Dow surge 259, advancers over decliners about 3-2 & NAZ added 17. The MLP index was off 4+ to the 288s & the REIT index gained 5+ to the 427s. Junk bond funds continued slightly higher & Treasuries remained in demanded which lowered yields. Oil dropped almost to 2 to finish slightly above 70 & gold was off 11 to 2694 (more on both below).
Dow Jones Industrials
Investors poured $20B into US equity funds on Wed after Pres-elect Donald Trump was declared the winner of the presidential election, according to Bank of America. The bank's strategists, led by Michael Hartnett, reported that it was the biggest daily stock inflow since Jun & the $2.9B that flooded into financials was the highest on record. The note said the biggest picture is that "Trump won big, as US voters cared more about inflation, inequality…immigration than low unemployment," & the Reps' "big sweep" equates to "big policies," with the potential for $8T in tax cuts, $3T in tariff revenues & $1T in spending cuts. Trump's victory over VP Kamala Harris was decisive, with the pre-elect winning both the Electoral College & the popular vote. The GOP also won control of the Senate & is within striking distance of maintaining a majority in the House, but control of the lower chamber was still up in the air as key races remained too close to call. The Dow, S&P 500 & NAZ all hit fresh records after Trump's win.
US stocks saw biggest inflow since June on day of Trump's election win: Bank of America
Federal Reserve Chair Jerome Powell said that he will remain in his role through the duration of his term even if incoming Pres-elect Trump decides to call for his resignation. The Fed announced a 25 basis point interest rate cut during the press conference following the central bank's announcement, Powell was pressed on whether he would resign from his role if Trump pressured him to do so. "No," Powell said in response. A follow-up question was posed about whether Powell thinks he would be required to step down in response to such a request & again responded with a succinct, "No." Powell was also asked whether he believes the pres has the power to fire or demote him & whether the Fed has determined the legality of demoting other Fed governors in leadership positions. "Not permitted under the law," Powell responded. In Feb, Trump said of Powell, "I think he's political. I think he's going to do something to probably help the Democrats, I think, if he lowers interest rates." Trump went on to warn about the potential for a resurgence of "massive inflation" because the conflict in the Middle East "could drive up the price of energy" & that Powell is "not going to be able to do anything. But it looks to me like he's trying to lower interest rates for the sake of maybe getting people elected." Trump also said that he wouldn't reappoint Powell & explained, "He did miss [on inflation], he did miss… I would have a couple of choices. I can't tell you now." In Jun, Trump said that he wouldn't fire Powell if he were to win the 2024 election & would allow him to serve out his term. "I would let him serve it out, especially if I thought he was doing the right thing," Trump said at the time.
Fed's Powell staying put even if Trump has another idea
Americans are feeling increasingly better about the short-term path for inflation. The latest consumer sentiment survey from the University of Michigan revealed that consumers expect inflation to sit at 2.6% in a year, a decrease from last month's expectation of 2.7%. Nov's reading is the lowest since Dec 2020 & within the 2.3-3.0% range seen in the 2 years before the pandemic. Expectations for long-run inflation did tick higher, though, rising to 3.1% from 3% the month prior. The overall consumer sentiment index popped to a reading of 73, up from 71 in Oct. Interviews for the survey concluded on Mon & therefore don't capture any reactions to election results. The responses come as inflation has continued to trend lower throughout 2024. In Sep the Consumer Price Index (CPI), a popularly cited inflation reading, increased 2.4% over the prior year. This marked its lowest annual increase in prices since Feb 2021.
Inflation expectations fall to lowest level since December 2020
Gold fell about ½ a % to trade around $2680, extending a short-term bearish trend that has been in place since it ended on Halloween. The decline came amid market expectations that Pres-elect Donald Trump's economic policies will be positive for the US Dollar, as higher tariffs & tax cuts could keep interest rates high, supporting foreign capital inflows into the US currency. This, in turn, is expected to pressure gold lower as it is mostly priced & traded in the $. Gold also won a bid as there was no mention at all of how the US presidential election results could impact the US economy in the Fed's accompanying statement. The wording was also largely unchanged from the previous meeting, except to state that "labor market conditions have generally eased" since the last meeting in Sep. During his press conference, Fed Chairman Jerome Powell brushed off questions about Trump's policies, saying it was premature to pass judgment as he did not know "the timing, (or) the substance of any policy changes." Powell also said he did not think the rise in Treasury yields was due to higher inflation expectations, possibly signaling a gloomier assessment that could benefit safe-haven gold.
Gold Weakens on Continued Post-Election Impact
Oil prices fell 3% on easing fears of prolonged supply disruptions from a hurricane in the Gulf of Mexico, while China's latest economic-stimulus packages failed to impress some oil traders. US West Texas Intermediate futures led the decline & were down 2.9% ($2.07) at 70.29 per barrel. Global benchmark Brent crude futures fell 2.5% ($1.86) to $73.77 per barrel. Energy producers shut in more than 22% of oil output in the Gulf of Mexico as a precautionary measure to brace against Hurricane Rafael, helping lift oil prices by more than 1% in the prior session. However, the latest forecasts on Rafael’s trajectory & intensity reduced the risk to oil production from the US Gulf. The storm, which left a trail of destruction in Cuba this week, had weakened to a Category 2 hurricane, according to the National Hurricane Center's latest advisory. Meanwhile, top oil importer China's latest round of fiscal support disappointed oil investors. Chinese authorities announced a package easing debt-repayment strains for local govs, but those measures do little to directly target demand. Expectations of tighter sanctions on Iran & Venezuela by Pres-elect Donald Trump, which could cut oil supply to global markets, limited oil’s losses. The Federal Reserve's decision to cut interest rates by a qtr percentage point also helped keep both benchmarks on course for about 1% week-over-week gains, despite today's slump.
Oil prices fall 3% as US hurricane risk recedes, China's stimulus disappoints
had their best week of the year as the S&P 500 hit 6K for the first time ever to round out gains spurred by Donald TrumStocks p's White House victory followed by the Federal Reserve's latest rate cut. The initial "Trump trade" rush was volatile today as & Treasury yields gave up a good chunk of their post-election gains. Disappointment over Cto hina's new fiscal stimulus drew investor attention, putting pressure on Chinese stocks. Even so, major gauges had strong weekly wins after racking up more records yesterday as the Federal Reserve delivered the expected interest rate cut. The Dow finished the week up an impressive 1336 to a new record.
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