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Gold lower at 1263.82 (-3.81). Silver 17.43 (-0.051). Dollar higher. Euro lower. Stocks called higher. U.S. 10-year 2.31% (+1 bp).
Expect investors to zero in on what the White House has to say about corporate taxes — widely expected to be cut to 15%, as will the top income-tax rate. There’s wariness about just how much POTUS can achieve, given the pushback over health care, and there are worries about a potential government shutdown wreaking havoc in the near term.
…There’s no doubt in Michael O’Rourke’s mind which way the dice will fall. The JonesTrading strategist is convinced the tax announcement will be an “unrealistic, massive disappointment.”
“It will be hard (likely impossible) for the president to get his own party to approve massive unfinanced corporate tax cuts, let alone the Democrats,” he tells clients. “Many politicians in Washington want to see the president fail. The more he promises and raises expectations, the more likely it is that he will.”
Gold steady at 1263.50 (-0.38). Silver 17.57 (-0.089). Dollar higher. Euro lower. Stocks called mixed. U.S. 10-year 2.34% (+1 bp).
Gold lower at 1268.62 (-9.13). Silver 17.81 (-0.183). Dollar lower. Euro higher. Stocks called higher. U.S. 10-year 2.30% (+3 bps).
Oil fell a sixth day as the ramp-up of U.S. drilling signaled further production gains in the world’s biggest crude-consuming nation.
Futures extended last week’s 6.7 percent decline in New York. U.S. explorers added 5 rigs last week to cap the longest stretch of gains since 2011, Baker Hughes Inc. data show. An OPEC committee concluded that a six-month renewal of an output-cut deal is needed, delegates with knowledge of the matter said. Money managers boosted wagers that U.S. oil futures would increase in the week to April 18, government data showed. Oil rose earlier along with global equities while the dollar weakened after the first round of the French presidential election.
Gold lower at 1270.74 (-13.68). Silver 17.84 (-0.085). Dollar lower. Euro higher. Stocks called higher. U.S. 10-year 2.29% (+4 bps).
The murder of a policeman in the centre of Paris has dominated the final day of France’s volatile presidential election campaign, fuelling security fears and sparking concern that undecided voters would be influenced by the terror attack.
…Bernard Cazeneuve, the prime minister, called on the French people not to let the attacks shift their vote, saying they should “not succumb to fear, manipulation, division”. He added that “nothing must hamper this democratic moment, essential for our country”.
[Paul Tudor Jones], who made a large part of his fortune by calling the infamous stock market crash in October 1987, referred to a chart of the market’s value relative to the country’s economy and said it should be “terrifying” to central bankers, namely Federal Reserve chief Janet Yellen, according to the report.
…The trader said that low interest rates instituted by central bankers around the world have ballooned U.S. stock market valuations back to 2000 levels, right before the dot-com bubble burst and shares plunged.
This chart is sometimes called the “Buffett Indicator” because the Berkshire Hathaway chairman once referred to it in an interview as one of the key measures of valuation he tracks.
Oil prices fell more than 2 percent on Friday and were on course for their biggest weekly drop in a month due to doubts that an OPEC-led production cut will restore balance to an oversupplied market.
…The chief executive of France’s Total warned this week that prices could fall further due to rising U.S. production.
Gold better at 1282.93 (+1.50). Silver 17.97 (-0.074). Dollar higher. Euro lower. Stocks called higher. U.S. 10-year 2.23% (unch).
Gold better at 1280.58 (+1.13). Silver 18.15 (-0.046). Dollar lower. Euro higher. Stocks called higher. U.S. 10-year 2.23% (+1 bp).
Gold lower at 1284.60 (-5.12). Silver 18.28 (-0.031). Dollar better. Euro easier. Stocks called higher. U.S. 10-year 2.20% (+3 bps).
Gold higher at 1286.00 (+2.82). Silver 18.41 (+0.021). Dollar lower. Euro higher. Stocks called lower. U.S. 10-year 2.22% (-3 bps).
Gold steady at 1287.66 (+0.17). Silver 18.58 (+0.011). Dollar lower. Euro higher. Stocks called higher. U.S. 10-year 2.23% (-1 bp).
Gold steady at 1287.10 (-0.47). Silver 18.59 (+0.029). Dollar higher. Euro lower. Stocks called lower. U.S. 10-year 2.24% (unch).
Gold better at 1277.04 (+1.11). Silver 18.39 (-0.003). Dollar steady. Euro easier. Stocks called lower. U.S. 10-year 2.29% (-1 bp).
Gold better at 1259.00 (+3.18). Silver 17.95 (+0.003). Dollar lower. Euro higher. Stocks called lower. U.S. 10-year 2.34% (-3 bps).
Gold lower at 1249.00 (-4.70). Silver 17.89 (-0.108). Dollar firm. Euro lower. Stocks called better. U.S. 10-year 2.38% (unch).
The Federal Reserve is trying to send a message to bond traders: prepare for a reduction in its $4.5 trillion balance sheet. But the traders aren’t buying it yet.
Such a move would most likely cause longer-term borrowing costs to rise because the Fed has been a large buyer of Treasuries and mortgage debt since the 2008 financial crisis. More than $400 billion of its holdings is set to mature next year, so a reduction in the Fed’s reinvestment could potentially depress market values.
…im Bianco, founder and head of Bianco Research in Chicago, said many traders think the Fed won’t make a move until 2020 or beyond.
“It is a mistake to conclude that the current talk means the market is fine with the balance sheet being reduced,” he said.
Companies have been loading up on debt based on two assumptions, shared by investors: that economic growth will be slow, and it will be steady. This is the perfect environment for leverage, as low growth keeps interest rates low relative to inflation, while the expectation of steady growth means few worry about a bad year interrupting repayments.
The danger is that either assumption proves wrong, and the focus shifts back from profit to balance sheet. Such a shift could be ugly, because there is so much more debt than usual being piled up by companies outside the finance sector: The ratio of debt to operating cash flow of the highest-quality U.S. companies is just slightly down from a record reached last year, Morgan Stanley calculates. Given leverage has in the past jumped in recessions, this is particularly unusual.
…The market isn’t—yet—repeating the 2000 equity bubble or the 2007 debt bubble, but it has some of the worst features of both. If investors turn out to be mistaken in thinking the economic cycle won’t turn down for years yet, it’s going to hurt.
Gold higher at 1264.35 (+12.37). Silver 18.38 (+0.124). Dollar higher. Euro lower. Stocks called easier. U.S. 10-year 2.31% (-3 bps).
Gold lower at 1252.00 (-6.44). Silver 18.25 (-0.095). Dollar better. Euro lower. Stocks called higher. U.S. 10-year 2.34% (+1 bp).
U.S. House of Representatives Speaker Paul Ryan said on Wednesday that tax reform will take longer to accomplish than repealing and replacing Obamacare would, saying Congress and the White House were initially closer to agreement on healthcare legislation than on tax policy.
“The House has a (tax reform) plan but the Senate doesn’t quite have one yet. They’re working on one. The White House hasn’t nailed it down,” Ryan told an audience in Washington.
“So even the three entities aren’t on the same page yet on tax reform,” he added.
PG View: Another reason for those long stocks to be worried that the “reflation trade” is in trouble.
Traders tend to scoff when a policymaker plays investor, often referencing when then-Federal Reserve Chairman Alan Greenspan made a very early “irrational exuberance” call in December 1996, more than three years before the top of the dot-com bull market.
That skepticism was voiced again Wednesday when the Fed released its meeting minutes from March which read: “Broad U.S. equity price indexes increased over the intermeeting period, and some measures of valuations, such as price-to-earnings ratios, rose further above historical norms. … Some participants viewed equity prices as quite high relative to standard valuation measures.”
PG View: That’s FedSpeak for “bubble” . . .
U.S. stocks erased earlier gains to close lower Wednesday after the Federal Reserve released the minutes from its March meeting.
…The Dow and S&P also posted their biggest one-day reversal since February 2016.
The minutes showed Fed officials want to start unwinding the central bank’s massive $4.5 trillion balance sheet later this year.
Gold lower at 1249.32 (-6.45). Silver 18.26 (-0.011). Dollar firm. Euro lower. Stocks called mixed. U.S. 10-year 2.37% (+1 bp).
Veteran money manager Bob Doll is becoming increasingly worried that the American economy poses a greater threat to the U.S. stock rally than the political tensions traders are currently focused on from President Donald Trump and Congress.
Sentiment on the U.S. economy may be too high, leaving investors vulnerable to negative surprises on growth, according to Doll…
…“We remain constructive in the medium-and long-term toward risk assets, but are growing increasingly cautious about the short-term outlook,” Doll wrote in a letter to clients April 3. “More than politics, the economy probably presents a more probable roadblock for equities.”