Markets rise to new records as they focus a new China trade deal

Dow shot up 211 closing near session highs to a new record, advancers over decliners 5-4 & NAZ rose 74.  The MLP index was flattish in the 224s & the REIT index fluctuated near 400.  Junk bond funds did little & Treasuries were sold as stocks rallied.  Oil was steady in the 59s & gold fell 7 to 1552.

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Pres Trump won't waste any time in beginning talks for a comprehensive trade deal with China.  He told reporters that phase 2 trade talks with China will begin immediately.  “We’ll start right away negotiating phase two," the pres said at the White House.  "I think I might want to wait to finish it till after the election because by doing that I think we can actually make a little bit better deal, maybe a lot better deal."  These comments came hours after Beijing confirmed that Liu He, China's top trade negotiator, will lead a delegation to the US next week to sign the phase one trade agreement on Jan 15.  "Phase one is a phenomenal deal," Trump said Tuesday. "It could be up to $50 billion in farm product."  He touted a recent rally in corn & cattle prices as evidence the deal is good for farmers.  Front month corn futures have gained 7.4% since the trade deal was announced on Dec 12 & front month cattle futures have climbed 7.5%.  "The farmers like me anyway. That's what I like about the farmers," Trump said.

Trump: Phase two China trade talks to start 'right away'

The White House announced that it is proposing a new rule to modernize environmental reviews that it says delay energy & infrastructure projects vital to US economic success.  The new rule called the "One Federal Decision" aims to ease environmental regulation reviews under the National Environmental Policy Act (NEPA) that have not been changed in more than 40 years on certain projects that do not get significant federal funding, which will make it easier to build pipelines, airports, mines & other types of infrastructure to benefit American workers & families.  "The administration is committed to ensuring that we are good stewards of our environment while supporting American prosperity," Pres Trump said.  The new rule will uphold America's high standards of environmental health during a press briefing to announce the rule.  "We will not stop until America's infrastructure is the envy of the world again," Trump said, adding that the regulations in place today have slowed America's progress, & projects end up costing "five times as much" as they would have without having to meet such costly & complex requirements needed for environmental reviews.  The proposed rule would give environmental reviews a 2-year limit to speed up the process and reduce delays in the development of various infrastructure projects.  The rule would also specify review page limits, information sharing & better definitions of environmental effects & other terms to clarify the review process & decisions.  "The rule would not exclude the greenhouse gas emissions and invites comment," Council on Environmental Quality (CEQ) Chair Mary B Neumayr said during a press briefing.  "It's important to note that it would reform the process but would not change the environmental law or regulation, such as the Clean Air or Clean Water or Endangered Species Acts.  Nothing in the proposal would eliminate protection."  "An improved environmental review and permitting process will allow us to continue our leadership and improve quality of life for all Americans," she added.

White House to ease environmental rules delaying energy, infrastructure projects

Pres Trump may not reach the 2nd part of a trade pact with China until after the 2020 election, he said.  The pres said his administration will start “right away” negotiating the next piece of an agreement after striking a phase one deal.  But he said “it’ll take a little time” to finish an accord & suggested he could have more leverage after his reelection bid in Nov.  “I think I might want to wait to finish ’til after the election, because by doing that, I think we can actually make a little bit better deal, maybe a lot better deal,” Trump added.  The pres & Chinese officials plan to sign a long-sought initial piece of a trade agreement on Jan 15.  The deal will involve some tariff relief, increased Chinese purchases of US agricultural goods & changes to intellectual property & technology rules.  Trump has pushed for a trade agreement between the 2 large economies as he tries to follow thru on a 2016 campaign promise to crack down on China's trade abuses.  But today was not the first time he suggested he could wait until after voters decide whether he gets a 2nd term to put together a full trade pact.  Only days before DC & Beijing announced the first piece of the accord, Trump said, “In some ways, I like the idea of waiting until after the election for the China deal.”  The pres has tried to dial back a trade war that has threatened the livelihood of farmers & other business owners in the US reliant on trade with China.  Trump counts the agriculture industry as a key political constituency, & his administration has so far authorized $28B in relief for farmer.

Trump says he could wait to finish China trade deal until after 2020 election

2 Federal Reserve officials said that the economy was likely to avoid a severe downturn because of timely intervention by the central bank last year.  The central bank has a “reasonable chance” of achieving a soft landing for the economy this year, despite the renewed tension in the Middle East, St Louis Fed Pres James Bullard said in a speech.  A soft landing is when the economy slows to its trend growth rate without collapsing.  For the US, where growth was at a pace exceeding 3% on an annual basis during the middle of 2018, a soft landing likely means a return to a growth rate near 2%.  Later, in a separate interview, Minneapolis Fed Pres Neel Kashkari said a recession wasn't in his forecast.  “It is certainly not in my current forecast that there is a recession necessarily to come in the next year to two years,” Kashkari said.  “My guess is that we will continue to see a modest growth environment, hopefully continued strong labor market and continued wage [growth] which will help consumers and families spend more money,” said Kashkari.  The Fed saw signs that the economy was slowing last year & shifted course, eventually cutting its benchmark policy rate by 3 qtr-percentage moves at successive meetings.  Kashkari was an early advocate for rate cuts.  Bullard said it is easy to underestimate the size of this move until one recognizes that the Fed had initially planned to raise rates last year.  So the magnitude of the change is bigger.  “The bottom line is that U.S. monetary policy is considerably more accommodative today than it was as of late 2018,” Bullard said.  Trade uncertainty will continue, Bullard continued, but businesses are adjusting strategies to remain profitable.  While geopolitical risk is elevated, oil shocks may be “neutral on net” for the economy, not the negative drag they were in much of the post-World War II era, he said.  Lower oil intensity (which measures the cost of converting energy into GDP) & higher domestic production probably mean that oil price shocks don’t have the same effect they once may have for the US economy.  Fed officials are signaling they intend to hold rates steady until there is a good reason to move.  Richard Clarida, the central bank's #2, said earlier today that the economy was in a “good place.”  Kashkari said he thought the Fed was in pause mode that could last “for the foreseeable future, the next six months, next year.”  But he added he would push for more rate cuts if inflation or inflation expectations continue to slide.  Kashkari & Bullard are switching chairs at the Fed's interest rate committee.  Kashkari will be a voting member this year.  Bullard was a voter in 2019.

U.S. economy likely to avoid recession with help of last year’s rate cuts, Fed officials say

Stocks had a very good day with the popular averages at new records.  And the Dow is just under the 29K important milestone.  With all the tumult in DC, traders are still feeling good.  The economy is doing well, even if it involves stumbling along at times, & the partial China trade deal is so near that investors can taste it .  Look for the Dow to go over 29K tomorrow.

Dow Jones Industrials