The Market Bull – December 12, 2019
The major averages close with large gains on yet another rumored trade war deal. The Fed left rates unchanged, but its balance sheet jumps on Repo activity.
The Trade Balance shrank again in October as falling exports and imports pushed it down to -47.2 billion. This is the second consecutive decline in the deficit and the fourth in the past five months. For the month exports slipped 0.2% while imports were down 1.7%. While the current falling volumes trend in trade will likely be positive for 4th quarter economic growth, it suggests slowing overall economic activity.
Factory Orders missed expectations in October with a .3% gain, snapping a pair of declines. The proxy for business spending non-defense capital goods ex-aircraft posted its best showing in quite some time with a 1.1% advance. Inventories rose again and will likely shave 4th quarter economic growth that to date while positive remains anemic.
The latest trade war settlement with the Chinese has Trump offering to cut tariffs and hold the imposition of the latest round of new tariffs scheduled for the 15th per a piece in the Wall Street Journal that painted the President as weak. In return the Chinese were asked to pledge to buy more agricultural products and to protect intellectual property. At this point the on again off again trade war settlement circus is becoming laughable. I’m just not certain which of the participants deserves the most derision.
Yesterday’s decision on interest rates was hardly news as the Fed voted for no change as was widely expected. Following consensus the Fed is expected to leave rates unchanged through all of 2020, while remaining data dependent. The only notable development is shown in the graph below as the Fed’s balance sheet is expanding rapidly with all of the Repo Market activity that is getting very little coverage by the mainstream media because it doesn’t fit into the official narrative all that well.
Standard and Poors 500 Index closed at: 3,168.57 up 26.94
NASDAQ finished the day: 8,717.32 up 63.27
Gold ended trading at: $1,473.60 down $1.40