U.S. Economy News

  • Today - Friday, January 18, 2019
    • The so-called fear index is on pace for its biggest one-month decline in three years, according to FactSet data.
    • The Cboe Volatility Index, or VIX, uses S&P 500 options to assess volatility over the next 30 days and tends to trade inversely to stocks.
    • So far in January, stocks have been rising more than falling, in stark contrast to the wide swings in the market during November and December.
    • At 11:10 AM ET, the VIX was at 17.40, a decline of about 31.6% so far in January. If it closes Friday about that level, it would be the largest decline since March 2016, when it fell 32.1%.
    • At about 1:30 PM ET, the VIX is 17.66.
    • Previously: Scorecard for the markets in 2018 (Jan. 1)
    • Fanhua (NASDAQ:FANHrebounds 8.6% after defending against a report that it said attempted to profit from the company's stock decline through a "short-selling attack."
    • On Thursday, Fanhua dropped 12% after the report was published.
    • The company is reviewing the report and will make an announcement clarifying and refuting allegations raised in the report before the market opens on Jan. 22.
    • U.S. stocks' advance gathers steam after a report that China offered to boost imports from the U.S. over a six-year period that would eliminate its trade surplus with the U.S.
    • S&P and Nasdaq move up 1.1%; Dow gains over 230 points, up 1.0%.
    • Dollar index +0.2% to 96.30.
    • SPDR S&P China ETF (NYSEARCA:GXC) gains 1.5%.
    • ETFs: YINN, YANG, GXC, FXP, PGJ, CN, TDF, CHN, DSUM, CXSE, XPP, FCA, YAO, YXI, CBON, KCNY, KGRN, FLCH, WCHN
    • Jan. Consumer Sentiment: 90.7 vs. 97.0 consensus and 98.3 prior.
    • Current economic conditions 110.0 vs. 114.5 expected and 116.1 prior.
    • Index of consumer expectations 78.3 vs. 86.0 expected and 87.0 prior.
    • "The approach we need is one of prudence, patience, and good judgment," says New York Fed President John Williams at a New Jersey Bankers Association forum.
    • Economic conditions have softened since the beginning of last year, when growth was above trend and interest rates were still low.
    • At the beginning of 2018, "gradually raising interest rates was the obvious and necessary choice," he said.
    • "Twelve months later, the tailwinds have lost their gust, interest rates are closer to normal levels, and inflation is tame."
    • Still, higher interest rates may be appropriate "at some point" if growth continues "well above sustainable levels," he says.
    • He also says the Fed's willing to be flexible on shrinking its balance-sheet. "So far, this plan has worked very well. But it is important to stress that if circumstances change, I will reassess our choices regarding monetary policy, including the path of balance sheet normalization."
    • Previously: Fed's George lines up behind pause (Jan. 15)
    • December Industrial Production: +0.3% to 109.9 in-line with consensus, +0.4% prior (revised).
    • Capacity Utilization 78.7% vs. 78.4% consensus, 78.6% prior (revised).
    • Responding to reports of a possible trade detente between the U.S. and China, stocks across the globe are continuing their climb higher.
    • On Thursday, the WSJ quoted Treasury Secretary Steven Mnuchin as saying Washington could ease tariffs on Beijing, although the suggestion faced pushback from U.S. Trade Representative Robert Lighthizer.
    • Earnings season remains in full swing, and investors today will also be watching figures on U.S. industrial production and consumer sentiment.
    • Asia: Nikkei +1.3%; Hang Seng +1.3%; Shanghai +1.4%; Sensex flat.
    • Europe: FTSE 100 +1%. CAC 30 +1.2%. DAX +1%.
    • U.S. futures: Dow +0.4%; S&P 500 +0.3%; Nasdaq +0.4%.
    • Oil is up 0.6% at $52.66/bbl, gold is 0.4% lower at $1288/ounce and the 10-year Treasury yield is up 2 bps to 2.77%.
    • ETFs: SPY, QQQ, DIA, SH, SSO, VOO, SDS, IVV, SPXU, TQQQ, UPRO, PSQ, SPXL, RSP, SPXS, SQQQ, QID, DOG, QLD, DXD, UDOW, SDOW, VFINX, EPS, DDM, QQEW, QQQE, SPLX, OTC:SFLA, QQXT, SPUU, SPXE, UDPIX, OTPIX, RYARX, SPXN, SPDN, SPXT, SPXV
    • "Out of consideration for the 800,000 great American workers not receiving pay and to ensure his team can assist as needed, President Trump has canceled his Delegation's trip to the World Economic Forum in Davos, Switzerland," Press Secretary Sarah Sanders said in a statement.
    • Trump had already scrapped his own trip, but Steven Mnuchin, Mike Pompeo, Wilbur Ross, Robert Lighthizer and Chris Liddell were supposed to attend the meeting.
  • Thursday, January 17, 2019
    • Major U.S. stock averages spike in late afternoon trading after the Wall Street Journal reports that Treasury Secretary Steven Mnuchin is pushing a plan to lift tariffs on China imports as a way to strike a trade deal and calm the markets.
    • The Nasdaq, S&P, and Dow jumped to session highs but settled slightly above their previous levels. A Treasury spokesperson said neither Mnuchin nor U.S. Trade Representative Robert Lighthizer have "made any recommendations to anyone with respect to tariffs or other parts of the negotiation with the Chinese."
    • S&P is up +0.5%, Nasdaq +0.5%, and Dow +0.5%.
    • All 11 industry sectors are in the green, with industrials (+1.5%) and materials (+1.3%) sectors leading. The weakest gains are in communications services (+0.05) and consumer staples (+0.3%).
    • Oil up 2 cents to $52.33/bbl, and gold -0.2% to $1.291.40/ounce.
    • Dollar Index relatively flat at 96.06.
    • 10-year Treasury slips, pushing yield up 2 basis points to 2.746%.
    • Previously: U.S. mulls pulling back China tariffs - WSJ (Jan. 17)
    • Treasury Secretary Steven Mnuchin is reportedly pushing a plan to pull back tariffs on Chinese imports in the hope Beijing will also soften its stance, according to the story.
    • Pushing back against Mnuchin is U.S. Trade Rep Robert Lighthizer.
    • The current deadline is March 1. Past that, tariffs on $200B of Chinese goods are set to jump to 25% from 10%.
    • Markets have moved modestly higher since the news hit a few minutes ago. S&P 500 (SPY +0.6%), Nasdaq (QQQ +0.6%), DJIA (DIA +0.7%). The iShares China Large Cap ETF (NYSEARCA:FXI) has erased an earlier loss, now just barely in the green. Other assets on the move include the Australian dollar (FXA +0.6%).
    • U.S. home-sale prices in December rose 1.2% Y/Y, its smallest increase since the number went positive in March 2012, says Redfin.
    • Also, the national number of completed home sales fell faster than has in two and a half year, down almost 11% from December 2017. Home sales fell in 69 of the 76 largest metro areas that Redfin tracks.
    • Meanwhile the number of homes newly listed for sale last month fell 4.1% from a year earlier. The number of homes for sale on the market, however, rose 4.8% in December, hitting a 42-month high.
    • The median sale price of homes sold in December fell since last year in nine of the 76 metro areas, including San Jose (-7.3%) and Boston (-1.0%).
    • Previously: Builder confidence comes in strong (Jan. 16)
    • ETFs: MORL, REM, XHB, ITB, MORT, PKB, NAIL, HOML
    • Initial Jobless Claims -3K to 216K vs. +221K consensus, 216K prior (unrevised).
    • Continuous Claims: +18K to 1.737M vs. 1.735M consensus, 1.719M prior (revised).
    • According to Bloomberg, junk bonds have already returned 3.45% this month, which would be the best January in several years. Drilling down further, CCC paper has returned 4.575%, the finest performer in fixed income.
    • The rally has issuers feeling their oats, with BB-rated DCP recently boosting its price and more than doubling the offering size to $325M. Still, issuance is sluggish - this was only the 2nd deal that's priced this month.
    • ETFs: HYG, JNK, DHY, HIX, EAD, PHT, HYT, HYLD, JQC, ACP, ANGL, CIK, MCI, DSU, SJB, KIO, NHS, CIF, ARDC
    • U.S. stock index futures are dipping into the red, down 0.3%, but quarterly reports today from Netflix, Morgan Stanley and others may be able to turn trading sentiment around.
    • The results come after Netflix this week said it would raise its U.S. monthly subscription prices and as investors bet bank profits will continue to lead markets.
    • According to FactSet, firms in the S&P 500 are projected to report earnings growth of 11% Y/Y during the Q4 earnings season.
    • Oil is up 0.5% at $52.05/bbl, gold is flat at $1294/ounce and the 10-year Treasury yield is up 1 bps to 2.71%.
    • ETFs: SPY, QQQ, DIA, SH, SSO, VOO, SDS, IVV, SPXU, TQQQ, UPRO, PSQ, SPXL, RSP, SPXS, SQQQ, QID, DOG, QLD, DXD, UDOW, SDOW, VFINX, EPS, DDM, QQEW, QQQE, SPLX, OTC:SFLA, QQXT, SPUU, SPXE, UDPIX, OTPIX, RYARX, SPXN, SPDN, SPXT, SPXV
  • Wednesday, January 16, 2019
    • "Many Districts reported that contacts had become less optimistic," goes the opening paragraph of the Fed Beige Book. At issue were financial market volatility, rising short-term rates, falling energy prices, and trade/politics.
    • Eight of 12 districts reported modest to moderate growth. Those reporting more sluggish activity: Cleveland, St. Louis, Kansas City, and Dallas.
    • The Atlanta Fed's GDPNow model for real GDP growth in 4Q18 remains unchanged at 2.8% on January 16.
    • The nowcast of the contribution of net exports to fourth-quarter real GDP growth inched down from -0.5% to -0.52% following the release of U.S. Import and Export Price Index.
    • Average real student debt load per capita for the age 24-to-32 demographic doubled to $10,000 in 2014 from $5,000 in 2005, according to the Federal Reserve's first issue of its Consumer & Community Context series.
    • That's affected their ability to take out mortgages to buy a home. The percentage of household heads in the 24-to-32 age group that own their own home fell to 36% in 2014 from 45% in 2005--a 9 percentage point drop.
    • "We estimate that roughly 20% of the decline in homeownership among young adults can be attributed to their increased student loan debts since 2005," according to the authors of the article, Alvaro Mezza, Daniel Ringo, Shane Sherlund and Kamilla Summer.
    • Tighter mortgage market conditions after the financial crisis may also have contributed, making it harder for people with student debt to get financing.
    • ETFs: XHB, ITB, PKB, NAIL, HOML
    • Major U.S. stock averages' earlier gains dwindle as the 26-day U.S. partial government shutdown continues.
    • S&P and Nasdaq each up 0.1%, with the Dow up 0.4%. S&P had been up as much as 0.5% earlier and the Nasdaq had risen as much as 0.8%.  The Dow was up 0.7% earlier.
    • Consumer staples (-0.6%), energy (-0.4%) and communication services (-0.2%) sectors weigh on the market, while financials (+1.4%) and materials (+0.5%) sectors power lead the gains.
    • Individual names falling include Verizon (-1.4%), Hewlett Packard Enterprise (-3.1%), Altria Group (-1.2%), Philip Morris International (-1.4%), and Coca-Cola (-0.9%).
    • 10-year Treasury yield edges up almost 1 basis point to 2.726%.
    • Oil falls 0.8% to $51.72, and gold rises 0.4% to $1,293.70.
    • Previously: Stocks stretch gains, lifted by financials (Jan. 16)
    • December Import/Export Prices: Import prices Index -1.0% vs. -1.2% consensus and -1.9% prior (revised).
    • Export prices -0.6% M/M vs. -0.3% consensus and -0.8% prior (revised).
    • MBA Mortgage Applications
    • Composite Index: +13.5% vs. +23.5% (W/W).
    • Purchase Index: +9.0% vs. +17.0%.
    • Refinance Index: +19.0% vs. +35.0%.
    • 30 year mortgage rate remains unchanged at 4.74%.
    • The cost of the partial government shutdown has essentially doubled, according to new White House estimates.
    • "The Trump administration had initially estimated the shutdown would cost the economy 0.1 percentage point in growth every two weeks that employees were without pay, but updated figures suggest it is now costing 0.13 percentage points each week.
  • Tuesday, January 15, 2019
    • One of the more hawkish members of the central bank, Kansas City Fed President Esther George says now "might be a good time to pause" the rate hike cycle.
    • “It seems to me that we should proceed with caution and be patient as we approach our destination."
    • George is a voting member of the FOMC this year.
    • U.S. stocks revive after a late-morning dip, lifting major stock market averages to session highs.
    • Wall Street overcomes pessimism over weaker-than-expected Q4 results at JPMorgan and Wells Fargo.
    • On the plus side: December core PPI fell unexpectedly and chain store sales rose 6.7% for the week ended Jan. 12.
    • Still to drop: Brexit vote.
    • S&P gains 1.1% in midday trading; Nasdaq +1.7% and Dow +0.7%.
    • By industry, the strongest performers are communication services (+1.8%), information technology (+1.5%), and healthcare (+1.5%).
    • The laggards: Materials (-0.9%) and industrials (-0.3%).
    • Oil +2.4% to $51.70/barrel and gold slips 0.3% to $1,287.90 /ounce.
    • Dollar Index +0.6% to 96.13.
    • 10-year Treasury yield rises 1 basis point to 2.718%.
    • Previously: Stock gains retreat after China trade comments (Jan. 15)
    • Chain store sales rose +6.7% for the week ending on January 12, according to Johnson Redbook
    • Sales are expected to top 7% for the full month of January.
    • ETFs: XLY, XRT, VCR, RTH, RETL, FDIS, FXD, EMTY, RCD, PMR, FTXD, JHMC
    • Jan. Empire State Survey: 3.9 vs. 10.75 consensus, 11.5 prior (revised).
    • New Orders 3.5 vs. 13.4 (revised).
    • Shipments 17.9 vs. 20.3 (revised).
    • Number of Employees 7.4 vs. 17.5 (revised).
  • Monday, January 14, 2019
    • The Federal Reserve's series of interest-rate hikes aren't a "headwind" slowing economic momentum, Fed Vice Chairman Richard Clarida told Fox Business Network Monday.
    • The December rate hike was "appropriate," he said, adding that the federal funds rate is now only slightly higher than the inflation rate, which is historically a low level for interest rates.
    • Similar to Chairman Jerome Powell's comments last week, Clarida says the Fed can "afford to be very patient" on future hikes. Specifically, the central bank will be observing the slower global economy and says so far the impact from overseas hasn't severely affected the U.S. economy.
    • Previously: Yellen: "Very possible" Fed's rate hikes are over (Jan. 14)
    • ETFs: PLW, GOVT, EGF, TAPR, FIBR, USTB
    • The Federal Reserve may be done with its rate-hiking cycle says former Federal Reserve Chair Janet Yellen at the National Retail Federation's annual Big Show event in New York, CNBC reports.
    • "If there is a downturn in the global economy and that spills into the U.S. ... It's very possible we may have seen the last interest rate hike of this cycle," she said.
    • The Fed started raising rates in 2015, for a total of five rate increases under Yellin's watch through 2017.
    • "Perhaps another rate hike or two is perfectly possible, but nothing is baked in," Yellen said.
    • Previously: Fed debates bond portfolio size, composition (Jan. 11)
    • ETFs: PLW, GOVT, EGF, TAPR, FIBR, USTB
    • The Trump Administration reopens a program after the mortgage industry says its closure during the partial government shutdown could have forced lenders to delay or cancel loan closings, the Wall Street Journal reports.
    • The Internal Revenue Service program processes forms that lenders use to verify borrowers' incomes.
    • It closed because it's funded through the normal appropriations process. But now, the administration decided it could fund it through user fees the IRS charges each time a borrowers' income is verified.
    • Reopening the program allows about 400 IRS clerks to return to work. Each week those employees process forms of some 400,000 people considering a loan, according to an IRS spokesman.
    • ETFs: XLF, MORL, FAS, REM, FAZ, VFH, MORT, UYG, DMO, FNCL, IYF, BTO, TSI, IYG, PGZ, JLS, RYF, FXO, SEF-OLD, CMBS, FINU, FMY, RWW-OLD, JMT, FINZ, LMBS, MBSD, JHMF
    • The Organization for Economic Cooperation and Development's composite leading indicators continue to see growth momentum easing in the OECD area as a whole.
    • The indicators point to slowing growth for the U.K., Canada, and the euro area, including Germany, France, and Italy; similar signs are emerging for the U.S.
    • For Japan, CLI continue to sees stable growth momentum.
    • In emerging economies, stable growth remains the assessment for the industrial sector of China, with similar signs emerging in India.
    • Easing growth momentum seen for Brazil and Russia.
    • The fourth quarter earnings season kicks off in earnest today, with Citigroup becoming the first of the big U.S. banks to put forward its results.
    • Firms in the S&P 500 were projected back in September to report Q4 earnings growth of 17% from the year earlier, according to FactSet, but dimmer expectations for global growth and disappointing holiday sales have forced many companies to slash their forecasts, pushing the estimated earnings-growth rate for the quarter closer to 11%.
  • Sunday, January 13, 2019
    • A partial U.S. government shutdown over President Trump's demand for border funding entered its 22nd day on Saturday, making it the longest in U.S. history.
    • Unless the impasse is resolved before next Friday, the shutdown could slash job growth by as much as 500K in January and lift the unemployment rate above 4.0%, although federal workers would be considered employed if Congress decides to pay them retroactively.
  • Friday, January 11, 2019
    • U.S. stocks erase much of the day's decline as financial, consumer discretionary, and consumer staples sectors gain.
    • S&P -0.1%, Nasdaq -0.4%, and Dow -0.3%.
    • Three out of 11 S&P 500 sectors are in the green--financials (+0.3%), consumer discretionary (+0.2%), and consumer staples (+0.1%).
    • Sectors leading the decline are utilities (-1.0%), energy (-0.3%), and healthcare (-0.3%).
    • Oil slips 1.7% falling below $52/barrel to $51.72.
    • 10-year Treasury rallies, pushing yield down 5 basis points to 2.70%.
    • Dollar Index is essentially unchanged at 95.54.
    • Talks at the Federal Reserve are intensifying over how big the central bank's portfolio of bonds and other assets will be and what it will be in it when it's done shrinking its balance sheet, according to the Wall Street Journal.
    • It seems the Fed is leaning toward holding a larger portfolio than it was aiming for a few years ago, and that those holdings will be weighted toward short-term Treasury securities, according to the minutes of the Fed's December meeting. Some members of the FOMC wanted to start selling some mortgage securities gradually.
    • Fed Chair Jerome Powell has said while the Fed doesn't believe the portfolio runoff contributed to recent financial market volatility, it can adjust the portfolio runoff program if needed.
    • The Fed purchased bonds in several rounds after the financial crisis to push down long-term rates. In late 2017, it started to let some bonds mature without replacing them, reducing its holdings to about $4.1T last month.
    • On Thursday, Powell said it's too early to say what size it will be when the runoff program ends. "It will be smaller than it is now but nowhere near what it was before," he said.
    • ETFs: DMO, TSI, PLW, PGZ, JLS, GOVT, CMBS, FMY, JMT, LMBS, EGF, TAPR, FTT, MBSD, FIBR, USTB
    • December Consumer Price Index: -0.1% M/M vs. in-line with consensus, +0.0% prior.
    • Core CPI +0.2% M/M in-line with consensus, +0.2% prior.
    • Core CPI +2.2% Y/Y in-line with consensus, +2.1% prior.
    • Citing Fed signals suggesting a "pause in the hiking cycle," Barclays cuts its full-year 2019 forecast for 10-year Treasury yield to 2.75% from 3%, strategists led by Rajiv Setia write in a Jan. 10 note.
    • Refers to minutes from Fed's December FOMC meeting and recent comments from Fed members that they're "open to remaining on hold."
    • U.S. rates "now unlikely to challenge the highs of late 2018" and the team sees 3% as "an effective cap" for 10-year yields even if "recession risks diminish."
    • 10-year Treasury yield currently ~2.72%; had been 3.25% in November.
    • Source: Bloomberg First Word.
    • Previously: Fed's Bullard - Last rate hike an "overreach" (Jan. 10)
    • ETFs: TLT, TBT, TMV, TBF, EDV, TMF, TTT, ZROZ, VGLT, TLH, UBT, SPTL, DLBS, VUSTX, TYBS, DLBL-OLD, OPER
    • U.S. stock index futures were mixed overnight after Jerome Powell reiterated the Fed would be patient about interest rate hikes, but said the central bank's balance sheet would be "substantially smaller." Dow +0.1%; S&P 500 flat; Nasdaq -0.1%.
    • Powell also said President Trump hasn't asked for a meeting despite months of attacks against him.
    • On the data front, investors today are likely to closely monitor the latest CPI figures as well as core CPI data for December at 8:30 a.m. ET.
    • Oil is up 0.7% at $52.98/bbl, gold is 0.4% higher at $1293/ounce and the 10-year Treasury yield is down 2 bps to 2.71%.
    • ETFs: SPY, QQQ, DIA, SH, SSO, VOO, SDS, IVV, SPXU, TQQQ, UPRO, PSQ, SPXL, RSP, SPXS, SQQQ, QID, DOG, QLD, DXD, UDOW, SDOW, VFINX, EPS, DDM, QQEW, QQQE, SPLX, OTC:SFLA, QQXT, SPUU, SPXE, UDPIX, OTPIX, RYARX, SPXN, SPDN, SPXT, SPXV
    • The partial government shutdown is entering its 21st day, tying the record for the longest such one in American history.
    • Visiting the U.S.-Mexico border yesterday, President Trump said he has "the absolute right to declare a national emergency" if a deal over funding for the barrier cannot be reached in Congress.
    • The White House has asked the Army Corps of Engineers to examine potentially diverting money from other projects and is also exploring having Homeland Security request funds from the Pentagon.
  • Thursday, January 10, 2019
    • Major U.S. stock averages spend the day zigzagging with the latest leg in the green and pointing up, kind of.
    • Nasdaq, S&P, and Dow are all up ~0.2%.
    • By sector, utilities (+1.1%) and industrial goods (+1.0%) are the top gainers, while conglomerates (-0.3%) and basic materials (-0.2%) are declining.
    • Even Fed Chair Jerome Powell's comments earlier in the day seemed partly good, partly not, as he repeats the central bank's stance of watching, waiting, and being flexible. At the same time, he's worried about U.S. debt and is showing no signs of stopping the Fed's balance sheet runoff.
    • Today's economic data points: Mortgage rates fell to their lowest in nine months, and jobless claims fell more than expected.
    • Oil +0.5% to $52.62/barrel, recovering from an earlier decline. Gold heads down 0.3% to $1,288.30/ounce.
    • 10-year Treasury yield adds 2 basis points to 2.73%.
    • Dollar index strengthens 0.4% to 95.55.
    • Previously: Fed's Bullard - Last rate hike an "overreach" (Jan. 10)
    • St. Louis Fed President Jim Bullard returns to the tape today, reiterating his concern that the central bank stands on the precipice of a policy mistake.
    • He calls December's rate hike an "overreach," and said he argued against it (he did not have a vote on the FOMC then; he does now). As for now, he says rates are where they should be, and the Fed should not be forecasting any more rate hikes.
    • He takes note of recent data showing a slowdown in China, that may (or may not) worsen.
    • His comments came after a speech in Little Rock.
    • Previously: Fed risking recession - Bullard (Jan. 9)
    • President Donald Trump cancels his trip to Davos, Switzerland, for the World Economic Forum because of the partial government shutdown, he writes via Twitter.
    • He blames the Democrats' "intransigence."
    • Previously: Shutdown threatens 2019 IPOs (Jan. 10)
    • Stocks dip back into red after Fed Chair Jerome Powell speaks about returning the Fed's balance sheet to "a more normal level" during an interview at the Economic Club of Washington.
    • What level is "more normal"? "We don't know exactly." He says it will be "smaller than it is now, but nowhere near where it was before."
    • Also says he's "very worried" about the amount of U.S. debt.
    • S&P and Nasdaq each down 0.2% and Dow -0.1%.
    • 10-year Treasury fall, pushing yield up 1 basis point to 2.72%.
    • Dollar index +0.4% to 95.51.
    • ETFs: TLT, TBT, TMV, TBF, EDV, TMF, TTT, ZROZ, VGLT, TLH, UBT, SPTL, DLBS, VUSTX, TYBS, DLBL-OLD, OPER
    • Federal Reserve Chairman Jerome Powell emphasizes the point that the central bank currently has the ability to wait, watch, and be flexible in an interview at the Economic Club of Washington.
    • Stock perk up, with the S&P and Nasdaq each up 0.3% and the Dow +0.4%.
    • He also stresses that the Fed's dot-plot chart isn't a plan. Rather, the two rates cited from that chart are a median expectations of the FOMC members, "based on a very strong outlook," he said.
    • An extended government shutdown would show up in economic data, he says. However, in the past shutdowns usually don't last very long and typically don't impact the economy much.
    • Previously: Most economists see Fed holding rates at least until June: WSJ survey (Jan. 10)
    • ETFs: PLW, GOVT, EGF, TAPR, FIBR, USTBUUP, UDN, USDU
    • Major U.S. stock averages erase Thursday's earlier losses as utility and industrial goods sectors outperform the broader market.
    • S&P and Nasdaq each rise 0.1%, Dow gains 0.3%.
    • Utilities (+0.7%), industrial goods (+0.6%), and consumer goods (+0.2%) lead the gainers, while conglomerates (-0.7%) and basic materials (-0.3%) exert downward pressure.
    • Oil swings up 0.3% to $52.49/barrel, erasing an earlier decline.
    • 10-year Treasury yield rises almost 1 basis point to 2.72%.
    • Dollar index gains 0.3% to 95.39.
    • Latest Wall Street Journal survey shows most (~60%) private economists expect the Fed to hold interest rates steady at least until June.
    • Economists were split over whether the Fed will raise once or twice this year; they see median fed-funds rate at 2.75% by the end of 2019, down from 2.89% in last month's survey.
    • Three of the 73 economists surveyed expect the Fed's next move to be a cut.
    • Previously: Fed can afford to be patient on further policy firming: FOMC minutes (Jan. 9)
    • 30-year fixed-rate mortgage averages 4.45% for the week ending Jan. 10, down six basis points from the previous week, according to Freddie Mac's Primary Mortgage Survey.
    • "Lower mortgage rates combined with continued income growth and lower energy prices are all positive indicators for consumers that should lead to a firming of home sales,” says Freddie Mac chief economist Sam Khater.
    • A year ago, the 30-year FRM rate was 3.99%.
    • 15-year FRM averages 3.89% vs. 3.99% in the previous week and 3.44% a year ago.
    • 5-year Treasury-indexed hybrid adjustable-rate mortgage averages 3.83%, down from 3.98% in the prior week; compares with 3.46% a year ago.
    • Previously: Mortgage applications rise as rates ease (Jan. 9)
    • ETFs: MORL, REM, XHB, ITB, MORT, DMO, PKB, TSI, PGZ, JLS, NAIL, CMBS, FMY, HOML, JMT, LMBS, MBSD
    • Initial Jobless Claims -17K to 216K vs. +224K consensus, 233K prior (revised).
    • Continuous Claims: -28K to 1.722M vs. 1.714M consensus, 1.750M prior (revised).
    • U.S. stock index futures are pointing to the first loss in five sessions for Wall Street amid further concerns of a slowdown in the world's second largest economy. Dow -0.5%; S&P -0.6%; Nasdaq -0.7%.
    • China's consumer price index dropped to 1.9%, well below the 3% upper limit set by the PBOC, and producer prices grew at the slowest pace in two years.
    • The latest breakdown in talks over the U.S. government shutdown also weighed on sentiment, with President Trump calling a meeting with Democratic lawmakers last night "a total waste of time."
    • Oil is down 0.8% at $51.94/bbl, gold is 0.2% higher at $1294/ounce and the 10-year Treasury yield is down 3 bps to 2.7%.
    • ETFs: SPY, QQQ, DIA, SH, SSO, VOO, SDS, IVV, SPXU, TQQQ, UPRO, PSQ, SPXL, RSP, SPXS, SQQQ, QID, DOG, QLD, DXD, UDOW, SDOW, VFINX, EPS, DDM, QQEW, QQQE, SPLX, OTC:SFLA, QQXT, SPUU, SPXE, UDPIX, OTPIX, RYARX, SPXN, SPDN, SPXT, SPXV
    • Investors will be looking for new clues on interest rate policy today after minutes from the FOMC's December meeting indicated patience for upcoming rate hikes and possible changes to the central bank's balance sheet plan.
    • Fed Chairman Jerome Powell will speak this afternoon before the Economic Club of Washington, and other Fed officials, including Tom Barkin, James Bullard, Charles Evan, Neel Kashkari and Richard Clarida, are set to give presentations throughout the day.
  • Wednesday, January 9, 2019
    • Major U.S. stock averages lose steam as investors digest minutes from the Fed's December meeting.
    • S&P +0.4% down from the 0.7% gain earlier, while Nasdaq's rise moderated to 0.8% from 1.1%. Dow +0.5% compared with +0.7% at about the time the minutes were released.
    • Most participants said the FOMC can afford to be patient about further firming. However, in discussion about balance-sheet normalization, some participants suggested that agency MBS holdings could be reduced "somewhat more quickly than the passive approach."
    • The Dollar Index slips 0.8% to 95.17.
    • Oil gains 5.2% to $52.39/bbl and gold +0.6% to $1,293.80/ounce.
    • 10-year Treasury yield loses 1 basis point to 2.72%.
    • Previously: Fed can afford to be patient on further policy firming: FOMC minutes (Jan. 9)
    • Most participants at the Federal Reserve policy-setting meeting in December said the committee could "afford to be patient about further policy firming," according to the FOMC meeting minutes.
    • A few participants at the meeting favored no change in the interest rate.
    • The lack of inflationary pressure gives the committee some leeway to "wait and see" how economic data develops amid the financial markets' volatility and increased uncertainty about global economic growth.
    • "Participants generally revised down their individual assessments of the appropriate path for monetary policy and indicated either no material change or only a modest downward revision in their assessment of the economic outlook."
    • At the Dec. 18-19 meeting the FOMC voted to raise the target range for the federal funds rate by 25 basis points to 2.25%-2.50%.
    • On balance sheet normalization: "Several participants commented on the possibility of reducing agency MBS holdings somewhat more quickly than the passive approach by implementing a program of very gradual MBS sales sometime after the size of the balance sheet had been normalized." They expect to continue talking about long-run implementation frameworks at future meetings.
    • U.S. stock average are near their session highs. The S&P +0.7%, Nasdaq +1.1%, and the Dow +0.7%.
    • 10-year Treasury yield is little changed at 2.73%.
    • ETFs: PLW, GOVT, EGF, TAPR, FTT, FIBR, USTB
    • With two empty seats for the Federal Reserve board of governors and one of the nominees withdrawing her name, President Donald Trump is left in a quandary.
    • Trump, who's reportedly furious with the Fed and Chairman Jerome Powell for the central bank's path of raising interest rates, would face difficulties in getting an easy-money nominee approved by Senate Republicans, who have a majority on the banking committee, MarketWatch reports.
    • "A left-leaning dove is not the typecast of a nominee that Senate Republicans would confirm," says Sarah Binder, a senior fellow at the Brookings Institution.
    • Finding a nominee who will go easy on rules for banks and favor cheap money will be a problem, FTN Financial chief economist Chris Low says.
    • Nominating a libertarian would be another mess, since some have been in favor of ending the Fed.
    • Some economists say Trump's best option may be to leave the seat with no nominee open, since a new governor with a different viewpoint would not be influential enough to change the Fed's course.
    • Marvin Goodfriend of Carnegie Mellon University, the nominee for the other opening on the Fed's board, was approved by the banking committee last year, but the full Senate never acted on it.
    • It's unclear if Goodfriend will be renominated for the post.
    • Previously: Fed board nominee Nellie Liang withdraws (Jan. 8)
    • The U.S. Trade Representative office's statement on meetings with Chinese officials in Beijing describes topics the delegations discussed but shed little light on any progress made.
    • People familiar with the talks said the two sides were closer on areas such as agriculture and energy, but farther apart on the more difficult issues, Bloomberg reports.
    • "The delegation will now report back to receive guidance on the next steps," the statement says.
    • The two sides discussed "ways to achieve fairness, reciprocity, and balance" between the U.S. and China.
    • Topic also included China's pledge to buy "a substantial amount" of agricultural, energy, manufactured goods, and other products and services from the U.S.
    • The major U.S. stock averages pare earlier gains. S&P essentially flat, Nasdaq +0.3%, Dow +0.3%. Dow and Nasdaq had opened up 0.7%, while S&P gained 0.5%.
    • ETFs: YINN, YANG, GXC, CYB, FXP, PGJ, CN, TDF, CNY, CHN, DSUM, CXSE, XPP, FCA, YAO, YXI, FXCH, CBON, KCNY, KGRN, FLCH, WCHN
    • The Federal Reserve's Jim Bullard, Raphael Bostic, and Charles Evans are all on the tape this morning more or less promising at least a pause in the central bank's rate-hike cycle.
    • Bullard and Evans have been among the more dovish on the Fed of late, so their remarks shouldn't be of too much surprise (both vote on the FOMC this year). Bostic (not a voter this year) leans more centrist. What he's saying: "I see little need to engage in restrictive monetary policy and push the federal funds rate above a neutral stance."
    • UUP -0.75%. Among overseas currencies on the move: Euro (FXE +0.8%), pound (FXB +0.5%), swissie (FXF +0.7%), yen (FXY +0.5%), aussie (FXA +0.6%)
    • KKR's 2019 global macro outlook, titled "The Game Has Changed," sees a shift from monetary policy to fiscal policy underway, according to Henry McVey, head of global macro and asset allocation.
    • Tightening liquidity conditions and higher real rates are "macro headwinds that must not be considered" and increased geopolitical uncertainty "warrants a higher risk premium than in the past."
    • His calls for the year: Moves to overweight position in public equities, including the U.S.
    • "Remains constructive" on cash flowing assets linked to nominal GDP, including infrastructure and asset-based finance.
    • In government bonds, sees good value in short-end of the curve, particularly in the U.S.
    • Sees dollar peaking against many currencies in 2019.
    • ETFs: UUP, UTF, UDN, IDE, INF, MFD, IGF, USDU, MGU, GHII, PAVE, GII, TOLZ, ISHG, NFRA, BWZ, FLM, TOLIX, DBIF, DBRE, INFR, XKII
    • The central bank could push the economy into recession if it persists with the rate hike cycle, says St. Louis Fed President Jim Bullard.
    • Bullard for awhile has been a consistent voice against further tightening, but this year has a vote on the FOMC.
    • Even current Fed expectations for just a slightly higher policy rate are "too hawkish in this environment," says Bullard.
    • Rate cuts? Bullard isn't quite there yet, but the Fed needs be ready to do so, if needed.
    • MBA Mortgage Applications
    • Composite Index: +23.5% vs. -9.8% (W/W).
    • Purchase Index: +17.0% vs. -8.0%.
    • Refinance Index: +35.0% vs. -2.0%.
    • 30 year mortgage rate at 4.74% vs. 4.84%.
    • President Trump gave a national address last night pointing to a "humanitarian and security crisis" on the southern border and demanded billions of dollars in Congressional funding for a wall, which would be "indirectly paid for" via a trade deal with Mexico.
    • An extended shutdown can affect the economy in a number of ways - from delaying business permits and visas to reducing service hours at innumerable agencies.
    • Withheld or foregone pay from millions of federal employees can also hit consumer spending, which makes up about 70% of U.S. economic activity.
    • Following three years of declines, U.S. carbon emissions rose 3.4% in 2018, as the effects of a strong economy, like diesel and jet-fuel use in transportation, outstripped a sharp decline in the number of power plants burning coal to generate electricity.
    • According to the Rhodium Group, the increase was the biggest jump since 2010, when the economy was rebounding from the Great Recession, and the second largest increase in two decades.
    • ETFs: DBE, RJN, OTC:GRN, FUE, ONG, JJE-OLD, UBN, PBW, QCLN, PUW, HECO
  • Tuesday, January 8, 2019
    • DoubleLine founder and CEO Jeffrey Gundlach sees "real potential for negative surprises" in corporate credit.
    • "Investors need to go to strong balance sheets. This will be the way to survive the zigzag of 2019."
    • He recommends getting out of junk bonds. "Use the strength of junk bonds as a gift and get out of them," he said.
    • The S&P 500 could zigzag for much of the year, and he sees a kind of tug-of-war between stocks and bonds.
    • As for the 2s10s yield curve, "I'm of the belief that the yield curve will steepen."
    • Emerging markets will outperform the S&P 500 if the dollar weakens and he expects the dollar to weaken.
    • "I still think Europe is a value trap."
    • With "an explosion of national debt in a growing economy," Gundlach asks, "Are we really growing at all, or is it just all debt-based?"
    • Doesn't recommend anything on Bitcoin, but "Bitcoin can easily make it to $5,000."
    • High-yield ETFs: HYG, JNK, DHY, HIX, EAD, PHT, HYT, HYLD, JQC, ACP, ANGL, CIK, MCI, DSU, SJB, KIO, NHS, CIF, ARDC, IVH, GGM, AIF, MPV, FHY
    • Yield-curve ETFs: STPP, FLAT
    • Stocks recover from session lows with the major U.S. averages solidly in the green at midday--S&P +0.5%, Nasdaq +0.5%, and Dow +0.7% as optimism over U.S.-China trade talks seem to prevail for the moment.
    • By sector, basic materials (+1.0%)--which includes energy--and consumer goods (+0.9%) are the strongest gainers.
    • Oil rises 2.6% to $49.80.
    • Laggard sectors are financials (flat) and healthcare (+0.2%).
    • The U.S. Dollar Index strengthens 0.3% to 95.91.
    • 10-year Treasury yield rises 1 basis point to 2.71%.
    • Previously: Futures extend gains on U.S.-China trade optimism (Jan. 8)
    • The Nasadaq (-0.3%) erases earlier gains while S&P 500 (+0.1%) and the Dow (+0.4%) still inhabit positive territory.
    • By sector, conglomerates (+0.9%) and basic materials (+0.5%) are faring best, while financials (-0.3%) and tech (-0.1%) weight on the S&P 500.
    • Individual names caught in the downdraft--Bank of America (-1.4%), Nvidia (-4.2%), Applied Materials (-4.0%), and Bristol-Myers Squibb (-2.8%)
    • 6.888M job openings vs. 7.063M consensus, 7131M prior (revised).
    • November job opening rate 4.4%.
    • Press release