Markets gain on economic data but lower for the week on trade tensions

Dow added 63 (hurt by a little selling into the close), advances over decliners better than 2-1 & NAZ was essentially even.  The MLP index rebounded 4+ to the 353s after overreaction to new tax policy yesterday & the REIT index was off fractionally in the 329s.  Junk bond funds did little & Treasuries drifted lower in price.  Oil jumped up 1+ to the 61s & gold fell 4 to 1313.

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US job openings rebounded to the highest on record in Jan, reflecting a solid job market at the start of the year, according to the Labor Dept data.  The number of positions waiting to be filled increased by 645K to 6.31M (est 5.92M) from a downwardly revised 5.67M in Dec (prev 5.81M) according to the Job Openings & Labor Turnover Survey (JOLTS).  Private hiring rose to 5.24M from 5.17M.  3.27M Americans quit their jobs, down from 3.34M in Dec & quits rate eased to 2.2% from 2.3%.  The surge in Jan job postings may help explain Feb's addition of 313K workers to payrolls, the biggest gain since mid-2016.  While wages cooled last month, pay may start increasing at a faster pace as the economy continues to expand & approaches full employment.  Revisions showed the quits rate touched 2.3%  in Dec, the highest since 2005, suggesting workers are confident that they will be able to find another job.  There were 1.1 unemployed people vying for every opening in Jan, compared with 1.9 people when the recession began at the end of 2007.  Rise in openings was mainly due to increases in construction; transportation & warehousing & professional & business services.  In the 12 months thru Jan, the economy created a net 2.1M jobs, representing 65.4M hires & 63.2M separations.

Job Openings in U.S. Rose to Record in January, Above Forecast

Investors just did something they’ve never done before: plowed a record $47.5B this week into stock funds, led by technology shares.  BofA Merrill Lynch Global Research, which tracks the fund flows, also notes that for the first time since 2013 stock flows are outpacing bonds.  If the momentum continues, stocks may attract $717B in new money for the year.  “If there was a driving factor, without a doubt, it is bond yields peaking,” Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research, said.  The yield on the 10-year Treasury note is sitting at 2.85%, & if it maintains that level or drops lower, Hartnett said & that's a win for stocks. “There is no real alternative,” he said.  As stock buyers came out, Pres Trump named Larry Kudlow, the supply-side, conservative economist, as his National Economic Council director.  The early buzz around Kudlow is bullish.  The former adviser to Pres Reagan is known to favor small gov & low taxes.  There is already speculation he will help orchestrate more tax cuts & Trump hinted as much earlier this week.  “We’re actually going for a phase two, which will help, in addition to the middle class, will help companies, and it’s going to be something, I think, very special,” Trump said.  Phase II may include making some of the new tax cuts permanent & bring the 21% corp tax rate even lower.  The surge in stock buying this week is also notable because it signals investors may be taking advantage of the sell-off that began in late Jan that began in late Jan.  In Feb, the Dow saw 2 of its biggest point drops in history.  On Feb 9, it fell 1175 & then entered correction territory with a 1032 decline on Thurs that same week.  The Dow, which briefly crossed back above 25K today, is still about 1200 away from regaining the Jan high.

Investors notch new record for stock buying

Germany's economy minister is flying to DC on Sun to discuss the looming trade war between Europe and the US.  Peter Altmaier planned to meet with high-ranking US officials thru Tues.  The German gov has expressed concern about Pres Trump's decision to raise tariffs on foreign-made steel & aluminum.  Trump has repeatedly singled out Germany & its auto exports for possible future duty increases.  German Chancellor Angela Merkel said today that the planned tariffs breach World Trade Organization rules, but she hopes to resolve the issue thru talks.

German economy minister to visit US for trade talks

The EU published a list of US products it plans to introduce duties on if the 28-nation bloc is not exempted from the steel & aluminum tariffs.  The list contains dozens of products including breakfast foods, kitchenware, clothing & footwear, washing machines, textiles, whiskey, motorcycles, boats & batteries.  They are worth around €2.8B ($3.4B) in trade annually, but the list could grow to the equivalent of €6.4B once the full extent of the impact of US tariffs is known.  The EU's executive Commission, which negotiates trade matters on behalf of member countries, gave European industry stakeholders 10 days to object if they fear that any products targeted for "rebalancing" tariffs would hurt their business.  Trump temporarily exempted big steel producers Canada & Mexico, provided they agree to renegotiate a North American trade deal to his satisfaction.  He said other countries could be spared as well if they can convince DC that their exports don't threaten American industry.  The tariffs are set to enter force next week.  The EU believes it too should be exempted & rejects Trump's assertion that the tariffs are needed for national security & are simply protectionist measures.  Most EU countries are US allies in the world.s biggest security organization, NATO.  EU Trade Commissioner Cecilia Malmstrom will hold talks next week with Sec of Commerce Wilbur Ross.  Malmstrom met last Sat with Trade Representative Robert Lighthizer to discuss the tariffs & the exemption procedures.  She said she got "no immediate clarity on the exact U.S. procedure."  That weekend, Trump argued that the US has been abused economically by the EU, saying they were "wonderful countries who treat the U.S. very badly on trade."  The EU insists that it is committed to open, global trade, & that the tariffs are a protective measure to prop up US industry which could undermine the global trading system.  The bloc says a glut on steel markets is to blame.

EU releases list of US products that could face duties

US factory output jumped last month, led by big gains in the production of cars, computers & furniture.  The Federal Reserve said that manufacturing output rebounded 1.2% in Feb, the most since Oct & following 3 months of weak or negative readings.  Factory production has increased a healthy 2.5% in the past year.  Manufacturers are benefiting from robust spending by consumers & businesses & solid growth overseas.  The $ has declined in value over the past year, which also makes US goods cheaper overseas.  Many economists expect last year's tax cuts & rising optimism among business owners to fuel greater investment in machinery & information technology equipment.  Consumer demand waned a bit at the start of this year, which could weigh on factory output in the months ahead.  Overall industrial production, which includes mines & utilities, rose 1.1% after a decline of 0.3%.  Mining output soared 4.3% & utility production plunged 4.7% as warmer weather reduced demand for heating.  The rise in mining activity was mostly driven by greater oil & gas drilling.  Oil prices have stabilized at about $60 a barrel, which has encouraged oil companies to set up more rigs.  Auto production climbed 3.9% after slipping 0.2% in Jan.   Sales were strong at the end of last year, spurred in part by people in Texas & Florida replacing hurricane-destroyed cars.  But that process has mostly been completed & auto sales have slowed in recent months.  Furniture production increased 1.9% & computer output rose 1.5%.  Other recent reports suggest manufacturing is healthy.  A survey of purchasing managers found that factory activity expanded at the fastest pace in 14 years in Feb, lifted by strong job gains & an increase in inventories.  Production & new orders grew but at a slightly slower pace.  Manufacturers are hiring at a rapid clip, adding 224K new jobs in the past 12 months.

US factory output jumped 1.2 percent in February

Stocks had a good day, although tech did not participate in the rise.  The Dow flirted with 25K for much of the day & finished below that level.  However the weekly decline is a reminder that trade talks & tensions are high.  That anxiety could be around for weeks, maybe months, as choppy trading with high volatility has become common in recent weeks.  Next week the Fed has its big meeting & the new tariffs are scheduled to begin.

Dow Jones Industrials