- MLPs hit by FERC ruling. Yesterday, the Federal Energy Regulatory Commission (FERC) decided it would no longer allow master limited partnerships (MLP) to recover an income tax allowance in their regulated cost of service rates, driving the Alerian MLP Index down over 10% intraday before it closed about 4.5% lower. Though the policy change, which only impacts regulated interstate oil and gas pipelines and not all pipeline partnerships, can be appealed, our sense is that the rule may stick. As discussed in today’s blog, our investment case for MLPs has been based on U.S. energy production growth, attractive yields, and deregulation. We believe these factors remain favorable, and the transition to more internal funding sources (and less reliance on capital markets) is positive in the long run. However, the transition has been bumpy and MLP investors have faced several other headwinds, including: energy sector weakness, higher interest rates, and slower distribution growth.
- Housing starts fall more than expected. Housing starts in the United States fell 7.0% month over month in February (-3.8% expected), dragged down by multifamily construction starts which dropped more than 26%. Building permits also fell for the month, with permits for single-family homes slipping 0.6% to a 872,000-unit pace. Despite the drop, it is important to remember that housing starts remain near post-recession highs, and the rate of construction in January was the highest since 2008. In addition, the market remains buoyed by a strong labor market and firm economic fundamentals.
- Eurozone inflation still low. The February Eurozone Consumer Price Index came in 1.1% higher year over year, versus an expected +1.2% print. The month-over-month reading met consensus expectations at +0.2%; however, we’ve noticed a slowdown in some of the Eurozone data as private consumption has softened. Although inflation is still well beneath long-term targets, annualized growth in gross domestic product is tracking to a respectable 2.5% in the first quarter.
- Four in a row. The S&P 500 Index is down four days in a row for the first time this year and the first time since December 2017. It hasn’t been down five days in a row since before the U.S. election in November 2016 when it fell nine straight sessions. Additionally, should the S&P 500 close red today it would be down every day of the week (assuming a five-day week). Again, the last time this happened was in early November 2016. Trivia stat for you: the year 2014 remains the only year to never have a single four-day losing streak during a calendar year.
- Housing Starts & Building Permits (Feb)
- Industrial Production & Capacity Utilization (Feb)
- Jolts Jobs Openings (Jan)
- U. of Mich. Sentiment (Mar)
- Italy: CPI (Feb)
- Eurozone: CPI (Feb)
- Eurozone: Labor Costs (Q4)
- Japan: Industrial Production & Capacity Utilization (Jan)
- China: New Loan Growth & Money Supply (Feb)