THE WALL STREET JOURNAL. ***** Friday, September 20, 2019 |B11
tracting one. Divining when
the economy has slipped into
a recession—or, at least, doing
it ahead of other investors—
requires analyzing myriad
smoke signals.
Although the broader mar-
ket is still flirting with re-
cords, the transport sector has
struggled to recover lost
ground—a potentially ominous
sign for investors who believe
transports need to rebound for
the market to break higher.
The U.S. manufacturing sec-tor, some argue, has already
fallen into recession. On Mon-
day, the New York Fed’s manu-
facturing index slid to just 2,
below its level from the begin-
ning of the last recession,
which began in 2007.
The Dow Transportation
Average—which tracks 20 of
the nation’s largest airlines,
railroads and truckers, includ-
ing FedEx—is still down 8.8%
over the past year, though it
has gained 15% this year.
FedEx itself has fallen 37%11 a.m. and 11:30 a.m.,
respectively.
Thursday: $32 billion in
seven-year notes, dated Sept.
30, 2019, maturing Sept. 30,- Cusip number:
912828YG9. Noncompetitive
tenders must be received by
noon Thursday; competitive
tenders, by 1 p.m.
AUCTION RESULTS
Here are the results of Thursday's Treasury auctions.
All bids are awarded at a single price at the market-
clearing yield. Rates are determined by the difference
between that price and the face value.
FOUR-WEEK BILLS
Applications $119,715,391,600
Accepted bids $45,000,323,600
" noncompetitively $1,566,963,600
" foreign noncompetitively $100,000,000
Auction price (rate) 99.848333
(1.950%)
Coupon equivalent 1.986%
Bids at clearing yield accepted 54.61%
Cusip number 912796WA3
The bills, dated Sept. 24, 2019, mature on Oct. 22,
2019.
EIGHT-WEEK BILLS
Applications $103,793,637,100
Accepted bids $40,000,337,100
" noncompetitively $260,637,100
" foreign noncompetitively $0
Auction price (rate) 99.696667
(1.950%)
Coupon equivalent 1.989%
Bids at clearing yield accepted 21.08%
Cusip number 912796WE5
The bills, dated Sept. 24, 2019, mature on Nov. 19,
2019.
NINE-YEAR, 10-MONTH TIPS
Applications $30,217,697,400
Accepted bids $13,246,585,400
" noncompetitively $9,053,200
Auction price (rate) 101.037653
(0.174%)
Interest rate 0.250%
Bids at clearing yield accepted 52.36%
Cusip number 9128287D6
The Treasury inflation-protected securities, dated
Sept. 30, 2019, mature on July 15, 2029.MARKETS
sel during the summer, when
there is more demand on the
power grid due to air condi-
tioning. The amount it is look-
ing for this week far exceeds
usual demand.
Elsewhere in commodities
Thursday, natural-gas futuresfell 3.8% to a two-week low of
$2.54 per million British ther-
mal units after government
figures showed inventories
rose more than expected last
week.
Front-month gold futures
ended the day down 0.6% at$1,498.40 a troy ounce. The
Federal Reserve cut interest
rates Wednesday, but signaled
that officials were divided on
how much to further reduce
rates in coming months. Fewer
rate cuts than anticipated
could hurt gold, as lower in-terest rates tend to make the
precious metal more attractive
to investors. Gold struggles to
compete with yield-bearing as-
sets when borrowing costs
rise.
—David Hodari contributed
to this article.over the past 12 months, in-
cluding a 12% drop this week.
Additionally, an index of
freight shipments maintained
by the research firm Cass In-
formation Systems Inc. has
been falling every month this
year.Afterthe3%dropinthe
August index, the firm said
“the shipments index has gone
from warning of a potential
slowdown to signaling an eco-
nomic contraction.”
By any reckoning, this ex-
pansion is old. It began in
June 2009, making it the lon-
gest on record, and it shows
some typical signs of a late-
stage expansion. That doesn’t
automatically mean the expan-
sion must end, though.
Even the National Bureau of
Economic Research, the offi-
cial arbiter of the cycle,
doesn’t have a strict definition
of it. While the shorthand is
two consecutive quarters of
contracting GDP growth, it
isn’t a concrete definition.
The business cycle can be
read through economic data
but is really about human na-
ture, said Nick Reece, an ana-
lyst and portfolio manager at
Merk Investments LLC.
“It’s driven by greed and
fear, emotions of excessive
pessimism and optimism,” he
said.FedEx Corp. has offered the
latest signal that a turning
point is coming in the busi-
ness cycle.
The delivery company cut
its 2020 outlook after the
closing bell Tuesday, pointing
to trade tensions and a weak
global economy.
Chief Executive Frederick
Smith said on the company’s
conference call that FedEx is
taking steps to reduce its ca-
pacity, partly because the ab-
sence of a trade deal with
China has reduced the move-
ment of goods internationally.
Investors often look at the
transport sector as a bell-
wether of the economy. Believ-
ers in what is known as the
Dow Theory say weakness in
shares of companies that
transport raw goods and ma-
terials can point to turmoil for
the broader market.
Sectors including transpor-
tation and manufacturing have
been sending out signals for
months that a turn in the
business cycle is near, leaving
investors to question the lon-
gevity of the decadelong bull
market in U.S. stocks.
The problem is there isn’t
an easy demarcation between
a growing economy and a con-
BYPAULVIGNA
Transport Sector Flashes New Warnings
CyclingDown
Weaknessintransportstocksisanothersign
thebusinesscycleisnearaturningpoint.PerformanceoverthepastyearSource: FactSet5–25–20–15–10–50%2018 ’19DowJonesTransportationAverageDowJonesIndustrialAverageU.S. government bond
prices held steady Thursday
after the Federal Reserve
added $75 billion to the finan-
cial system to stabilize short-
term money markets in its
third such operation this
week.
The yield on the benchmark
10-year Treasury note settled
at 1.777%, unchanged from
Wednesday. It was the first
time this week that the yield
didn’t decline.
Yields, which climb when
bond prices increase, edged
higher amid signs that the
Fed’s injection of reserves had
calmed markets
and held down
the rate that lend-
ers were charging
in the market for overnight re-
purchase agreements, or re-
pos.
Banks bid for $83.875 bil-
lion in reserves, $8.875 billion
more than the amount offered
by the Fed, using collateral in
the form of Treasury and
mortgage securities. The Fed
said it would offer $75 billion
in repos Friday.
The rate to borrow cash
overnight using Treasury se-
curities as collateral surged
starting late Monday as the
amount of cash available to
lend was exceeded by the de-
mand to borrow it. Overnight
rates reached as high as 10%
Tuesday until the Fed added
money into the repo market,
leading to a decline in rates,
traders said.
The overnight repo rate for
Treasury collateral was 2.25%
Thursday morning, analysts
said. That rate “relative to re-
cent activity is good, but rela-
tive to the fact that the Fed
cut interest rates, is not
great,” said Thomas Simons, a
money market economist at
Jefferies Financial Group. The
Fed’s repo operations “have
clearly helped,” he said.
With the Federal-funds rate
now set at a target range of
1.75% to 2%, an overnight repo
rate of 1.9% would be closer to
typical during calmer market
conditions, Mr. Simons said.
The Fed’s cash infusion
Thursday followed a decision
Wednesday to lower interest
rates for the second time this
year, as policy makers loos-
ened monetary policy seeking
to support the economy.
The WSJ Dollar Index,
which measures the U.S. cur-
rency against 16 others, de-
clined 0.1% to 91.32 as inves-
tors bet that the Fed’s rate
cuts would sustain the expan-
sion in the U.S. economy, ana-
lysts said. Federal-funds fu-
tures, which investors use to
bet on the direction of central
bank policy, show roughly 2-
in-3 odds that the central bank
will cut interest rates at least
once more before the end of
the year, according to CME
Group data.
BYDANIELKRUGER
Fed Move
Helps to
Calm Bond
Investors
CREDIT
MARKETS
U.S. Sets Auctions of $218 Billion in Treasurys
The U.S. Treasury Department
will auction $218 billion in
securities next week. Details (all
with minimum denominations of
$100):
Monday: $45 billion in 13-
week bills, a reopening of an
issue first sold on June 27, 2019,
maturing Dec. 26, 2019. Cusip
number: 912796SY6.
Also, $42 billion in 26-week
bills, dated Sept. 26, 2019,
maturing March 26, 2020. Cusip
number: 912796SH3.
Noncompetitive tenders for
both issues must be received by
11 a.m. EDT Monday and
competitive tenders, by 11:30
a.m.
Tuesday: $40 billion in
two-year notes, dated Sept. 30,
2019, maturing Sept. 30, 2021.
Cusip number: 912828YJ3.
Noncompetitive tenders must be
received by noon Tuesday;
competitive tenders, by 1 p.m.
Wednesday: $41 billion in
five-year notes, dated Sept. 30,
2019, maturing Sept. 30, 2024.
Cusip number: 912828YH7.
Also, $18 billion in one-year,
10-month 0.220% floating-rate
notes, a reopening of an issue
first sold on July 31, 2019,
maturing July 31, 2021. Cusip
number: 9128287G9.
Noncompetitive tenders for
the five-year notes must be
received by noon Wednesday;
competitive tenders, by 1 p.m.
For the FRNs, the deadlines areOil prices rose Thursday,
highlighting fresh signs of
pressure on Saudi Arabian
output after weekend attacks
on one of the kingdom’s larg-
est oil facilities.
Brent crude, the global
gauge of prices, rose 1.3% to
end the day at $64.40 a barrel.
Both Brent and U.S. crude
prices jumped earlier in the
day after The
Wall Street
Journal re-
ported that Saudi Arabia is
reaching out to foreign pro-
ducers to import crude oil and
petroleum products.
West Texas Intermediate,
the U.S. oil benchmark, closed
up less than 0.1% at $58.13 a
barrel.
Oil prices have swung
sharply this week as investors
try to gauge how severely the
attacks will ultimately affect
global oil supply. Oil futures
soared Monday, followed by
slips on Tuesday and Wednes-
day after Saudi officials sig-
naled that output could return
to normal more quickly that
initially expected.
But news of the Saudi im-
ports could indicate “that not
everything’s rosy in the gar-
den,” said Sucden Financial
broker Robert Montefusco. “It
doesn’t bode well and means
it may take longer for Saudi
supply to come back online.”
Saudi Arabia isn’t usually an
importer of crude, although it
sometimes imports extra die-BYSARAHTOYCrude Rises on Worries for Saudi Rebound
COMMODITIES
A Strategic Petroleum Reserve site in Texas. President Trump authorized tapping the reserve in response to attacks on Saudi oil facilities.U.S. DEPARTMENT OF ENERGY/EPA/SHUTTERSTOCKU.S. stocks gave up most of
their gains heading into
Thursday’s closing bell,
though major indexes remain
within striking distance of
their records.
The indexes opened mod-
estly higher as investors con-
tinued to assess the Federal
Reserve’s latest outlook on fu-
ture interest-rate cuts. But
they couldn’t sustain the rally.
The Dow Jones
Industrial Aver-
age ended the
session down
0.2%, while the S&P 500 and
the Nasdaq Composite were
essentially flat.
Other markets were also
quiet—U.S. crude oil added
less than 0.1% after swinging
sharply this week in the wake
of the attacks on Saudi oil in-
frastructure. And the yield on
the 10-year Treasury note was
unchanged at 1.777%.
Money markets, however,
continued to show signs of
stress. The Federal Reserve
Bank of New York stepped in
for the third consecutive day
to relieve funding pressure.
Rates on short-term repur-
chase agreements briefly
spiked to nearly 10% earlier
this week as financial firms
scrambled for overnight fund-
ing.
The Dow and S&P are on
course to book modest de-clines for the week, although
both indexes are within 1% of
July’s all-time highs.
In addition to parsing the
latest signals on interest rates
from the Federal Reserve, in-
vestors are also waiting for
signs of progress in the trade
talks between representatives
from the U.S. and China that
were scheduled to begin in
Washington Thursday. Those
discussions come ahead of
high-level talks next month.
“The overall picture for the
economy looks good,” said Jeff
Kravetz, regional investment
director at U.S. Bank. “We
have contained inflation, low
unemployment and a resilient
consumer. The economic out-
look is still favorable with in-
terest rates low, but we still
have some caution with the
geopolitical risks.”
The Dow Jones Industrial
Average fell 52.29 points to
27094.79. The S&P 500 ticked
up 0.06 point to 3006.79, while
the technology-heavy Nasdaq
Composite climbed 5.49 points
to 8182.88.
Some analysts and inves-
tors said they remain bullish
on the technology sector de-
spite trade headwinds.
Shares of Microsoft climbed
$2.55, or 1.8%, to $141.07, after
the software company said it
plans to buy back as much as
$40 billion in stock and raise
its dividend 11%.
Shares of chip makers,which have been caught in the
crosshairs of the trade spat,
eased from earlier gains, with
Advanced Micro Devices and
Qualcomm slipping 0.4% and
0.9%, respectively.
“Semiconductor stocks have
more risk because they’re ex-
posed to China, but if we’re
going to forecast a positive
trade outcome in the next few
months, I think that’s an area
that will surge,” said Ben Bar-
zideh, wealth adviser at Pier-
shale Financial Group.
The Commerce Department
reported the U.S. current-ac-
count deficit, a measure of the
nation’s trade and financialflows with other countries,
narrowed to a seasonally ad-
justed $128.19 billion in the
second quarter from a revised
$136.19 billion in the first
quarter.
Data has remained mixed
recently. Hiring slowed in Au-
gust and factory activity
eased, while consumer spend-
ing has remained strong. But a
recent batch of housing data
has pointed to a firming U.S.
economy. Sales of previously
owned U.S. homes in August
grew at the fastest pace since
March of last year, the Na-
tional Association of Realtors
said Thursday.“There are some risks for a
recession, partly driven by
concerns surrounding trade
policy and weakness already
showing up in the manufactur-
ing industry,” said Jason
Pride, chief investment officer
of private wealth at Glenmede.
“The Fed is essentially taking
out insurance with these rate
cuts to prevent those risks
from turning into something
bigger.”
A divided Fed cut interest
rates by a quarter percentage
point Wednesday to cushion a
slowing U.S. economy from a
global slowdown. Two Fed
policy makers preferred to
hold rates steady and one
wanted a half percentage-
point cut.
Fed Chairman Jerome Pow-
ell said officials still have a
positive outlook for the U.S.
economy. But he signaled less
certainty about the rate path
than at the central bank’s late
July meeting.
Investors were looking for
the Fed to give a stronger in-
dicator of future actions as
they position themselves in an
unclear market environment
amid uncertainty surrounding
U.S.-China trade tensions, ana-
lysts said.
Elsewhere, the Stoxx Eu-
rope 600 gained 0.6%. At mid-
day Friday, Japan’s Nikkei 225
wasup0.4%.
—Caitlin Ostroff
contributed to this article.BYJESSICAMENTONDow Falls as Caution Grips Market
MovingSideways
Gainsintechnologyandhealth-carestocksoffset
lossesinenergysharesintheS&P500Thursday.Source: FactSet3–3–2–1012%9:30 10 11 noon 1 2 3 4MicrosoftMerckHessS&P500THURSDAY’S
MARKETS