Dow dropped 138 (near session lows), advancers over decliners 3-2 & NAZ retreated 115. The MLP index gained 4 to go over 410 & the REIT index rose 3+ to the 439s. Junk bond funds were little changed & Treasuries saw more buying which lowered yields. Oil was even in the high 68s & gold went up 14 to 2660 (more on both below).
Dow Jones Industrials
Pres-elect Trump's plan to impose a 25% tariff on all goods from Mexico & Canada while hiking the levies on products from China will drive up costs for Americans, Goldman Sachs warned this week. Economists at the bank wrote that the proposal Trump floated the day before would add a tax on 43% of US imports, & could push inflation higher by nearly 1%. "Using our rule of thumb that every 1 [percentage point] increase in the effective tariff rate would raise core [personal consumption expenditures] PCE by 0.1%, we estimate that the proposed tariff increases would boost core PCE prices by 0.9% if implemented," the note reads. The PCE index is the Federal Reserve's favored inflation gauge. The Commerce Dept reported that it rose 0.2% in Oct from the month before & 2.3% year over year. Core PCE, which excludes volatile food & energy prices, rose 0.3% for the month & increased 2.8% from a year ago. The central bank is focusing on the PCE headline figure as it tries to bring back the pace of price increases back to its target of 2%, although policymakers view the core data as a better indicator of inflation. Trump yesterday said he would issue an exec order upon taking office to charge Mexico & Canada a 25% tariff on all products coming into the US, as well as additional tariff hikes on China over the flow of illegal immigrants and illicit drugs. In a post, Trump, who takes office on Jan 20, 2025, said thousands of people were "pouring through" Mexico & Canada "at levels never seen before." "Right now a Caravan coming from Mexico, composed of thousands of people, seems to be unstoppable in its quest to come through our currently Open Border," he wrote. "On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders." "This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!" he added. "Both Mexico and Canada have the absolute right and power to easily solve this long simmering problem." Goldman Sachs' economists noted Trump previously threatened a 25% tariff on Mexico during his first administration, but the announcement on Canada "is somewhat more surprising."
Trump's proposed tariffs on Mexico, Canada, China will increase inflation, Goldman Sachs warns
With Ms of Americans expected to travel for Thanksgiving, the Federal Aviation Administration (FAA) is using military airspace specially opened for civilian use to accommodate smooth travel during the busy holiday, officials said. The Dept of Transportation (DOT) announced the holiday travel measures on its website last week. "To lessen inland volume and reduce delays during holiday travel, the FAA will use special airspace off the East Coast and Gulf of Mexico that the military releases to the FAA for commercial planes to use," DOT said. More than 18M airport screenings are expected during what the Transportation Security Administration (TSA) called "the busiest Thanksgiving travel period on record." "This holiday season is expected to be one of the busiest travel periods on record, and the vigilant people of the Transportation Security Administration stand ready to ensure the security and ease of travel," Secretary of Homeland Security Alejandro Mayorkas said that also thanked TSA employees for their dedication to working the holiday. The agency said the projected 18.3M screenings from Tues-Mon represent a 6% increase in volume over the same period last year. Passenger volumes have hit record highs in 2024, according to the agency, showing a 17% increase since 2022.
FAA opens up military airspace for civilian travel for 'busiest Thanksgiving travel period on record'
The US pharmaceutical industry is pushing to revamp the new law that allows Medicare to negotiate prices for its costliest prescription drugs once pres-elect Trump is back in office, according to lobbyists, execs, analysts & healthcare policy experts. 7 lobbyists & execs who work with top pharmaceutical & biotech companies said they are pushing to delay the timeline under which medications become eligible for price negotiations by 4 years for small molecule drugs, which are primarily pills & account for most medicines. 2 sources said the industry is already speaking directly with members of the Trump transition team. The ability of Medicare for the first time to directly negotiate prices on selected medicines was part of the Inflation Reduction Act, considered 1 of the key achievements of the administration of outgoing Pres Biden. Medicare covers 66M Americans, mostly aged 65 & older. Since the IRA was passed in 2022, drugmakers have complained about the terms of Medicare's negotiating powers, saying it would stifle innovation. The gov says the drug price negotiations will save nearly $25B by 2031. In particular, the industry has opposed the time frame for negotiation eligibility for most drugs. When drugs have no competition, the law allows the gov to negotiate prices for complex biologic, or biotech, drugs after 13 years on the market, but after 9 years for drugs taken as pills & capsules. Drug companies have said this will dissuade them from developing the medicines that are generally cheaper & easier to produce & more convenient for patients, & instead push them to prioritize researching biologics, which are most often given by infusion rather than taken at home.
Big pharma pushes Trump to ease Medicare drug price rules
Gold rose, rebounding from an over 1-week low hit in the previous session, on a weaker $, but trimmed earlier gains after data showed stalled inflation progress, hinting that the Federal Reserve might be cautious on further rate cuts. Spot gold was up 0.4% at $2641 per ounce & US gold futures rose 0.7% to $2640. US consumer spending increased solidly in Oct, but progress lowering inflation appears to have stalled in the past months. The $ index slipped 0.8%, hitting a 2-week low, boosting gold's appeal for holders of other currencies. Markets now see a 70% chance of a qtr-point rate cut in Dec. The non-yielding bullion tends to shine in a lower-interest-rate environment. Before the release of the PCE figures, bullion climbed up to 1%. The rebound followed a dramatic $100 plunge yesterday, marking gold's sharpest 1-day drop in over 5 months, as safe-haven demand waned following the announcement of a long-negotiated ceasefire between Israel & Lebanon's Iran-backed Hezbollah. Prices fell to their lowest level since Nov 18 in the previous session.
Gold trims gains on U.S. inflation data, finds support in softer dollar
Oil edged higher as signs OPEC+ will once again delay restoring output countered easing geopolitical risk in the Middle East. Brent traded above $73 a barrel, after sliding in the prior 2 sessions on anticipation of a truce between Israel & Hezbollah. OPEC+ talks to delay a production restart have begun ahead of a meeting this weekend, allaying concerns over a supply glut. Israel started a cease-fire with the Iran-backed militant group after weeks of talks mediated by the US. Oil options markets have begun pricing a lower risk of escalation & hundreds of thousands of bullish calls expired worthless yesterday. Crude has been caught in a tight range since the beginning of last month, buffeted by competing bullish & bearish signals. There's a number of catalysts that may drive the market's next move — including the policies of a 2nd Trump presidency, geopolitical risks linked to Russian & Iranian supplies next year & OPEC+'s output plans. On 1 hand OPEC+ appears to be reluctant to unwind given concerns over weak oil demand and market consensus that 2025 looks like a surplus year for oil balances. On the other hand, deeper cuts also seem unlikely, with prices still above $70 Brent, global observable oil inventories relatively low & some geopolitical risk still in the market. The American Petroleum Institute reported US crude inventories shrank by 5.9M barrels last week, which would be the biggest drop since Aug if confirmed by gov figures today. Elsewhere, a Canadian petroleum industry group said that Pres-elect Trump's proposed tariffs, which may include nearly 4M barrels of Canadian crude imports, would result in higher gasoline & energy costs for US consumers. Brent for Jan rose 0.3% to $73.05 a barrel & WTI for Jan advanced 0.4% to 69.02 a barrel.
Oil Steadies as Traders Await Clues on OPEC+ Production Plans
Stocks dipped as investors digested fresh data that showed inflation made little progress toward the Fed's 2% target in Oct. The mood is muted ahead of the Thanksgiving holiday, when markets shut tomorrow & close early on Fri. But the Fed is taking the fore again after being eclipsed somewhat by the debate over the impact of Pres-elect Trump's tariff plans & cabinet choices. Have a good holiday to all! 😀
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