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Futures File: Washington woes weigh on stocks

By Walt Breitinger and Alex Breitinger
Dec. 3, 2017 at midnight

After reaching all-time highs Thursday, stock market futures plunged Friday on fears of political problems in Washington, D.C.

On Thursday night, the Republican tax overhaul plan was put into limbo as projections for higher budget deficits and wavering votes threatened to prevent passage of the legislation.

More shocking was news that broke Friday morning that Michael Flynn, the former national security adviser to President Donald Trump, was pleading guilty to charges of lying to the FBI regarding conversations with Russia's ambassador. Flynn is now cooperating with special counsel Robert Mueller's investigation, which has prompted speculation that Flynn could expose others in the Trump orbit to new charges.

Concerns about threats to the administration, tax plan, and overall stability in Washington spooked the Dow lower by more than 300 points at one point Friday morning. Prices rebounded into Friday afternoon after Senate Majority Leader Mitch McConnell stated the Senate had sufficient votes to pass tax legislation, although there are numerous hurdles remaining before the plan could become law.

Silver sinks

Silver prices plummeted this past week, approaching $16 per ounce for the first time since August. Prices fell Wednesday as investors dumped metals in favor of stocks. Expectations for higher interest rates in the coming months also hurt demand for precious metals, as higher interest rates typically make investments in CDs and bonds more lucrative than holding onto metal that doesn't pay interest.

To others, the drop is presenting a buying opportunity, as silver has rarely been underneath $16 per ounce during the past two years, and silver should benefit from the problems in Washington.

Wheat market withers

Wheat prices drilled into new lows last week, with prices for Chicago and Kansas City wheat futures nearing $4 per bushel. The market lost ground as foreign competitors like Russia and Australia undercut U.S. wheat sales.

Adding to Midwestern farmers' concerns are weather forecasts for a dry and cold winter in many wheat-growing areas. If the dormant wheat crop is damaged over the winter, it could cut into the spring harvest. While this would be detrimental to affected farmers, these threats could provide a much-needed spark to boost wheat prices as well.

By the end of the week, grain prices rebounded, with corn, wheat and soybeans closing strong Friday afternoon.

— Walt and Alex Breitinger are commodity futures brokers with Paragon Investments in Silver Lake, Kansas. This is not a solicitation of any order to buy or sell any market.



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