Dow sank 267 (off session lows), decliners over advancers 3-1 & NAZ was off 64. The MLP index fell 1+ to the 294s & the REIT index retreated 1+ to the 413s. Junk bond funds continued to be weak & Treasuries had a little buying which lifted yields slightly. Oil slid back fractionally but held above 70 & gold fell 9 to 2660 (more on both below).
Dow Jones Industrials
Peter Navarro, who is set to become the top trade advisor to Pres-elect Trump, contended that Trump's plans for broad tariffs & steep tax cuts will not spur inflation or raise deficits, despite warnings from some experts. Navarro said Trump's first term in the White House proved his point. “We put on significant tariffs on China, steel, aluminum, dishwashers, solar, a lot of increased countervailing duties to stop the dumping,” Navarro said. “We had zero inflation from any of that,” he added. Trump imposed tariffs on China during his first term. Pres Biden's administration kept many of them in place. “So I would say that just go back and play all the interviews that were done on CNBC of people back in the first term with their hair on fire, worrying about inflation,” said Navarro. “It never happened, and it’s the same movie this time,” the 75-year-old China hawk added. Navarro, whom Trump picked earlier in Dec to be his senior counselor for trade & manufacturing, argued that the inflation that hung over Biden's term & Biden's administration kept many of them in place. During his recent campaign, Trump said he wanted to enact much larger& broader tariffs, plus additional targeted duties on imports from China. Since winning the election, he has issued additional tariff threats on Mexico & Canada. Trump also has suggested a laundry list of proposed tax cuts, including further lowering the corp tax rate, as well as eliminating taxes on tips for service workers & on Social Security benefits for seniors. He has also vowed to extend tax cuts implemented during his first term, some of which are set to expire at the end of 2025.
Trump trade counselor Peter Navarro says planned tariffs won’t spur inflation
Nov retail sales grew at a faster pace than had been expected, reflecting continued resilience in the American consumer & indicating that the holiday shopping season in the US is off to a strong start. Retail sales rose 0.7% in Nov. The forecast had expected a 0.6% rise in spending. Meanwhile, retail sales in Oct were revised up to a 0.5% increase from a prior reading that showed a 0.4% increase in the month, according to Census Bureau data. A 2.4% month-over-month increase in motor vehicle & auto parts sales, as well as a 1.8% increase in online sales, drove the gains. Nov sales, excluding auto & gas, rose 0.2%, below estimates for a 0.4% increase. The control group in today's release, which excludes several volatile categories & factors into the gross domestic product reading for the qtr, increased by 0.4%, in line with estimates. Capital Economics North America economist Bradley Saunders wrote that the report reflects "consumer resilience." "The solid rise in retail sales in November was led by vehicle sales but still showed signs of broad-based strength, with control group sales increasing at a healthy pace too," Saunders added.
Retail sales jump in strong start to holiday season
A report released by the National Association of Home Builders showed homebuilder confidence has held steady in the month of Dec. The report said the NAHB/Wells Fargo Housing Market Index came in at 46 in Dec, unchanged from Nov. The forecast expected the index to inch up to 47. With the unchanged reading, the housing market index remained at its highest level since reaching 51 in Apr. "While builders are expressing concerns that high interest rates, elevated construction costs and a lack of buildable lots continue to act as headwinds, they are also anticipating future regulatory relief in the aftermath of the election," said NAHB Chair Carl Harris. He added, "This is reflected in the fact that future sales expectations have increased to a nearly three-year high." The report said the HMI component measuring sales expectations in the next 6 months jumped to 66 in Dec from 63 in Nov, reaching the highest level since Apr 2022. Meanwhile, the gauge charting traffic of prospective buyers edged down to 31 in Dec from 32 in Nov, while the index gauging current sales conditions held steady at 48. The NAHB said the latest HMI survey also revealed that 31% of homebuilders cut prices in Dec, unchanged from Nov. The average price reduction was 5% in Dec, the same as in Nov.
U.S. Homebuilder Confidence Holds Steady In December
Gold prices slid ahead of the Federal Reserve's policy meeting, with traders cautiously waiting for cues on the central bank's outlook for 2025. Futures traded 0.4% lower at $2652 a troy ounce. A widely anticipated 25-basis-point rate cut is already fully priced into markets, according to analysts, but further cuts are less certain. Meanwhile, US PMI data showed the services sector rose at a faster-than-expected pace. The resilience of the US economy supports the view that the Fed's 2025 rate cutting cycle is likely to be shallow.
Gold Down Ahead of Fed Policy Meeting
Oil prices fell as Chinese economic data renewed demand concerns, while investors remained cautious ahead of the Federal Reserve's interest rate decision. Brent crude futures were down 32¢ at $73.59 a barrel, while US West Texas Intermediate crude futures were down 44¢ at $70.27 a barrel. Prices were weighed down by profit-taking after last week's 6% rally & a batch of disappointing Chinese economic data yesterday. Prices fell from multi-week highs yesterday on unexpectedly weak consumer spending data from China, despite strength in industrial output & as investors shifted into a holding pattern ahead of the Fed meeting. The Fed holds its final policy meeting of the year on today & tomorrow, when it is widely expected to cut interest rates by a qtr of a percentage point. The meeting will also reveal how far officials think they will cut interest rates in 2025 & 2026, & whether the central bank will scale back easing in anticipation of higher inflation under the incoming Trump administration. The 25 basis point cut has been priced in by the market, so any surprises from the Fed meeting could move the market. Lower interest rates could boost economic growth & oil demand.
Oil prices fall on demand concerns, focus on Fed meeting
US stocks fell, with the Dow logging its biggest losing streak in decades. The other major indices dropped in tandem. Fed policymakers kicked off their final gathering of the year earlier, amid almost total conviction that a 0.25% rate cut is coming tomorrow. Some traders suspect it could be the last cut for some time, as inflation proves persistent. Given that, the focus is on clues to the path of rates next year — & in Jan, in particular.
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