WEEKEND WRAP: Stocks Bounce Badly, Bonds Rally In Charged Political, Economic Environment

Stocks ripped higher on Friday after September non-farm payrolls missed estimates, stoking expectations of another 25 basis point rate cut by the FOMC in their upcoming, October 29-30, meeting.

All US indices posted gains over one percent, offsetting about half of the losses made during Tuesday and Wednesday sessions. Despite the huge Friday gains, three of the four major indices finished in the red for a third straight weekly decline as fears of an upcoming recession, continued parlor games in Washington fueling fears of an impeachment of President Trump, and ongoing fits and starts in trade negotiations with China outweighed monetary politics and policy direction.

The NASDAQ was the lone survivor, with a gain of just over 1/2 percent.

Jittery as it has been, US equity markets continue to show signs of weakness but not of breaking down in a capitulating move. With third quarter earnings about a week away, there's optimism that corporate America still has not lost its profitable manner, meanwhile, the flight to US treasuries and corporate bonds continued apace throughout the week, with the yield on the 10-year note dropping 17 basis points - from 1.69 to 1.52% - for the week, and losing 38 basis points since the recent bond selloff sent to 10-year yield to a high of 1.90 on September 13.

Friday's closing bond price for the benchmark 10-year is nearing the lows made in late August and early September of 1.47%.

There seems to be little standing in the way of the 10-year note heading below its historic low yield made on July 5, 2016, of 1.37%, as comparable notes in developed nations - Germany, Japan, Switzerland - are all offering negative yields.

How long the treasury complex can withstand the onslaught of buying worldwide is a minor concern since the Fed has already signaled to markets that they were willing and able to offer negative yields, like the rest of the world's developed nations.

The specter of negative yielding bonds looms closer in the US, but is probably at least two years away, if it develops at all. A recession, such as has been predicted for 2020 (and also was predicted for 2019), could push the 10-year below one percent, but it's a long way down to zero for the world's most popular bond and the world's largest economy.

Unless Democrats succeed in unseating President Trump through impeachment or other means, the onus of recession remains, though it could very well be short-lived, since the US has plenty of untapped capital and productivity.

For the present time, it would be prudent to keep a close eye on the impeachment fiasco underway in congress. There's a strong likelihood that push-back by the Trump administration could send the entire bag of nonsense and dubious Democrat claims into the courts, pushing the narrative through the Democrat primaries in Spring 2020 all the way to November's presidential and congressional elections.

That actually could be the plan for Democrats, since they have made some very spurious allegations about the president, but, the mainstream media loves a circus and promotes the impeachment mantra in an unalterable, monotonous, fallacious chorus.

The American public has grown tired of the repeated attempts to besmirch the duly elected chief executive and the result could be an historic landslide victory for Republicans in the fall of 2020. The alternative, should the Democrats and their obedient lackeys in the media succeed is more than likely to cause a rift in the populace - generally between urban liberals and rural conservatives - that could foment tremendous civil unrest and lawlessness. That is the disruption Wall Street - and most of the civilized world - fears most.

Bumpy will be the ride for the economy, politics, and society over then next 12 to 16 months unless the Democrats are exposed and soundly defeated.

At the Close, Friday, October 4, 2019:
Dow Jones Industrial Average: 26,573.72, +372.68 (+1.42%)
NASDAQ: 7,982.47, +110.21 (+1.40%)
S&P 500 2,952.01, +41.38 (+1.42%)
NYSE Composite: 12,831.54, +145.78 (+1.15%)

For the Week:
Dow: -246.53 (-0.92%)
NASDAQ: +42.85 (+0.54%)
S&P 500: -9.78 (-0.33%)
NYSE Composite: -140.43 (-1.08%)

Investors Unconcerned Over Impeachment, Recession

As end-of-quarter trading sessions go, this one was quite on the tame side.

Sure enough, funds bought up some of the most-favored names as "window dressing" for clients, present and future, pleasure. It's an age old tactic to garner new business. "Look what we have," is how funds tout their portfolios to prospective investors, since there are no regulations prohibiting such misleading behavior.

Nonetheless, the practice is commonplace, but less and less significant as consumers become more aware of some Wall Street tactics.

Otherwise, most of the buzz on Monday was over the ongoing impeachment coup against President Trump being conducted in the House of Representatives. The Democrats are using unnamed sources in second-hand, hearsay-colored, whistleblower complaints as their latest weapon against the president.

House Speaker Nancy Pelosi also changed House rules back in December to allow committee members to take depositions from interviewees and people subpoenaed without minority (Republican) representation, which is why the Democrats are working swiftly to take statements while they are actually in recess. Clearing out the opposition is a truly underhanded tactic, not worthy of the US congress, though the Democrat party has apparently now sunk to new levels of sleaziness. More on all of this in an article authored by Raul Ilargi Meijer via The Automatic Earth blog.

Much of what's occurring in DC is apparent to the sharpest minds on Wall Street, and there's certain to be monitoring of events as the happen. Taking wall Street's apparent unconcerned posture as a clue, there's likely less than a 10 percent chance of the Democrats succeeding in impeaching President Trump. Their narrative is weak, not all members of the party are in agreement with approach and, further, if the House actually voted to impeach, a trial would have to be held in the Senate, where a 2/3rds vote is needed to convict and that is highly unlikely, given that Republicans are in the majority.

The weeks ahead will surely be replete with accusations and arguments about the president's "unfitness." A spirited counter-attack from the administration is also expected, and that should be a spectacle to behold.

Wall Street seems confident that the tremors in Washington, DC will not result in a political earthquake. While a positive outcome from their proceedings is far from assured, it is probably best to keep a level head, understanding that much of what the House Democrats are calling "crimes" are actually the president investigating the root causes of the non-stop witch hunt against him.

At the Close, Monday, September 30, 2019:
Dow Jones Industrial Average: 26,916.83, +96.58 (+0.36%)
NASDAQ: 7,999.34, +59.71 (+0.75%)
S&P 500: 2,976.74, +14.95 (+0.50%)
NYSE Composite: 13,004.74, +32.76 (+0.25%)

WEEKEND WRAP: Despite Impeachment Overhang, Wall Street Is Oddly Calm

By midweek, political events had overtaken actual financial news and numbers as House Democrats turned up the heat on yet another attempt to impeach President Trump.

People with intact frontal lobes understand that the Democrats have once again fabricated the "crime" committed by President Trump. Still, the mainstream mass media complex cannot help itself from flailing about furiously at the behest of their liberal handlers. Would the media actually be impartial, this farcical drama - and the Mueller investigation that yielded nothing - would never even see the light of day.

It's further proof that most Democrats in the House have nothing constructive to add to the national debate other than outsized hatred for President Trump and all of his millions of supporters. If there is justice in this insane world, the Democrats will be outed, joe Biden's son, Hunter, will be tried, convicted and imprisoned, and the Democrat party will implode entirely in the aftermath of a massive Trump landslide.

That's for the future to tell. For the present, Wall Street would rather focus on facts, reality, data, and numbers. Third quarter results for traded corporations will begin rolling out next week. Prior to that, September non-farm payroll data will be released on Friday of this week. Whether traders and speculators can divorce themselves from the kabuki theater that is Washington DC long enough to focus on true economic data is the big question. Fast-moving headlines pushing the impeachment narrative will be difficult to ignore in coming days.

For whatever it's worth, the US economy may not be exactly a juggernaut of capitalist endeavor, it is, however, firing on all cylinders, albeit at a slow pace. By the end of October the world will have the first estimate of third quarter GDP, a number that should make headlines, whether it is good (above 2.5%) or bad (below 2.0%). Anything in the range of 2.2-3.0% will be considered a win for the economy (and President Trump), while across the pond, Europe teeters on the brink of recession.

Also on the horizon is quietude from the Federal Reserve, as the next FOMC meeting is scheduled for October 29-30. Thus, the next possible federal funds rate cut will only be under consideration and newsworthy the last two weeks of the coming month. Should economic data and corporate third quarter earnings reports come in positively there would be a rationale for the Fed to just keep rates where they are. The economy isn't struggling, jobs seem to be still plentiful and inflation fears have been kept in check. The few scenarios under which a rate cut could be considered are, at this juncture, unlikely, including a banking blowup, or taking the impeachment folly as serious.

With all that could go wrong, the world continued to turn following the attack on Saudi oil installments a few weeks back. President Trump tactfully pulled the United States back from the brink of escalation against Iran, instead opting for increased sanctions and a peaceful resolution to never-ending mid-East fanaticism and the associated war-mongering by elements in the US and Israel.

Oil, the lifeblood of the global economy, retreated as the situation de-escalated, and may actually fall below $50 per barrel as winter season looms.

Bonds seem to have found a sweet spot, despite the continued inversion of the 3-month:10-year pair, with the 10-year settling into a range between 1.55 and 1.75%. Should that range prevail over the coming weeks and months, clear sailing for the US economy may be a prudent call. While stocks, still somewhat overvalued, continue to flirt with all-time levels, the NASDAQ notably took the brunt of the selling from last week. That's probably a positive, since the NASDAQ contains some of the more pricey shares of tech companies that may need to be tamped down.

Conclusively, the week was far short of either a disaster or a rousing rally. Could it be, for a change, that the most sane place on the planet was lower Manhattan?

These are indeed strange days.

At the Close, Friday, September 27, 2019:
Dow Jones Industrial Average: 26,820.25, -70.85 (-0.26%)
NASDAQ: 7,939.63, -91.03 (-1.13%)
S&P 500: 2,961.79, -15.83 (-0.53%)
NYSE Composite: 12,971.98, -56.72 (-0.44%)

For the Week:
Dow: -114.82 (-0.43%)
NASDAQ: -178.05 (-2.19%)
S&P 500: -30.28 (-1.01%)
NYSE Composite: -121.82 (-0.93%)

Nothing Good Can Come From Impeachment

Stocks were lower on Thursday, amid impeachment charges being leveled against President Trump and further increases and concerns over the Fed's now-daily repurchase (REPO) auctions.

With the media and Democrat members of congress piling on the president with lies and accusations of bribery anda cover-up, Wall Street has reason to be concerned. It has been a Democrat prerogative to unseat or derail Mr. Trump since before he won the election over Hillary Clinton. Their "Russia-gate" investigation dragged the president and America through mud, muck, baseless accusations and political divisiveness for the better part of three years. The current Ukraine polemic is more of the same, stemming from the hopelessly corrupted intelligence agencies through congress, aided by media bleating.

Alert and awake investors are aware of the dangers such unsubstantiated attacks on a sitting president are producing. As the rhetoric grows louder and more poignant the country will be pulled apart politically to even more extremes, putting the world's most powerful nation on the verge of widespread civil unrest.

Meanwhile, congress is essentially worthless in terms of passing meaningful legislation of benefit to the general population, something they have been unable to produce in nearly forty years. The only person getting anything done at the federal level is the president, though he is harassed and undercut by his opponents at every juncture.

In the widest general terms, this overblown impeachment proceeding in the House of Representatives and the six or seven investigating committees involved will engender nothing good.

At the Close, Thursday, September 26, 2019:
Dow Jones Industrial Average: 26,891.12, -79.59 (-0.30%)
NASDAQ: 8,030.66, -46.72 (-0.58%)
S&P 500: 2,977.62, -7.25 (-0.24%)
NYSE Composite: 13,028.74, -8.87 (-0.07%)

Impeachment, Liquidity Concerns Don't Slow Equity Traders, For Now

On Wednesday, he Fed conducted another in a series of overnight repurchase auctions (REPO) which was oversubscribed by the most since the operations began to be a daily fixture last week. Wednesday's overnight funding fiasco was for a maximum of $75 billion, but offers were up to $92 billion, meaning somebody didn't get ready cash for operations.

This is becoming more and more of a liquidity crisis, which, as learned from the Lehman crash of 2008, can readily become a solvency crisis, as Lehman and Bear Stearns before them both were forced into liquidation.

With the oversubscribed condition seemingly becoming worse by the day, the NY Fed quietly announced that the operations proposed last week - daily $75 billion overnight until October 10 and three $30 billion two-week terms - were to be raised to $100 billion overnight and $60 billion in the two-week auctions.

Markets seemed more concerned with making money quickly rather than focus on a looming issue or the impeachment farce currently making the rounds in Washington. For what it's worth, Wall Street either doesn't want to look or considers these events inconsequential. In the case of impeachment, they may be right, since the Democrats are pushing on a string in their flimsy argument that President Trump committed some kind of crime by discussing with the president of Ukraine some possibly-underhanded dealings by former vice president Joe Biden.

It's nonsense, as the White House has released the complete transcript of the two leaders' phone conversation and there is no quid pro quo element to it and the Bidens (Joe and his son, Hunter) were brought up by Ukrainian President Volodymyr Zelensky.

As far as the Fed's actions are concerned, traders are normally blind to the much larger world of bonds and credit. Doug Noland, a reputable bond and credit analyst (possibly the world's best) writes in his most recent credit bubble bulletin that the Fed's actions are a response to excessive speculative leverage, mainly in the bond markets, which have been whipsawed of late, but spilling over into equities and currencies - especially China - as well.

While the street may have its focus on near term profits and end-of-quarter positioning, real experts see nothing good from the Fed's reach for substantial amounts of liquidity and expect volatility to continue over the next month or more.

At the Close, Wednesday, September 25, 2019:
Dow Jones Industrial Average: 26,970.71, +162.94 (+0.61%)
NASDAQ: 8,077.38, +83.76 (+1.05%)
S&P 500: 2,984.87, +18.27 (+0.62%)
NYSE Composite: 13,037.61, +45.35 (+0.35%)

Impeachment of President Trump Is Irresponsible and a Vile Attack by Desperate Democrats

Markets were roiled throughout the session on Tuesday, as the Fed continued overnight repo operations, Europe appeared headed for a recession, and, late in the day, Speaker of the House, Nancy Pelosi, announced an impeachment enquiry would commence against President Donald J. Trump, ostensibly for comments (or, promises, as Democrats allege) made during a telephone call to the president of Ukraine.

Sadly, the Democrats in the House (and, loosely, the Senate) have lost all hope of winning the presidential election in 2020, so they've resorted to the most vile political weapon available and are willing to drag the citizens of the United States through an arduous and ridiculous process that in the end will yield nothing.

The Democrats have no crime to pin on President Trump. Rather, they see no chance of beating him in the upcoming election, so, being as desperate for power as they are, seem willing to abandon all sense of propriety and decency.

For his part, President Trump had already agreed to make the entire, unredacted transcript of the phone call in question prior to Pelosi's announcement. It's apparent to most legal scholars - and apparently to Wall Street investors - that the president has done nothing wrong and that the impeachment call is merely another step away from responsibility by the Democrat party, continuing a vendetta against Trump which began on election eve, 2016, when he defeated their darling, Hillary Clinton, in the presidential election.

Wall Streeters understand well that more turmoil from Washington, DC is unwarranted, unnecessary, and potentially disruptive to markets. Whatever President Trump has done during his nearly three years in office, he certainly has not undermined American business interests. For the most part, he's battled the fake Russia-gate hoax investigation, and this is being viewed by interested parties as a continuation of Democrat hatred of the president.

What may be even worse than launching an impeachment enquiry on flimsy grounds is that the Democrats currently do not have enough votes to pass the impeachment onto the senate. A simple majority is needed for referral to the senate for a trial, but, while the Democrats do have a majority, they may not have the full support of their members.

Thus, unless charges against President Trump are solid and can show intent and criminality, House Democrats may have bitten off more than they can chew. It's nowhere near certain that any evidence will be enough to indict the president and charge him with a crime. It's even less clear that moderate Democrats will support the effort.

In the end, the president is likely to run roughshod over the Democrat haters in congress, as he did with the Mueller investigation, now relegated to ancient history. As Bill Clinton famously said during his impeachment hearings, "there's no there there."

Impeachment is an issue that should be taken with the utmost seriousness and only be entertained in the interest of the American citizenry. There is not one shred of evidence that President Trump is anything but a true patriot, an honorable American, doing his best - against violent opposition by the democrats and the press - to serve the American people.

Pelosi's green-lighting of an impeachment investigation is both irresponsible and likely to fail.

And it should.

At the Close, Tuesday, September 24, 2019:
Dow Jones Industrial Average: 26,807.77, -142.22 (-0.53%)
NASDAQ: 7,993.63, -118.83 (-1.46%)
S&P 500: 2,966.60, -25.18 (-0.84%)
NYSE Composite: 12,992.26, -93.07 (-0.71%)