also reportedly showed a stockpile rise of 4.3M barrels for gasoline, along with a supply decline of 665K barrels for distillates.  US markets are closed tomorrow will close early on Fri.  The positive tone this week found another leg of support when Pres Trump said yesterday US-China negotiations were in the “final throes,” while China's Commerce Ministry said Vice Premier Liu He, the country's top trade negotiator, spoke with Trade Representative Robert Lighthizer & Treasury Secretary Steve Mnuchin.  Cautious optimism for a trade-pact resolution has underpinned oil prices but some analysts question how long that can persist as a supportive factor, especially heading into the next meeting for OPEC early next month.

Oil prices fall as U.S. inventory data shows surprise gain

Trading was unexciting as many traders started their holiday celebration early.  Fri will a shortened day.  Next week, which starts the new month, will bring a lot more excitement.  So far, the Dow is up an impressive 1100 in Nov.

Dow Jones Industrials

Markets edge higher after revised GDP data for Q3

Dow fell 22, advancers over decliners 3-2 & NAZ went up 31.  The MLP index fell 1+ to a depressed the 201s & the REIT index was steady at 406.  Junk bond funds inched higher & Treasuries were sold.  Oil slipped lower in the 58s & gold was off 4 to 1462.

AMJ (Alerian MLP Index tracking fund)

CL=F

Crude Oil

58.29

-0.12

-0.2%

GC=F

Gold

1,455.20

-5.10

-0.4%

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The US economy grew more quickly than expected in the 3 months thru Sep, according to new figures published by the Commerce Dept.  GDP increased at a 2.1% annualized rate, the gov said in its 2nd reading of Q3 GDP.  That was higher than its original estimate of 1.9%  last month.  The forecast expected the measure to remain unrevised from the preliminary reading.  The upward revision was largely the result of stronger inventory & business investment.  At the beginning of the year, the economy grew at a torrid 3.1%  rate, but has weakened substantially over the year, largely a result of the US-China trade war.  “The trade conflict with China represents the main risk to U.S. growth,” said Agathe Demarais, global forecasting director at the Economist Intelligence Unit.  And if the world's 2 largest economies fail to sign a phase one trade deal by mid-Dec, suspending Bs of $s in planned tariffs, “growth would decelerate more sharply than we currently expect.”  Still, the holiday shopping season, which is expected to be relatively healthy thanks to solid job growth & strong consumer spending, could boost economic growth.

US economy grew faster than previously thought

Demand for housing is high, but there aren't enough homes for sale to meet it.  Pending home sales, which measure signed contracts, fell 1.7% in Oct month-to-month, according to the National Association of Realtors (NAR).  Sales were 4.4% higher annually, likely because mortgage rates are much lower this fall.  The average rate on the 30-year fixed mortgage was about a full percentage point lower this Oct than it was a year ago.  Rates did move slightly higher in Oct, which could account for some of the monthly drop, but a shortage of homes for sale is more of the culprit.  Lower rates overall this year have juiced demand significantly, causing for-sale inventory to fall.  Inventory had been rising at the start of this year, due to last year's rate spike.  “We still need to address and, more importantly, correct inadequate levels of inventory across the country,” said Lawrence Yun, chief economist at the NAR.  “There is no shortage of buyers seeking homes, but a lack of available units continues to drag down the nation’s housing market and overall economy.”  Sales of newly built homes, which are also measured by signed contracts, were significantly higher in Oct compared with a year Oct 2018.  Builders are seeing strong demand & are trying to shift production to more affordable homes.  Housing starts are still not where they need to be, however, to meet demand.  “We risk a lingering shortage of sufficient inventory if homebuilding only continues at its current pace over the next 20 years, when the U.S. population is projected to increase by more than 40 million over this period. Clearly, home builders must step in and construct more housing,” added Yun.

Pending home sales fall 1.7% in October, as housing shortage worsens

After Hong Kong's pro-democracy candidates scored a landslide win in local elections, Chinese state media called the results “skewed” & a “setback” for the city's drive for democracy.  Pan-democrats in Hong Kong won almost 90% of 452 district council seats in Sun's elections — widely seen as a barometer of public sentiment after months of social unrest in the special administrative region.  The results were also a stinging rebuke to Beijing-backed chief exec Carrie Lam & her administration.  “The result of Sun's district council election marks a setback for Hong Kong's democratic development, as the results were skewed by the illegal activities of the opposition camp to the benefit of their candidates,” said China Daily.  “In the run-up to Sunday’s voting, members of the opposition camp, particularly their young agitators, engaged in an all-out campaign to sabotage the campaign activities of pro-establishment candidates and intimidate their supporters from going to the ballot box,” added the English language newspaper.  Hong Kong, a former British colony, which returned to Chinese rule in 1997, has been plagued by months of anti-gov protests.  The Chinese territory operates under the “one country, two systems” framework which grants Hong Kong self-governing power & various freedoms, including limited election rights.  Demonstrators are angry at what they say is Chinese meddling in some of those freedoms.  The Chinese Communist Party's People’s Daily reported yesterday that the local elections in Hong Kong have concluded, but it did not mention the result.  The newspaper also said the months-long social unrest in Hong Kong has “severely disrupted the elections process” & added that “patriotic candidates” were harassed on the day of the election by those seeking chaos.  In a commentart, state news agency Xinhua blamed “foreign forces” & said the election “fell victim” to the social unrest.  “During the past more than 5 months, rioters conspired with foreign forces & escalated violent acts, which resulted in political antagonism, social splits, and setbacks in the economy,” Xinhua said.  “Campaigns of some patriotic candidates were seriously disrupted, and their offices were trashed and set ablaze. One candidate was injured in an attack. Harassment on patriotic candidates occurred on the voting day,” according to the news agency.

Beijing finally responds to Hong Kong election results after big win for democrats

As expected, this is a quiet day for trading ahead of tomorrow's holiday.  The revision on GDP data sounds good, however that could later hurt Q4 data.  In the meantime, the popular averages are at or hovering near record highs.

Dow Jones Industrials