That means Colorado brings in $200M in tax revenue and counting, the state's Department of Revenue says.
Through August 2017, the state saw combined sales (recreation and medical usage) of $996.357M, and the full year of 2017 ended up over $1.5B. The total after August 2018 was just over $1.022B and set for record full-year pace.
That comes even amid a continuing decline in average costs, with a pound of bud sold between May 1 and July 31 dropping to $759, from $846 earlier in the year. Trim dropped to $325/lb, down from $404/lb.
Comex copper futures closed -1.1% at a four-week low $2.7465/lb., following Chinese stock markets lower on the prospect of slowing global economic growth in the world's largest copper consumer.
While “the underlying Chinese economy is still running smoothly,” copper’s drop and “continuing malaise is from the impact of those macro headwinds,” says Investec mining analyst Hunter Hillcoat.
Worries of a Chinese slowdown have sharpened investors’ focus on the country’s economic figures, and Chinese markets could could take another hit if analyst forecasts for slowing Q3 growth are proven correct when GDP data is released tomorrow.
Last month, investors placed $19.4B into passive U.S. equity funds, compared with inflows of $13.0B in August.
On the active side, investors pulled $8.8B vs. $14.4B of outflows M/M.
Among top U.S. fund families, Vanguard had the highest monthly firm inflows of $16.5B, while State Street Global advisors had the second-highest firm inflows of $10.4B.
Fund families that saw the greatest outflows included Harbor with about $3.5B of outflows in September, the bulk of which came from Harbor International, an active fund that had outflows of $3.4B. Franklin Templeton had the second-highest outflows at $2.7B.
Among U.S. open-end mutual funds and ETFs, Fidelity Advisor Growth & Income saw the most inflows of all active strategies at $1.8B, the fund's highest inflows in a decade.
U.S. crude inventories rose 6.5M barrels last week, nearly 3x analyst consensus expectations, even as U.S. crude production fell 300K bbl/day to 10.9M bbl/day as offshore facilities closed temporarily due to Hurricane Michael.
An OPEC internal report says rising crude oil inventories and increased production in the U.S. could push oil prices further down in the coming weeks, and "could be a bearish factor for oil prices in the coming few weeks," WSJ reports.
Also, more analysts are believing the impact of renewed U.S. sanctions on Iran, which are due to take full effect on Nov. 4, has been fully priced into the market.
The U.S. Securities and Exchange Commission launches its Strategic Hub for Innovation and Financial Technology--or FinHub for short.
The site will serve as a portal for the public to engage with the SEC staff on fintech-related issues and initiatives, such as blockchain (including digital assets), automated investment advice, digital marketplace financing, and artificial intelligence/machine learning.
Textron (TXT -10.8%) tumbles to its lowest levels in six months after missing on Q3 earnings and revenue estimates while also issuing full-year earnings expectations below analyst consensus.
J.P. Morgan analyst Seth Seifman says the key element driving TXT's miss was the industrial business; otherwise, Seifman says Q3 largely was in line with estimates and even tallied a higher aviation backlog.
The industrial unit has struggled YTD and TXT recently announced a management change, so "the miss is not out of nowhere, though the magnitude is surprising," Seifman writes. "We will be looking for more information from management regarding how industrial got so far off track this year... and how [it] plans to bring the business to sustained profitability."
TXT's woes help drive the industrial sector (XLI -1.7%) broadly lower, including CAT -3.7%, DE -2.8%, CMI -2.7%, PCAR -2.4%.
Also: Textron specialized vehicles 'a year behind the schedule' (Oct. 18)
"There appears to be too much inventory in the channel right now, and this has impacted mill orders and volumes" in early Q4, says Longbow Research analyst Chris Olins.
The imposition of the tariffs raised futures prices for U.S. hot-rolled coil steel from $660/ton in January to $924 at the start of June, but they have since fallen back to $834.
"Hot rolled coil prices continue to grind lower and our channel checks suggest large size orders at $800/ton or below," says Credit Suisse analyst Curt Woodworth, who has previously downgraded the steel sector (SLX -2.8%) on concerns over a glut in U.S. supply.
Analysts also worry that NUE's investments in new production plants, including a $240M rebar mill in Florida, and other steelmakers' plans to ramp up capacity will exacerbate oversupply.
Other steel names also are trading in the red: X -1.4%, MT -2.6%, AKS -3.2%, CMC -1.2%, CLF -2.7%, RS -1.9%, WOR -3.3%, TS -2.1%, TMST -1.7%, SCHN -1.4%, ZEUS -2.2%.
Among those trotted out today was Randal Quarles, the Fed's vice chair of supervisions, who isn't known to opine a whole lot on monetary policy. He's calling for a regime of continued steady rate hikes, unless a "strong and steady signal" emerges to suggest otherwise.
Then there's former White House economic advisor Gary Cohn, who appeared on CNBC to tell the president to stand down on his criticism of the central bank.
As if that weren't enough, The Maestro also appeared on CNBC to advise Jay Powell and company to put on "earmuffs" so as not to have to listen to the president. For those thinking Trump's plea for lower rates is some sort of unprecedented encroachment on the Fed, Greenspan says he received pressure from the White House "all the time."
Also speaking today was noted Fed dove Jim Bullard, who can't seem to figure out why his fellow central bankers are so sure this series of rate hikes needs to continue.
Analysts at B. Riley FBR raise their 2019 natural gas price forecast to $3.50/Mcf, believing the nat gas market is at the cusp of entering a structurally undersupplied state beginning H2 2019, assuming normal winter weather.
The firm cites low current natural gas storage inventory, limited ability for power generation to switch from gas to coal and an unappreciated shift in composition of demand to highest-ever percentage of relatively price inelastic demand.
B. Riley FBR believes sustained price strength is necessary to incentivize enough incremental dry natural gas supply to balance the intermediate- to long-term market.
The analysts view Range Resources (RRC -1%) and Southwestern Energy (SWN +1%) as the best ways to invest in their thesis; for SWN, they maintain their $10 share price target while raising their RRC target to $29 from $22.
Similar to last-week's market selloff, many healthcare REITS are on the rise, such as Ventas (VTR +0.3%), HCP (HCP +0.2%), Medical Properties Trust (MPW +0.2%), Physicians Realty Trust (DOC +0.3%), and Welltower (WELL +0.1%).
There are pockets of green in other REIT sectors as well:
In triple-net REITs: Store Capital (STOR +0.6%), Realty Income (O), and National Retail Properties (NNN +0.2%).
Some retail REITs are also spared the worst of market undertow: Washington Prime Group (WPG +0.6%), Federal Realty Investment (FRT +0.1%), Tanger Factory Outlet Center (SKT +0.4%), Simon Property Group (SPG +0.5%), and PREIT (PEI +0.1%).
"There is no evidence that to undermine all the [budget] rules will lead to prosperity, but it will carry a high price tag for all actors," says ECB chief Mario Draghi, likely referencing Italy's plan to boost borrowing. "Rules must be respected in the self-interest of all parties, especially the weaker ones."
The ECB, of course, holds nearly €200B of Italian government paper.
Draghi's comments have helped send Italian bond yields shooting higher, and Italian shares (NYSEARCA:EWI) sharply lower (down 1.9% at last check). Europe overall (NYSEARCA:FEZ) is down 0.5%.
The selloff is spreading to the U.S., where the S&P 500 (NYSEARCA:SPY) is down 1.2% and the Nasdaq (NASDAQ:QQQ) 1.7%.
After weeks of steady increases, U.S. mortgage rates are taking a breather this week, with the 30-year fixed-rate mortgage slipping 5 basis points.
30-year FRM averaged 4.85% for the week ending Oct. 18, 2018 vs. 4.90% the previous week; a year ago, the average was 3.88%.
"While the housing market has clearly softened in reaction to the rise in mortgage rates, the economy and consumer sentiment remain very robust and that will sustain purchase demand, particularly in affordable markets and neighborhoods," says Freddie Mac Chief Economist Sam Khater.
15-year FRM averaged 4.26% vs. 4.29% a week ago; year-ago rate was 3.19%
5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 4.10%, up from 4.07% a week ago; year ago the rate was 3.17%.
Goldman Sachs (NYSE:GS) is joining with Mike Novogratz's Galaxy Digital Ventures on about $15M in Series B funding for cryptocurrency custodian BitGo (total raised was $58.5M).
BitGo provides such services for more than 75 coins and tokens, and holds over $2B in assets.
Goldman's investment could help pave the way for the bank to offer its own such service. "We believe that a custody offering is a logical precursor to digital asset market making,” says a bank spokesperson.
U.S. stock index futures are under pressure again, down 0.3%, as investors digest minutes from the Fed's most recent meeting that highlighted it was staying on course for rate hikes despite growing criticism from President Trump.
The yield on the benchmark 10-year Treasury note and 30-year Treasury bond were 3 bps higher at 3.21% and 3.38%, respectively.
On the data front, Philly Fed and U.S. jobless claims will be released at 8:30 a.m. ET.
Oil is down 0.7% at $69.28/bbl, gold is 0.1% lower at $1226/ounce.
News that Theresa May might be prepared to delay Britain’s departure from the EU has caused fury on the front pages of several newspapers today.
"A further idea that has emerged - and it is an idea at this stage - is to create an option to extend the implementation period for a matter of months," she told the Brexit summit in Brussels, as EU leaders confirmed it was up to May to offer new ideas.
The Environmental Protection Agency aims to adopt final rules for auto fuel economy standards by March and year-round sales of higher ethanol blends by May, according to a regulatory agenda released today by the Trump administration.
The EPA also says it plans to revoke California's long-held waiver to set its own fuel economy standards, which a dozen other states follow, saying booming U.S. oil production has added new stable supply to the global oil market and "reduced the urgency of the U.S. to conserve energy."
The announcement that the EPA plans to formally propose changes to biofuels policy, including year-round E15, in February and approve them in May follows Pres. Trump's announcement last week in Iowa that he was "unleashing the power of E15 to fuel our country all year long."
Trump says approving year-round E15 will lower drivers' costs at the pump.
The U.S. Securities and Exchange Commission will consider seeking comment from the public on ways to ease the burden of requirements that publicly listed companies report earnings quarterly, Reuters reports.
About two months ago, President Trump asked the SEC to consider requiring earnings disclosures less often.
A few FOMC members said they expected policy may need to become "modestly restrictive" for awhile and some "judged that it would be necessary to temporarily raise the federal funds rate above their assessments of its longer-run level" to reduce the risk of a sustained overshooting the committee's 2% inflation objective or "the risk posed by significant financial imbalances," according to the Federal Reserve minutes from their September meeting.
A couple participants, though, didn't favor a restrictive policy stance if there are clear signs of an overheating economy or rising inflation.
For the economy overall, participants said recent data suggested some acceleration in labor costs, but wage growth remained moderate due partly to tepid productivity growth.
Several participants commented that inflation may modestly exceed 2% for a period of time.
And, of course, trade issues came up: "Some participants commented that trade policy developments remained a source of uncertainty for the outlook for domestic growth and inflation."
Another downside risk: "The divergence between domestic and foreign economic growth prospects and monetary policies," which could further strengthen the dollar.
The S&P 500, down earlier, is close to break-even, -0.05%, the Dow -0.31%, and Nasdaq -0.17%.
U.K. annual inflation rose 2.4% from 2.7% in August, beating estimates of 2.6% as consumer prices were pulled down by cheaper food prices.
Core CPI, which excludes food, energy, alcohol, and tobacco costs rose by an annualized 1.9%%, compared to forecasts for 2.0% and the 2.1% pace seen in August.
According to a Financial Times report on Wednesday, Barnier commented that he would be open to the possibility of a one-year extension to Britain’s Brexit transition in return for the UK accepting a “two-tier” backstop to avoid a border in Northern Ireland.
Here's the reasoning behind the FOMC's decision to remove "the stance of monetary policy remains accommodative" from its statement last month:
The committee said it was "appropriate" to remove the description from its statement before the target range for the federal funds rate moved closer to neutral--the point at which interest rates neither boost nor hinder economic growth. "Earlier communications had helped prepare the public for this change, the minutes said.
Leveraged risk: Also mentioned in the minutes as a risk to the economy--leveraged loans.
"Some participants commented about the continued growth in leveraged loans, the loosening of terms and standards on these loans, or the growth of this activity in the nonbank sector as reasons to remain mindful of vulnerabilities and possible risks to financial stability."
Still, they consider risks to the economy "roughly balanced."
10-year U.S. Treasury note yield little changed, up 1 basis point to 3.175%.
VanEck announces the launch of the VanEck Vectors Video Gaming and eSports ETF (NYSEARCA:ESPO).
The fund will track companies developing video games and related software, streaming services and active in eSports events.
VanEck on the potential upside: "Just a few years ago, talk of sold out stadiums, viewership in the millions, high-profile sponsors, and notable marketing arrangements would have been centered on football, baseball, basketball or hockey. But today, that talk can just as easily be applied to the world of video games and eSports. This is the future of sports and a growth story that is global in scope."
Tech stocks are treading water with the Technology Select Sector SPDR Fund (NYSEARCA:XLK) is down 0.2%, the S&P 500 IT Index is down 0.3%, and the Philadelphia Semiconductor Index is down 0.1% compared to the 0.07% dip for the S&P 500.
Semiconductors: Semi equipment stocks are on the move after yesterday’s aftermarket earnings beat by Cree +5.7% and Lam Research +2.2%. ASML +2.1% followed up this morning with its own strong quarter. Others gaining on the news include (UCTT +9.3%), (AMAT +1.5%), and (KLAC +1.9%). (AMD -2.8%) is heading the opposite direction with no clear catalyst.
Services: IBM -6.1% pulls down services after its revenue miss and decelerating strategic imperatives. Accenture -0.4% is also dipping possibly on this morning’s acquisition news.
Software: Adobe -1.2% gives up some of its post-guidance gains while Twilio -5.5% is still feeling the pressure from its SendGrid -5.6% acquisition.
Crude oil prices tumble to their lowest level in nearly a month, with U.S. WTI edging below $70/bbl for the first time since Sept. 21 after domestic crude stockpiles rose last week by a larger than expected 6.5M barrels: WTI -2.8% to $69.91/bbl, Brent -1.8% to $79.93/bbl.
It was the fourth straight weekly increase in U.S. crude supplies, with recent production levels hit by hurricane-related shutdowns in the Gulf of Mexico.
The declines come amid tension between the U.S. and Saudi Arabia following the apparent murder of a Saudi journalist at the kingdom’s consulate in Turkey, as well as growing concerns about the outlook for global growth.
Even though government bond yields in Europe and Japan are lower than those in the U.S., hedging for currency can make them more profitable than U.S. Treasuries, Bloomberg reports.
For example, they can earn about 3.8% a year from very low yielding 10-year German bunds--more than half a percentage point more than Treasuries.
Jim Caron, a fund manager at Morgan Stanley Investment Management, uses the strategy to buy euro bonds and pointed to Spain, where he can get effective yields of almost 5% on 10-year notes.
Sachin Gupta at Pimco says the interest-rate spread between U.S. and other developed countries will eventually disappear.
“Other countries are still lagging behind in terms of economic strength and interest rate hikes,” he said. “So this differential is likely to become more attractive over the next year or two before it goes the other way.”
Venture Global is building two export terminals in Louisiana; its Calcasieu Pass facility is expected to begin operations in 2022 and its Plaquemines facility is expected to follow in 2023, and the agreements stipulate each of the facilities will supply Poland with 1M metric tons/year of LNG.
The deal comes as Europe looks to import more natural gas to help shift its power generation away from coal, and Poland is seeking alternatives to Russian natural gas transported via pipeline.
Venture Global last month signed a 20-year contract with Spain's Repsol for 1M metric tons/year of LNG.
Credit Suisse this morning downgraded Lennar (NYSE:LEN) and Meritage (NYSE:MTH) to Neutral from Outperform, and KB Home (NYSE:KBH) to Underperform from Neutral. While Q3 may produce earnings beats, says analyst Susan Maklari, slowing demand and worries over affordability will continue to weigh.
BTIG's Carl Reichardt says a monthly survey of builders showed decelerating housing demand last summer has continued into the fall. He trims EPS estimates, and cuts price targets for D.R. Horton (NYSE:DHI) and KB Home.
Housing starts for September were released minutes ago, and showed a larger-than-expected decline from August. Also released this morning was the latest mortgage application data, and it too showed a slowdown in the face of surging interest rates.
Among premarket movers: Toll Brothers (NYSE:TOL) -2.4%
Tilray (NASDAQ:TLRY), Cronos Group (NASDAQ:CRON) and Canopy Growth (NYSE:CGC) are down 7%, 6% and 3%, respectively, premarket as investors "sell on the news" of the start of legal cannabis sales in Canada. All three are down on light volume, however, so reversals when the session starts may occur.
The U.S. airline sector is on watch after United Continental (NASDAQ:UAL) issues strong guidance and Deutsche Bank lifts its outlook on American Airlines Group (NASDAQ:AAL).
United hiked its profit outlook for the third time this year to a range of $8.00 to $8.75 vs. $7.25 to $8.75 prior and $8.16 consensus.
Deutsche Bank sees gains for American Airlines on a much better-than-anticipated fuel expense recapture.
Both developments bode well for the airline sector as a whole.
UAL is up 5.66% in premarket trading and American is 4.0% higher. JetBlue (NASDAQ:JBLU) is showing a 2.6% gain, while Southwest Airlines (NYSE:LUV) and Alaska Air Group (NYSE:ALK) are both up 1.8%. Hawaiian Holdings (NASDAQ:HA) and Spirit Airlines (NASDAQ:SAVE) are both 1.7% higher premarket. Allegiant Travel (NASDAQ:ALGT) and Mesa Air (NASDAQ:MESA) aren't trading yet, but are poised to head higher.
With about five months to go before Brexit, many will be watching a key summit today in Brussels between U.K. and European leaders.
But because there is still no agreement over how to solve the Irish border question, the most likely scenario is negotiations continuing over the coming weeks.
Tensions are high as businesses, consumers and investors on both sides of the fence are concerned that more delays won't leave enough time to solve outstanding differences and ratify an exit agreement in parliament.
Passing a crucial market test, Turkey made a comeback in the international bond markets after receiving three times the bids for its $2B dollar-denominated bond.
This means that companies and banks in the country now have greater access to foreign capital markets, allowing them to borrow at better rates, following a roller-coaster ride for Turkish assets over the last few months.
Just weeks after the retooling of NAFTA, the U.S. Trade Representative’s office has informed Congress it intends to open trade talks with the EU, U.K. and Japan, aiming to "address both tariff and non-tariff barriers and to achieve fairer, more balanced trade."
Under fast-track rules, the U.S. cannot start trade talks until 90 days after notifying Congress.
China's holdings of U.S. Treasuries fell for a third consecutive month in August, dropping $6B to $1.165T, as the Asian nation struggled to prevent the yuan from weakening amid tensions with America.
Beijing's sale of Treasuries is sometimes viewed as a response to the ongoing trade war, especially after China’s ambassador to the U.S. signaled in March his country could scale back purchases of the debt to retaliate against tariffs.
President Donald Trump says the Federal Reserve is "my biggest threat" because it's raising rates too fast and it's "too independent," Fox Business Network reports.
So far, the Fed's policy-setting committee has raised short-term interest rates three times this year and appears ready to boost them again in December. The Fed forecasts three more rate increases next year.
Higher rates make it more expensive for consumers and businesses to borrow money, which they would then spend to feed economic growth.
It's Trump's latest salvo against the Fed and its chair, Jerome Powell, for its path of increasing interest rates.
The 10-year U.S. Treasury note yield is little changed at 3.156% in late trading ET.
After solid Q3 earnings reports from Goldman Sachs Group (GS +2.5%) and Morgan Stanley (MS +5.4%), the big banks are rising strongly today. They were the last of the six big U.S. banks to report.
JPMorgan climbs 2.0% in afternoon trading, as Bank of America (BAC +1.8%), Wells Fargo (WFC +0.8%), and Citigroup (C +0.9%) are all up as well.
Financial Select Sector SPDR ETF (NYSEARCA:XLF), a broad financial ETF including JPM, BAC, WFC, C, and GS as components, is up 1.4%.
Regional banks are mixed. Most regional banks have yet to report; Comerica (CMA -1.4%) Q3 revenue fell short of expectations when it reported Tuesday. On Friday, PNC Financial Services (PNC -1.1%) posted disappointing loan and deposit growth.
The SPDR S&P Regional Banking ETF (KRE -0.1%) slips a bit.
BlackRock (BLK -4%) slumps as the asset manager saw $3.1B net outflows during the quarter. Most other asset managers are on the rise, including AllianceBernstein (AB +2.4%), WisdomTree Investments (WETF +2.6%), Franklin Resources (BEN +1.3%), and T. Rowe Price Group (TROW +1.2%).
Rising mortgage rates are pushing down Freddie Mac's (OTCQB:FMCC) Multifamily Apartment Investment Market Index across most markets in Q2 2018 and over the past year.
The analytical tool combines multifamily rental income growth, property price growth, and mortgage rates to provide a single index that measures multifamily market investment conditions.
At the national level the AIMI fell 2.6% in Q2; 12 out of 13 local markets tracked by the index also slipped, with the largest declines in Phoenix (-4.77%), Houston (-3.79%), and Atlanta (-3.36%). Only Boston(+0.39%) experienced an increase.
The biggest factor was a 29 basis point increase in mortgage rates during the quarter. Net operating income, though, grew in every market and the nation. Seattle saw the biggest quarterly increase, up 4.6%.
For the past 12 months, the national AIMI declined 7.1% with declines in every local market it tracks.
The tech sector is once again shaking off some dust with the Technology Select Sector SPDR Fund (NYSEARCA:XLK) up 2.2%, the S&P 500 Index up 1.6%, the tech heavy Nasdaq 100 up 1.9%, and the Philadelphia Semiconductor Index is up 2.2%.
Software: Adobe +8.3% is driving software gains off its FY19 guidance, offsetting Palo Alto’s -3.4% weakness following its appointment of Google vet Amit Singh as president. Twilio -4.5% is still dropping following its $2B acquisition offer for SendGrid +13%.
Internet: Facebook +2.4% and Snap -3.7% cancel each other out a bit after diverging initiations at Loop Capital while Snap also received a negative note from Cascend.
Semiconductors: Semis are up on a Deutsche Bank note positive on Xilinx +3% and Qualcomm +2.5% nearing an FTC settlement in its antitrust case. Other movers with no clear catalysts include AMD (AMD +4.9%) and Skyworks (SWKS +1.1%).
Hardware: Cognex +5% pushes up after a Needham upgrade. Movers on no to little news include (STX +2.1%), (NTAP +2.4%), and (WDC +1.8%).
Notable aftermarket earnings: IBM +2%, Lam Research +1.4%, Cree +5.5%.
Analysts say the Trump administration’s plan to allow year-round sales of higher-grade corn ethanol would have limited impact on the depressed U.S. ethanol market, with record supplies and prices for the fuel hovering near the lowest in a decade.
Even if the plan moves forward by next summer and hundreds of mostly small and rural gasoline station chains install new dispensers to sell E15, overall sales likely would rise only slightly; currently only ~1,300 stations have pumps that can dispense E15, little more than 1% of the 122K stations in the U.S.
“The likely impact on U.S. ethanol and corn demand in the foreseeable future is immaterial,” as the infrastructure needed to dispense E15 is insufficient, says J.P. Morgan's Ann Duignan.
A service station would need to spend $250K to add fuel pumps, tanks and other equipment, investments that could take about six years to pay off with sales of E15, says an exec at pipeline and terminal operator Pro Petroleum.
Analysts also say large oil refiners are unlikely to build new infrastructure for E15.
A Department of Energy plan to prop up ailing coal companies has run aground in the White House, a setback to an industry that had hoped for a major resurgence after Pres. Trump's election, Politico reports.
Energy Secretary Perry has spent more than a year pushing various plans that would invoke national security to force power companies to keep their economically struggling coal plants running, but the White House reportedly has shelved the plan amid opposition from Trump’s own advisers on the National Security Council and National Economic Council.
Tomorrow is the big day in Canada for cannabis users. Pot stocks appear poised to continue their rally. Tilray (NASDAQ:TLRY), Cronos Group (NASDAQ:CRON) and Canopy Growth (NYSE:CGC) are up 6%, 11% and 4%, respectively, premarket.
U.S. stock index futures are pointing to a firmer open ahead of fresh economic data that includes industrial production numbers, the Housing Market Index and JOLTS. Dow +0.5%; S&P 500 +0.4%; Nasdaq +0.6%.
Earnings season is also kicking into high gear as Netflix becomes the first large technology company to report results after today's close.
On the radar are also quarterly figures from BlackRock, Goldman Sachs, Morgan Stanley, Johnson & Johnson and IBM.
Oil is down 0.9% at $71.14/bbl, gold is 0.1% lower at $1232/ounce and the 10-year Treasury yield is up 1 bps to 3.17%.
Saudi Arabia's Tadawul All Share Index lost as much as 4% in the first six minutes of trading on Tuesday, while the riyal retreated to its weakest level in two years, as U.S. Secretary of State Michael Pompeo arrived in the kingdom to meet with King Salman bin Abdulaziz over the Khashoggi case.
CNN said the kingdom was preparing a report saying the writer died as the result of an interrogation that went wrong, and that the operation was carried out without clearance.
Spain's Socialist government is sticking to its pledge to loosen deficit targets in 2019, challenging the opposition People's Party to wield its Senate veto against plans to help voters weary of years of austerity.
The administration will target a budgetary shortfall next year of 1.8% of GDP, compared with 1.3% reported to the European Commission by the former PP government, and trimmed its forecast for growth next year to 2.3% from 2.4%.
Italy's government signed off on an expansionary 2019 budget late Monday, with planned measures that would boost welfare spending, lower the retirement age and cut taxes, in defiance of EU rules that require a shrinking deficit.
The draft budget law has rattled financial markets in the past month, with investors demanding significantly higher interest rates to buy Italian bonds.
Bullish weather forecasts again led to a sharp rally in core winter natural gas contracts to start the week, boosting November natural gas prices by more than $0.08 to $3.242/MMBtu, and spot gas jumped $0.17 to $3.135/MMBtu as early-season cold drove up demand across much of the U.S.
With unseasonably low temperatures expected to persist through the end of October, NatGasWeather expects the coming weather pattern to further raise storage inventory deficits vs. the five-year average to more than 650B cf and likely toward 700B cf.
The background state will remain bullish for quite some time until record production finally shows signs of improving deficits, “something that’s not expected to happen until after October due to the coming colder-than-normal pattern," the forecaster says.
Gas-oriented energy companies were strong gainers in today's trade: CHK +3.4%, RRC +5.3%, SWN +4.9%, COG +2.2%, GPOR +2.6%, EQT +3.4%, EQM +1.5%.
BlackRock CEO Laurence Fink and Blackstone Group's (NYSE:BX) chief Stephen Schwarzman are skipping Saudi Arabia's business conference, sometimes called "Davos of the Desert," after the disappearance and alleged murder of dissident journalist Jamal Khashoggi.
iShares MSCI Saudi Arabia ETF (NYSEARCA:KSA) closed down 1.8% on Monday.
JPMorgan (NYSE:JPM) CEO Jamie Dimon also decided not to attend, as reported earlier.
Executives from Goldman Sachs Group (NYSE:GS), Bank of America (NYSE:BAC), Citigroup (NYSE:C), HSBC Holdings (NYSE:HSBC), and Standard Chartered (OTCPK:SCBFF) are still scheduled to attend as of midday Monday, according to the Wall Street Journal.
Saudi officials indicated that the event will still proceed; it's set to begin Oct. 23.
Banks and other financial firms have worked for years to develop strong relationships with the Saudi government and its crown prince, Mohammed bin Salman, to get fees as the kingdom starts to move beyond oil and transform into an investment center.
"We have a bullish outlook through the end of the year and into next year," says HSBC precious metals analyst Jim Steel. "Our average is $1,274/oz. this year, which means we'd continue to have a drive up into the end of the year."
Last week's stock market selloff has been a factor in gold's rise, as well as the drop in the 10-year yield from a recent 3.25% back to 3.15%, says Bart Melek, head of commodities strategy at TD Securities, but the risk-off move may have given way to another catalyst: "Now there's a view the Fed might not be as aggressive" in raising rates, he says.
Meanwhile, last week’s positive reversal for gold left much of the market wrong-footed, helping accelerate the move, according to Saxo Bank's Ole Hansen.
Gold mining stocks are broadly higher: ABX +2.4%, NEM +2.2%, GOLD +2.7%, AEM +2.3%, GG +0.9%, FNV +1.4%.
The FDA has issued two guidance documents that it says should help make the drug development process more efficient.
The first addresses the use of minimal residual disease (MRD) as a biomarker in clinical trials for certain blood cancers. The agency believes it clarifies how best to use MRD as a general measure of tumor burden or assess the likelihood of relapse.
The second is final guidance on the regulatory framework for finding treatments that address underlying molecular changes that cause or contribute to disease (e.g., gene therapies). It includes an approach for drug developers for enrolling patients with rare genetic variants in clinical trials and the evidence required to demonstrate efficacy.
Fidelity Investments announces that it's getting into crypto by starting a new unit, Fidelity Digital Assets Services, to manage digital assets for hedge funds, family offices, and trading firms.
It will offer security and storage services, trade execution and client support services.
"Our goal is to make digitally-native assets, such as bitcoin, more accessible to investors," says Abigail P. Johnson, chairman and CEO of Fidelity Investments. "We expect to continue investing and experimenting, over the long-term, with ways to make this emerging asset class easier for our clients to understand and use."
The new unit, now a stand-alone business, started in the Blockchain Incubator at Fidelity, which began in 2013. The incubator continues to research and experiment with blockchain and digital assets.
Pot stocks have perked up in conjunction with Canopy Growth's (CGC +10.5%) acquisition of Colorado-based hemp research outfit ebbu. The commencement of legal cannabis use in Canada on Wednesday, October 17, may have something to do with it as well.
The Technology Select Sector SPDR Fund (NYSEARCA:XLK) is down 1.1%. S&P 500 IT Index is down 1.2%. The tech heavy Nasdaq 100 drops 1% and the Philadelphia Semiconductor Index is down 0.5%.
Movers with no clear catalysts: (XRX +1.9%), (DBD -0.5%), (KOPN +2.4%), (SYMC +1%).
Internet and Software stocks are feeling the most pressure with Netflix -2.2% down ahead of earnings, Adobe -3.3% down on its event day, and Hortonworks -3.4% and Cloudera -3.1% pulling back from their post-merger announcement gains. Apple -2.1% is also weighing down FAANG after a negative analyst note this morning about Chinese demand.
Janet Yellen, who ran the Federal Reserve for four years, says that President Trump's critical remarks about Federal Reserve policy could be damaging to the central bank, Bloomberg reports.
“To politicize it and to undermine that is something that is essentially damaging to the Fed and to financial stability,” Yellen said in Washington at the Mortgage Bankers Association's annual convention.
"Presidents can speak out if they choose to and give their opinions about policy. There’s no law against that, but I don’t think it’s wise," she added.
Still, she doesn't think Trump's criticism of the Fed raising interest rates will change the Fed's actions and she defended her successor, Jerome Powell.
The Fed last increased its benchmark interest rate last month, raising it by 25 basis points to 2.0%-2.25%. It's widely expected to hike interest rates again in December.
The 10-year U.S. Treasury note yield is up 0.8 basis point to 3.16% in midday trading; Financial Select Sector SPDR ETF (NYSEARCA:XLF) -0.09%.
The firm lowers its rating on the sector to Market Weight from Overweight, saying capital spending by firms has “disappointed” investors, and downgrades Nucor (NUE -0.4%), Steel Dynamics (STLD -0.7%) and Cleveland-Cliffs (CLF -1.2%) to Neutral from Outperform.
The ongoing U.S. talks with Canada on tariffs related to steel and aluminum also could add to the oversupply of the commodity, Credit Suisse says, seeing odds favoring a deal by early 2019.
Crude oil prices rise only modestly amid rapidly escalating tensions between the U.S. and Saudi Arabia over the disappearance and alleged murder of Washington Post columnist Jamal Khashoggi at the Saudi consulate in Istanbul; U.S. WTI +0.3% to $71.58/bbl, Brent +0.3% to $80.68/bbl.
Pres. Trump says Saudi King Salman denies knowing what happened to Khashoggi; Trump says he is sending Sec. of State Pompeo to meet the king.
Turkish authorities say they reached an agreement with Saudi Arabia to search the kingdom’s consulate in Istanbul for Khashoggi, a sign that the countries are seeking to avoid direct confrontation over the incident.
Goldman Sachs reiterates its long call on crude oil, as the "potential magnitude of supply shortfalls from Iran in the short term or Saudi potentially outweighs for now a backdrop of weaker fundamentals and increased macro uncertainty."
Despite a Saudi threat of higher crude prices if the U.S. pushes too far, most analysts believe it is difficult to imagine Saudi Arabia taking action that would hit world oil supply.
Also, crude markets are supported by data that shows South Korea did not import any oil from Iran in September for the first time in six years, before U.S. sanctions against Iran take effect in November.
Sibanye-Stillwater (NYSE:SBGL) +6.8% pre-market and surging as much as 20% on the Johannesburg Stock Exchange, a development the company says is reflective of its “better outlook."
“We are recovering from the significant negativity from the first quarter and the market is starting to reflect the better outlook,” says SBGL's head of investor relations.
Traders say the improvement is part of a wider appreciation in South African gold shares and not related to a short squeeze; other South African miners also are higher pre-market: HMY +4.9%, AU +3.9%, GFI +2.5%.
SBGL has surged 16% since Thursday, when Goldman Sachs said the stock was "materially undervalued."
Morgan Stanley says it also favors SBGL because the stock “trades at a material discount to its sum of the parts and where valuation is ignoring sources of optionality,” and AU's premium relative to South African peers is “warranted” because of its diversification and lower cost of production.