Dow shot up 187, advancers over decliners 3-1 & NAZ & gained 92. The MLP index rose 2+ to the 211s & the REIT index was off fractionally to the 391s. Junk bond funds inched higher & Treasuries are being sold. Oil crawled higher above the important 60 level & gold was even at 1481.
AMJ (Alerian MLP Index tracking fund)
The major averages were trading at record highs as investors continued to digest last week's 2 historic trade deals. The Dow was up as much as 190 (0.7%) while the S&P 500 & NAZ were higher by as much as 0.9%. The markets ended last week with small gains to record highs for the benchmark S&P 500 index & the NAZ composite index as traders celebrated the first phase of a trade deal between the US& China & House Dems backing the US-Mexico-Canada Agreement, which rewrites the Clinton-era North American Free Trade Agreement. Markets rose today despite changes in the language of the original USMCA agreement which centered around enforcement & would allow foreign labor inspectors to operate in Mexico, something opposed by the Mexican gov. Commodities held small gains with gold $1482 an ounce & West Texas Intermediate crude oil at $60.05 a barrel. Treasuries were lower with the yield on the 10-year note up 3.6 basis points at 1.857%. In Europe, Britain's FTSE spiked 2.5% after Prime Minister Boris Johnson said he wanted a Brexit vote to happen before Christmas. Elsewhere, France's CAC was higher by 1.1% & Germany's DAX gained 0.7%. Overnight, China reported unexpectedly strong Nov factory activity & spending. Industrial production rose 6.2% from a year earlier, up from the previous month's 4.7%. Retail sales growth rose to a 5-month high of 8% from Oct's 7.2%. The major averages in Asia were flat to lower with China's Shanghai Composite & Japan's Nikkei little changed while Hong Kong's Hang Seng fell 0.4%.
Mexico's trade negotiators for North America said that Mexico categorically opposes allowing foreign labor inspectors to operate in the country, saying that was not contemplated in the recent agreement with DC & Ottawa on the USMCA pact to replace the North American Free Trade Agreement. Jesús Seade was flying to DC to meet with Trade Representative Robert Lighthizer & lawmakers to express his country's “surprise and concern” over language in implementation legislation introduced Fri in Congress calling for the posting of up to 5 labor attaches to monitor Mexico's labor reform. Seade, an undersecretary in the Foreign Relations Dept, Tweeted that while the proposed attaches exact functions are not yet clear, “Mexico will NEVER accept them if it is in any way about disguised inspectors, for one simple reason: Mexican law prohibits it.” Mexican negotiators have said they stood firm in opposition to the idea of letting in foreign inspectors out of sovereignty principles. Instead the agreement signed Dec 10 in Mexico City called for 3-person panels to field any disputes, with the panels including one person from Mexico, one from the US & a person from a 3rd country chosen by mutual consent. Mexico's Senate quickly passed the amended version of the deal last week. After Seade raised objections Sat to the language in the US legislation & announced his sudden trip to DC, critics suggested he & others in Pres Andrés Manuel López Obrador's gov had overlooked something in the trade agreement & approved it too hastily. Addressing 'that criticism, Seade said there was no hidden “fine print” in the deal & the language on labor attaches in the US legislation did not come from its text. He called it a “concession to the hard-liners in Congress ... which should have been advised about and expresses mistrust.” “It is a very good agreement for Mexico: Much was obtained in the trilateral,” he added. “That’s why the U.S. needs ‘extras’ to sell it internally that WERE NOT PART OF THE PACKAGE.”
A stronger economy & a severe housing shortage have the nation's homebuilders feeling better than they have in 2 decades. Builder confidence in the newly built, single-family home market jumped 5 points in Dec to 76, the highest reading since 1999, according to the National Association of Home Builders/Wells Fargo Housing Market Index. Anything above 50 is considered positive. Nov's reading was also revised higher by 1 point. The index stood at 56 last Dec. At the worst of the housing crash, in 2009, builder sentiment hit a low of just 8. “Builders are continuing to see the housing rebound that began in the spring, supported by a low supply of existing homes, low mortgage rates and a strong labor market,” said NAHB Chairman Greg Ugalde. Builders' confidence is clearly based on what they're seeing in their showrooms. Of the index's 3 components, current sales conditions rose 7 points to 84, sales expectations in the next 6 months rose 1 point to 79 & buyer traffic increased 4 points to 58. All, however, is not perfect in the homebuilding market. Builders could likely be doing even better if they didn't face so many headwinds. “While we are seeing near-term positive market conditions with a 50-year low for the unemployment rate and increased wage growth, we are still underbuilding due to supply-side constraints like labor and land availability,” said NAHB chief economist Robert Dietz. “Higher development costs are hurting affordability and dampening more robust construction growth.”
Homebuilder confidence jumps to highest level in 20 years
The US-China trade deal leaves a large American deficit and a permanent collision course
While investors are excited about the 2 trade deals, important details on both need to be worked out. The USMCA & phase 1 for the US-China deal remain "works in progress" that need more work. Gold is not being sold while stocks rally indicating that some investors remain cautious,
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 60.18 | +0.11 | +0.2% |
| GC=F | Gold | 1,482.70 | +1.50 | +0.1% |
The major averages were trading at record highs as investors continued to digest last week's 2 historic trade deals. The Dow was up as much as 190 (0.7%) while the S&P 500 & NAZ were higher by as much as 0.9%. The markets ended last week with small gains to record highs for the benchmark S&P 500 index & the NAZ composite index as traders celebrated the first phase of a trade deal between the US& China & House Dems backing the US-Mexico-Canada Agreement, which rewrites the Clinton-era North American Free Trade Agreement. Markets rose today despite changes in the language of the original USMCA agreement which centered around enforcement & would allow foreign labor inspectors to operate in Mexico, something opposed by the Mexican gov. Commodities held small gains with gold $1482 an ounce & West Texas Intermediate crude oil at $60.05 a barrel. Treasuries were lower with the yield on the 10-year note up 3.6 basis points at 1.857%. In Europe, Britain's FTSE spiked 2.5% after Prime Minister Boris Johnson said he wanted a Brexit vote to happen before Christmas. Elsewhere, France's CAC was higher by 1.1% & Germany's DAX gained 0.7%. Overnight, China reported unexpectedly strong Nov factory activity & spending. Industrial production rose 6.2% from a year earlier, up from the previous month's 4.7%. Retail sales growth rose to a 5-month high of 8% from Oct's 7.2%. The major averages in Asia were flat to lower with China's Shanghai Composite & Japan's Nikkei little changed while Hong Kong's Hang Seng fell 0.4%.
All three major indexes hit record highs on banner day for stocks
Mexico's trade negotiators for North America said that Mexico categorically opposes allowing foreign labor inspectors to operate in the country, saying that was not contemplated in the recent agreement with DC & Ottawa on the USMCA pact to replace the North American Free Trade Agreement. Jesús Seade was flying to DC to meet with Trade Representative Robert Lighthizer & lawmakers to express his country's “surprise and concern” over language in implementation legislation introduced Fri in Congress calling for the posting of up to 5 labor attaches to monitor Mexico's labor reform. Seade, an undersecretary in the Foreign Relations Dept, Tweeted that while the proposed attaches exact functions are not yet clear, “Mexico will NEVER accept them if it is in any way about disguised inspectors, for one simple reason: Mexican law prohibits it.” Mexican negotiators have said they stood firm in opposition to the idea of letting in foreign inspectors out of sovereignty principles. Instead the agreement signed Dec 10 in Mexico City called for 3-person panels to field any disputes, with the panels including one person from Mexico, one from the US & a person from a 3rd country chosen by mutual consent. Mexico's Senate quickly passed the amended version of the deal last week. After Seade raised objections Sat to the language in the US legislation & announced his sudden trip to DC, critics suggested he & others in Pres Andrés Manuel López Obrador's gov had overlooked something in the trade agreement & approved it too hastily. Addressing 'that criticism, Seade said there was no hidden “fine print” in the deal & the language on labor attaches in the US legislation did not come from its text. He called it a “concession to the hard-liners in Congress ... which should have been advised about and expresses mistrust.” “It is a very good agreement for Mexico: Much was obtained in the trilateral,” he added. “That’s why the U.S. needs ‘extras’ to sell it internally that WERE NOT PART OF THE PACKAGE.”
Mexico will 'NEVER' accept US trade investigators, negotiator says
A stronger economy & a severe housing shortage have the nation's homebuilders feeling better than they have in 2 decades. Builder confidence in the newly built, single-family home market jumped 5 points in Dec to 76, the highest reading since 1999, according to the National Association of Home Builders/Wells Fargo Housing Market Index. Anything above 50 is considered positive. Nov's reading was also revised higher by 1 point. The index stood at 56 last Dec. At the worst of the housing crash, in 2009, builder sentiment hit a low of just 8. “Builders are continuing to see the housing rebound that began in the spring, supported by a low supply of existing homes, low mortgage rates and a strong labor market,” said NAHB Chairman Greg Ugalde. Builders' confidence is clearly based on what they're seeing in their showrooms. Of the index's 3 components, current sales conditions rose 7 points to 84, sales expectations in the next 6 months rose 1 point to 79 & buyer traffic increased 4 points to 58. All, however, is not perfect in the homebuilding market. Builders could likely be doing even better if they didn't face so many headwinds. “While we are seeing near-term positive market conditions with a 50-year low for the unemployment rate and increased wage growth, we are still underbuilding due to supply-side constraints like labor and land availability,” said NAHB chief economist Robert Dietz. “Higher development costs are hurting affordability and dampening more robust construction growth.”
Homebuilder confidence jumps to highest level in 20 years
Looking at the latest US.-China trade numbers, one wonders how the agreement announced last week could lead to an acceptable balance of bilateral trade accounts. China's surplus on its US goods trade in the first 10 months of this year was $295B & amounted to 40% of America's total trade gap. During
the same period, Beijing slashed US exports to China 14.5% to $87.6B. By contrast, Chinese goods sales to the US were more than 4 times larger at $382B. In spite of that, reports indicate that Beijing promised to increase, over the next 2 years, its purchases of US goods & services by $200B. If that’s all Beijing is offering, its exports to the US would have
to be halved from their current annual rate of $462B to reach a
meaningful narrowing of the US trade deficit with China. The
sad truth is that the US will continue to run huge wealth (&
technology) transfers to China financed by America's increasing net
foreign debt that will show as net foreign assets on China's books. Other
big issues — such as intellectual property protection, forced
technology transfers, illegal industry subsidies & exchange-rate
management — are appearing as declaratory statements rather than clearly
defined legal arguments. Their enforcement mechanism takes the form of
bilateral consultations at technical levels that could escalate to top
echelons in case of serious disagreements. It is obvious that
political expediency took precedence over an agreement to close the US
trade gap with China as a matter of American national security. That clearly transpires from official statements. DC
is emphasizing China's promises of larger purchases of farm & other
American products, even though reports of $200B of likely Chinese
imports from the US over the next 2 years would still leave huge
American trade deficits. China is not mentioning any such promises. Chinese state media
is pointing out that Beijing concluded a “trade agreement based on the
principle of equality and mutual respect,” & that the expansion of
China's markets will lead to increasing imports of goods & services
from abroad “including the United States under the WTO rules as well as
market rules and business principles.”
The US-China trade deal leaves a large American deficit and a permanent collision course
While investors are excited about the 2 trade deals, important details on both need to be worked out. The USMCA & phase 1 for the US-China deal remain "works in progress" that need more work. Gold is not being sold while stocks rally indicating that some investors remain cautious,
Dow Jones Industrials
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