Dow climbed 408 (session high), advancers over decliners 5-4 & NAZ was up 44. The MLP index added 1+ to the 323s & the REIT index went up 2+ to the 401s. Junk bond funds continued mixed & Treasuries continued to see selling which increased yields. Oil was off 1 to the 74s & gold slid 6 to 2647 (more on both below).
Dow Jones Industrials
Pres Trump delivered remarks virtually to the World Economic Forum in Davos, Switzerland, in which he discussed how his tax plans will look to incentivize companies to make products in America or face tariffs. "To further unleash our economy, our majorities in the House and Senate, which we also took along with the presidency, are going to pass the largest tax cut in American history, including massive tax cuts for workers and families and big tax cuts for domestic producers and manufacturers," Trump said. Portions of the original Trump tax cuts,including the lower tax rates for individuals as well as the expanded standard deduction and child tax credit, are due to expire at the end of 2025 if they're not extended. Trump said, "We're working with the Democrats on getting an extension of the original Trump tax cuts, as you probably know by just reading any paper." "My message to every business in the world is very simple: come make your product in America and we will give you among the lowest taxes of any nation on earth. We're bringing them down very substantially, even from the original Trump tax cuts," the pres continued. "But if you don't make your product in America, which is your prerogative, then very simply you will have to pay a tariff," he said. "Differing amounts, but a tariff, which will direct hundreds of billions of dollars and even trillions of dollars into our treasury to strengthen our economy and pay down debt." Trump campaigned on an across-the-board tariff on all imports in the 10 -20% range, along with a 60% levy on goods from China. Since taking office, Trump indicated he's planning to start with a 10% tariff on China, plus 25% tariffs on Canada & Mexico that could begin as early as Feb 1. "Under the Trump administration, there will be no better place on earth to create jobs, build factories, or grow a company than right here in the good old USA," the pres told the Davos audience. Trump went on to cite several recent investment announcements as signs of growing business optimism about the US economy, including several investment deals he helped facilitate.
President Trump sends a message 'to every business in the world' at major economic forum
Union Pacific (UNP) reported 2024 4th qtr net income of $1.8B, up from $1.7B a year ago, as higher rail freight volumes drove record profits. The largest Class 1 railroadreported net income for full year 2024 of $6.7B, from $6.4B in 2023. “We had a very successful year in 2024, with an operating ratio of better than 58%,” said CEO Jim Vena. “That shows how our team executed on strategy, safety, and service for overall operational excellence. “It was a fantastic end to 2024.” While carload volumes were 5% ahead y/y In the 4th qtr ended Dec 31, operating revenue of $6.1B was off 1% on lower fuel surcharge revenue & unfavorable business mix, partially offset by increased volume & core pricing gains. Intermodal traffic increased by 16% in the qtr, though average revenue per car dipped 9% y/y. Intl intermodal volumes were up by 26% on a surge of import demand, outpacing strong container flows thru West Coast ports. Domestic intermodal grew as the railroad wooed more shipments away from trucks. Operating ratio was 58.7%, an improvement of 220 basis points, which included an unfavorable 70 basis point impact from the ratification of a new union contract. Operating income grew 5% to a record $2.5B. “There are a lot of unknowns in 2025 — tariffs, regulatory changes, interest rates — but that’s been the case in the forty-plus years I’ve been in railroading. It is what it is,” said Vena. “Operating with a ‘buffer’ in railcars, locomotives and operating capacity paid dividends. We are expecting growth of high single digits to low double digits in 2025.” The stock rose 12.21 (5%).Union Pacific profit up 7% in Q4, forecasts similar growth in 2025
Mortgage rates finally broke a 6-week streak of increases, but the decline will not provide much relief, as long-term rates dipped just below 7%. Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate on the benchmark 30-year fixed mortgage dropped to 6.96%, down from last week's reading of 7.04%. The average rate on a 30-year loan was 6.69% a year ago. "After crossing the 7%-mark last week, the 30-year fixed-rate mortgage saw its first decline in six weeks," said Sam Khater, Freddie Mac's chief economist. "While affordability challenges remain, this is welcome news for potential homebuyers, as reflected in a corresponding uptick in purchase applications." The average rate on the 15-year fixed mortgage fell to 6.16% from 6.27% last week. 1 year ago, the rate on the 15-year fixed note averaged 5.96%.
Mortgage rates finally fall after 6-week climb
Gold prices dipped on after hitting a near 3-month high in the previous session, while market participants awaited further clarity on policies from Pres Trump's administration. Spot gold was down 0.4% at $2744 per ounce, having hit its highest since Oct. 31 yesterday & US gold futures shed 0.7% to $2751. Spot prices are flirting with technically overbought conditions, which suggests that a slight technical pullback is due. Gold's relative strength index is at 64, suggesting that the price is approaching the "overbought" territory that starts at 70. Gold is set to take further strides towards the psychological $3000 mark if Pres Trump's policies in turn boost demand for inflation hedges & safe havens. Gold is considered a safe investment amid economic and geopolitical turmoil, but higher interest rates reduce bullion's appeal as it yields no interest. Trump has proposed imposing tariffs of about 25% on Canada & Mexico & 10% on China, starting Feb 1. He has also mentioned potential tariffs on European imports, but did not provide specific details. The Federal Reserve will meet on Jan 28-29 amid steady economic growth & falling inflation, but is likely to face uncertainty from Trump's proposed policies. Traders see a 96% chance that the central bank will keep its benchmark interest rate unchanged.
Gold slips as traders await clarity on Trump's policies
Oil prices fell in Asian trade, extending losses amid uncertainty over how Pres Trump's proposed tariffs & energy policies will affect global economic growth & energy demand. Brent crude futures fell 38¢ (0.5%) to $78.62 a barrel for a 6th straight day of losses, while US West Texas Intermediate (WTI) crude fell for a 5th day, down 39¢ (0.5%) to $75.05. The oil market has given back some of its recent gains on a combination of factors. Key factors include expectations of higher US production under Pres Trump's pro-drilling policy & easing geopolitical tensions in Gaza, allaying fears of further escalation in supply disruptions from key producing regions. The broader economic implications of US tariffs could further hurt global oil demand growth. Trump has said he will add new tariffs to his threat of sanctions on Russia if it does not reach a deal to end its war in Ukraine, adding that these could also be applied to "other participating countries." He has also vowed to hit the European Union with tariffs, imposing 25% tariffs on Canada & Mexico, & said his administration is discussing 10% punitive duties on China for fentanyl being shipped to the US from there. On Mon, he also declared a national energy emergency, which is intended to give him the authority to ease environmental restrictions on energy infrastructure & projects & ease permitting for new transmission infrastructure and pipelines. On the US oil front, crude inventories rose by 958K barrels last week.
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