Dow rose 213, advancers over decliners 5-2 & NAZ soared 124. The MLP index jumped up another 3+ to the 241s & the REIT index added 1+ to the 325s. Junk bond funds rose along with stocks & Treasuries were slightly higher. Oil crawled higher in the 66s & gold was even at 1350, still not far from recent highs.
AMJ (Alerian MLP Index tracking fund)
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China adopted a carrot & stick approach to the US as the risk of a trade war between the 2 powerhouse economies continued to simmer. At the same time that Beijing promised foreign car makers greater freedom to compete in the world's biggest market, it also slapped anti-dumping duties on imports of US sorghum. The contrasting moves sends a message: China is willing to open some areas of its economy, but will also respond to signs of rising US protectionism. The question for Pres Trump, as he mulls whether to follow thru on threatened tariffs on as much as $150B in Chinese imports, is whether to focus on the concessions or the curbs. His attack on China's currency policy this week & the banning of sales of crucial American technology to telecommunications-gear maker ZTE signal a hawkish stance. Treasury Sec Steve Mnuchin doubled down on Trump's charge that China is gaming its currency, describing the remarks as a "warning shot" about the consequences of devaluation. But he also said that he’s “cautiously optimistic” for a deal to end the trade dispute between the 2 countries. “The president is personally involved on this issue,” he told reporters last week. Larry Kudlow offered a low-key response to China's latest trade moves. “Whenever they’re moving in our direction in a regulatory way, whenever they’re lowering barriers, that’s a good thing,” Kudlow said today. “When however they raise barriers, as they seem to be on the farm issue, that’s not good." Officials in Beijing have repeatedly made clear that the nation doesn't want a trade war, but have vowed to fight Trump's trade policy “to the end” if needed. Trump has already proposed tariffs covering $50B in Chinese products targeting industries including aerospace, robotics & machinery & may add levies on an additional $100B of goods. China has retaliated with a pledge to levy a 25% tariff on about $50B of US imports including soybeans, automobiles, chemicals & aircraft. It will impose temporary anti-dumping deposits on US sorghum imports from tomorrow. Trump isn't alone in complaining about China's trading practices. Gov & corp officials from around the world routinely complain that China blocks foreign competitors from their economy, forces technology transfer from overseas firms & backs state-sponsored national champions at the expense of private enterprise. By removing the 50% foreign-ownership limit on Chinese automotive businesses, Beijing addressed a longstanding trade grievance without bowing to specific US tariff demands. China has been promising to ease the rules since well before Trump was elected pres. How effective the move is in opening up the market will come down to implementation. Virtually all major US, Asian & European car makers are already locked into joint ventures with Chinese partners, after spending $B to enter the country over the past 3 decades. Those deals can't be undone until at least 2022 & the cost is likely to be prohibitive. The process for setting up new independent plants, as Tesla (TSLA) is attempting, will require approvals from local govs that often have ties to Chinese manufacturers. The European Chamber of Commerce has lobbied for years for the cap's removal. It said it's awaiting more details & hopes the changes “allow much greater participation of foreign enterprises across multiple industries in China.” “We’ve seen comments from China about their plans to liberalize, but until we see the regulations and laws that will actually implement these plans, it’s hard to say what the benefit will be,” said Erin Ennis, senior VP at the US-China Business Council. Trade tensions haven't dulled China's growth story yet. The economy expanded 6.8% in Q1 from a year earlier, matching the pace set in the final 3 months of last year. In a reflection of the nation's economic evolution, services & consumption fueled the expansion.
China Takes Carrot-and-Stick Approach to U.S. Trade Tensions
US factory production cooled in Mar after surging a month earlier, representing a pause in an otherwise strong manufacturing sector, Federal Reserve data showed. Factory output rose 0.1% (matching est) after an upwardly revised 1.5% increase that was the biggest since 2009. Output at factories increased 3% from Mar 2017, the biggest year-over-year gain since 2012. Total industrial production, which also includes mines & utilities, increased 0.5% (est 0.3% rise) after a revised 1% gain. Total capacity utilization, measuring the amount of a plant that is in use, rose to 78% (est 77.9%) from 77.7%. Factory output expanded at a 3.1% annualized rate in Q1 following a 5.5% pace of the final 3 months of 2017, the strongest back-to-back period in 6 years. Manufacturing makes up 75% of total industrial production & accounts for about 12% of the economy. The outlook for manufacturing remains solid as fiscal stimulus provides support for increased business investment, while improving global economies & a weaker $ help underpin US exports. Economists also expect lower taxes to bolster domestic consumer demand. One potential risk to some American manufacturers is the trade spat between the US & China. Meanwhile, the factory-use rate eased in Mar to 75.9% from 76% a month earlier that was the highest since Aug 2015. While the plant-use rate has been climbing, it remains 2.4 percentage points below the long-run average. Mining production rose 1% with oil and gas well drilling rising 4.1%.
John Williams, who takes the helm of the powerful Federal Reserve Bank of NY in Jun, played down risks the yield curve would become inverted as the central bank gradually raises interest rates. The current pres of the Fed's San Francisco branch said a truly inverted yield curve “is a powerful signal of recessions” that historically has occurred “when the Fed is in a tightening cycle, and markets lose confidence in the economic outlook.” That is not the case now, he said. “The flattening of the yield curve that we’ve seen is so far a normal part of the process, as the Fed is raising interest rates, long rates have gone up somewhat -- but it’s totally normal that the yield curve gets flatter,” Williams added. The spread between 2- & 10-year Treasury yields is the narrowest in over a decade as investors price in a slightly steeper pace of Fed tightening. Williams, who sees 3 or 4 rate hikes in 2018, placing him solidly with the majority of policy makers, said that “I don’t see the signs yet of an inverted yield curve.” Williams will become a key member of Fed Chairman Jerome Powell's leadership team when he takes charge on Jun 18. Interpreting market signals will be a key job for Williams, where he'll be the Fed's key eyes & ears on Wall Street. A potential source of risk has emerged in recent weeks with the widening in the spread between Libor (the London interbank offered rate) &the overnight indexed swap rate, which has risen to levels unseen since the financial crisis. Williams played this down. “At least so far, the main culprits, whenever you look at these kind of developments in money markets, are really kind of structural factors,” he said, noting there'd been an increase in Treasury-bill issuance among other potential influences on rates. “It’s natural but misleading to go back to the crisis,” he said, because back then the widening in the Libor-OIS spread was a “powerful signal” of banking crisis. “It’s not about the health of the banks, it’s really more about -- I think -- some technical factors.” Williams was upbeat on the outlook for the US economy. He said inflation was closing in on the Fed's 2% target & he saw the jobless rate falling to 3.5% next year while US growth averages around 2.5% this year & next.
Fed's Williams Says Inverted Yield Curve Powerful Recession Sign
club.ino.com/trend/analysis/stock/UNH?a_aid=CD3289&a_bid=6ae5b6f7
Earnings season got off to an excellent start. The Dow shot up at the opening today & did looked back until it faded in the last 30 mins. The market is focused on earnings & ignoring the other problems, especially trade negotiations with China which are not going well. They have the potential for dragging on for months. The Dow is 200 away from reaching 25K (first reached 3 months ago). More good earnings should keep buyers busy buying stocks. Meanwhile, gold continues in demand by negative thinkers.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
China adopted a carrot & stick approach to the US as the risk of a trade war between the 2 powerhouse economies continued to simmer. At the same time that Beijing promised foreign car makers greater freedom to compete in the world's biggest market, it also slapped anti-dumping duties on imports of US sorghum. The contrasting moves sends a message: China is willing to open some areas of its economy, but will also respond to signs of rising US protectionism. The question for Pres Trump, as he mulls whether to follow thru on threatened tariffs on as much as $150B in Chinese imports, is whether to focus on the concessions or the curbs. His attack on China's currency policy this week & the banning of sales of crucial American technology to telecommunications-gear maker ZTE signal a hawkish stance. Treasury Sec Steve Mnuchin doubled down on Trump's charge that China is gaming its currency, describing the remarks as a "warning shot" about the consequences of devaluation. But he also said that he’s “cautiously optimistic” for a deal to end the trade dispute between the 2 countries. “The president is personally involved on this issue,” he told reporters last week. Larry Kudlow offered a low-key response to China's latest trade moves. “Whenever they’re moving in our direction in a regulatory way, whenever they’re lowering barriers, that’s a good thing,” Kudlow said today. “When however they raise barriers, as they seem to be on the farm issue, that’s not good." Officials in Beijing have repeatedly made clear that the nation doesn't want a trade war, but have vowed to fight Trump's trade policy “to the end” if needed. Trump has already proposed tariffs covering $50B in Chinese products targeting industries including aerospace, robotics & machinery & may add levies on an additional $100B of goods. China has retaliated with a pledge to levy a 25% tariff on about $50B of US imports including soybeans, automobiles, chemicals & aircraft. It will impose temporary anti-dumping deposits on US sorghum imports from tomorrow. Trump isn't alone in complaining about China's trading practices. Gov & corp officials from around the world routinely complain that China blocks foreign competitors from their economy, forces technology transfer from overseas firms & backs state-sponsored national champions at the expense of private enterprise. By removing the 50% foreign-ownership limit on Chinese automotive businesses, Beijing addressed a longstanding trade grievance without bowing to specific US tariff demands. China has been promising to ease the rules since well before Trump was elected pres. How effective the move is in opening up the market will come down to implementation. Virtually all major US, Asian & European car makers are already locked into joint ventures with Chinese partners, after spending $B to enter the country over the past 3 decades. Those deals can't be undone until at least 2022 & the cost is likely to be prohibitive. The process for setting up new independent plants, as Tesla (TSLA) is attempting, will require approvals from local govs that often have ties to Chinese manufacturers. The European Chamber of Commerce has lobbied for years for the cap's removal. It said it's awaiting more details & hopes the changes “allow much greater participation of foreign enterprises across multiple industries in China.” “We’ve seen comments from China about their plans to liberalize, but until we see the regulations and laws that will actually implement these plans, it’s hard to say what the benefit will be,” said Erin Ennis, senior VP at the US-China Business Council. Trade tensions haven't dulled China's growth story yet. The economy expanded 6.8% in Q1 from a year earlier, matching the pace set in the final 3 months of last year. In a reflection of the nation's economic evolution, services & consumption fueled the expansion.
China Takes Carrot-and-Stick Approach to U.S. Trade Tensions
US factory production cooled in Mar after surging a month earlier, representing a pause in an otherwise strong manufacturing sector, Federal Reserve data showed. Factory output rose 0.1% (matching est) after an upwardly revised 1.5% increase that was the biggest since 2009. Output at factories increased 3% from Mar 2017, the biggest year-over-year gain since 2012. Total industrial production, which also includes mines & utilities, increased 0.5% (est 0.3% rise) after a revised 1% gain. Total capacity utilization, measuring the amount of a plant that is in use, rose to 78% (est 77.9%) from 77.7%. Factory output expanded at a 3.1% annualized rate in Q1 following a 5.5% pace of the final 3 months of 2017, the strongest back-to-back period in 6 years. Manufacturing makes up 75% of total industrial production & accounts for about 12% of the economy. The outlook for manufacturing remains solid as fiscal stimulus provides support for increased business investment, while improving global economies & a weaker $ help underpin US exports. Economists also expect lower taxes to bolster domestic consumer demand. One potential risk to some American manufacturers is the trade spat between the US & China. Meanwhile, the factory-use rate eased in Mar to 75.9% from 76% a month earlier that was the highest since Aug 2015. While the plant-use rate has been climbing, it remains 2.4 percentage points below the long-run average. Mining production rose 1% with oil and gas well drilling rising 4.1%.
John Williams, who takes the helm of the powerful Federal Reserve Bank of NY in Jun, played down risks the yield curve would become inverted as the central bank gradually raises interest rates. The current pres of the Fed's San Francisco branch said a truly inverted yield curve “is a powerful signal of recessions” that historically has occurred “when the Fed is in a tightening cycle, and markets lose confidence in the economic outlook.” That is not the case now, he said. “The flattening of the yield curve that we’ve seen is so far a normal part of the process, as the Fed is raising interest rates, long rates have gone up somewhat -- but it’s totally normal that the yield curve gets flatter,” Williams added. The spread between 2- & 10-year Treasury yields is the narrowest in over a decade as investors price in a slightly steeper pace of Fed tightening. Williams, who sees 3 or 4 rate hikes in 2018, placing him solidly with the majority of policy makers, said that “I don’t see the signs yet of an inverted yield curve.” Williams will become a key member of Fed Chairman Jerome Powell's leadership team when he takes charge on Jun 18. Interpreting market signals will be a key job for Williams, where he'll be the Fed's key eyes & ears on Wall Street. A potential source of risk has emerged in recent weeks with the widening in the spread between Libor (the London interbank offered rate) &the overnight indexed swap rate, which has risen to levels unseen since the financial crisis. Williams played this down. “At least so far, the main culprits, whenever you look at these kind of developments in money markets, are really kind of structural factors,” he said, noting there'd been an increase in Treasury-bill issuance among other potential influences on rates. “It’s natural but misleading to go back to the crisis,” he said, because back then the widening in the Libor-OIS spread was a “powerful signal” of banking crisis. “It’s not about the health of the banks, it’s really more about -- I think -- some technical factors.” Williams was upbeat on the outlook for the US economy. He said inflation was closing in on the Fed's 2% target & he saw the jobless rate falling to 3.5% next year while US growth averages around 2.5% this year & next.
Fed's Williams Says Inverted Yield Curve Powerful Recession Sign
UnitedHealth (UNH), a Dow stock, chased a 35% profit hike in
last year's Q1 with a 31% jump in the first 3
months of 2018 by adding customers & improving its growing operations
outside insurance. The nation's largest health insurer also boosted its forecast for 2018 after a surprisingly strong start to the year. UNH
added customers for its Medicare Advantage & Medicaid businesses &
stretched its reach into South America by buying a health care provider & insurer that operates in Chile, Columbia & Peru. The insurer also saw its provision for income taxes shrink 15% to $800M due partly to a lower federal tax rate. Health
insurance is still the biggest revenue generator,
which covers nearly 49M people. But it also has been focused on
growing its Optum business, which provides pharmacy benefits management & technology services. It also operates an expanding number of clinics & urgent care & surgery centers. Optum delivered $1.7B in operating earnings, a 29% gain compared to last year. A
21% revenue gain from that segment's OptumHealth business helped
stoke the improvement, with growth coming from care delivery &
financial services. The company will add more
fuel to that business when it completes a $5B deal announced last
Dec to purchase hundreds of DaVita Medical Group clinics. Adjusted EPS totaled $3.04 & total revenue jumped 13% to $55.19B. Analysts expected EPS of $2.92 on $54.86B of sales. The company now forecasts 2018 EPS of $12.40-12.65, up from a prediction it made in
Jan for EPS of $12.30-12.60. Analysts have been
projecting EPS of $12.54. UNH
is the first health insurer to announce earnings every qtr, &
many analysts & investors see it as a bellwether for other insurers. The stock rose 8.22 (about 4%).
If you would like to learn more about UNH, click on this link:club.ino.com/trend/analysis/stock/UNH?a_aid=CD3289&a_bid=6ae5b6f7
UnitedHealth hikes 2018 forecast, books another big 1Q gain
Earnings season got off to an excellent start. The Dow shot up at the opening today & did looked back until it faded in the last 30 mins. The market is focused on earnings & ignoring the other problems, especially trade negotiations with China which are not going well. They have the potential for dragging on for months. The Dow is 200 away from reaching 25K (first reached 3 months ago). More good earnings should keep buyers busy buying stocks. Meanwhile, gold continues in demand by negative thinkers.
Dow Jones Industrials
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