Thursday, December 18, 2014

Markets soar after FOMC promises patience on raising interest rates

Dow vaulted 421 (closing at the high), advancers over decliners more than 4-1 & NAZ jumped 102.  The MLP index went up 2+ to the 453s & the REIT index went up 2+ to the 327s (a new multi year high).  Junk bond funds had a good day after having a bad month (until yesterday) & Treasuries saw selling.  Oil dropped below 56 & gold inched higher, getting close to 1200.

AMJ (Alerian MLP Index tracking fund)

CLK15.NYMCrude Oil May 1555.56 Down 2.21 (3.8%)

Live 24 hours gold chart [Kitco Inc.]

Deere, agreed to sell its crop insurance segment to Farmers Mutual Hail Insurance of Iowa, retreating from a business that suffered years of losses.  The sale comprises John Deere Insurance & John Deere Risk Protection.  No terms were disclosed.  The buyer, founded in 1893, is counting on more demand as farm production expands to meet the needs of a growing population.  Agricultural output will need to double by 2050 as global population rises about 1/3 to 9.6B & the middle class expands, according to the Global Harvest Initiative, an effort supported by companies including DE that back expanded farm production.  DE is narrowing his company’s focus to businesses like farm machinery, technology & services. The stock rose 80¢.  If you would like to learn more about DE, click on this link:

Deere to Sell Crop Insurance Unit to Farmers Mutual Hail

Deere (DE)

Wal-Mart Groceries
Photo:   Bloomberg

Wal-Mart, a Dow stock & Dividend Aristocrat, is creating new senior leadership posts to focus on produce & meat, part of a push to improve the quality of its fresh grocery items & attract more organic-food shoppers.  The chain will have a new position in charge of “long-term sourcing strategy for meat.”  The post will be filled by Scott Neal, currently a senior VP for produce, meat, seafood & quality control for the US division.  Neal will “help ensure we have a sustainable approach to providing the best quality products for our customers,” WMT said in the message.  The moves follow a pledge in Oct to make fresh groceries a “big focus” this year.  The company said at the time that it was working to boost both the quality & consistency of its produce.  Separately, the company said that it’s imposing stricter safety standards on poultry suppliers, aiming to stave off foodborne illnesses.  The move requires vendors to undergo special testing by Jun 2016.  The stock rose 1.71.  If you would like to learn more about WMT, click on this link:
Wal-Mart Appoints Meat Czar as Part of Grocery Push

Wal-Mart (WMT)

German business confidence rose for a 2nd month in a sign that Europe's largest economy is overcoming the weakness it hit earlier in the year.  The Ifo institute’s business climate index, based on a survey of 7K execs, advanced to 105.5 in Dec from 104.7 in Nov, when it rose for the first time in 7 months.  That matches the estimate.  The Bundesbank has said the German economy is showing signs of strengthening after it effectively stagnated in the middle of the year & managed only a “modest start” to Q4.  Even so, the recovery may come too late to be much help to the euro area, leaving the ECB considering buying gov bonds to stave off region-wide deflation.  A gauge of current conditions in Germany was unchanged at 110 & an index of expectations climbed to 101.1 from a revised 99.8.  German investor confidence also rose for a 2nd month in Dec, a separate index showed this week.

German Business Confidence Rises With Signs of Growth 

This was the best 2 day rally in 2 years after Dow rose over 700.  While kind words from the FOMC are the main reason, stocks were also sharply oversold.  That means due for a recovery.  The MLP index shot up 32 from its lows just 3 days ago.  The VIX, volatility index doubled to almost 24 in a couple of weeks & dropped to the 17s today.  This is not a market for those feint of heart.   

Dow Jones Industrials

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Markets surge on economic data

Dow shot up 245, advancers over decliners almost 4-1 & NAZ gained 71. The MLP index lost a fraction to 451 after yesterday's big advance & the REIT index rose a fraction to 326.  Junk bond funds had good gains after selling earlier in the month & Treasuries lost ground when stocks were in demand.  Oil climbed to 58 while gold was flattish.

AMJ (Alerian MLP Index tracking fund)

CLK15.NYM...Crude Oil May 15...57.99 Up ...0.22 (0.4%)

GCZ14.CMX...Gold Dec 14.......1,202.30 Up ...8.00 (0.7%)

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The index of US leading indicators rose in Nov for a 3rd straight month, a sign the economy is gaining traction heading into 2015.  The Conference Board’s index, a gauge of the outlook for the next 3-6 months, increased 0.6% in Nov, matching the prior month’s gain.  The  forecast called for a 0.5% advance.  Strengthening employment & a plunge in prices at the pump are bolstering the consumer spending that makes up almost 70% of the economy, helping shelter the expansion from slowing growth overseas.  Federal Reserve policy makers said yesterday they would remain “patient” in increasing near-zero interest rates even as domestic demand firms.  “The biggest challenge has been, and remains, more income growth,” Ken Goldstein, an economist at the Conference Board, said.  “However, with labor market conditions tightening, we are seeing the first signs of wage growth starting to pick up.”  Estimates ranged from gains of 0.1% to 0.8%.

Leading Indicators in U.S. Increased in November for Third Month

The number of Americans filing for unemployment benefits fell last week as the economy’s continued improvement tempered dismissals.  Jobless claims decreased 6K to 289K, the fewest since early Nov, according to the Labor Dept report.  The forecast projected 295K.  Claims have been below 300K for 13 of the past 14 weeks.  Employers are curtailing dismissals & hiring at the strongest pace since 1999, a sign of a tightening labor market that may put upward pressure on wage growth.  The FOMC yesterday raised its assessment of the labor market & it they will be patient on the timing of the first interest-rate rate increase.  The 4-week average of jobless claims declined to 298K from 299K the week before.  The number continuing to receive jobless benefits dropped 147K to 2.37K, unwinding the previous week’s surge.  Insured unemployment had jumped to 2.52M, which was the highest since Aug.  The unemployment rate among people eligible for benefits decreased to 1.8% from 1.9% the prior week.

Jobless Claims in U.S. Decrease to Lowest Level in Six Weeks

New-home prices fell in fewer Chinese cities last month after the gov eased property curbs & cut interest rates for the first time since 2012, boosting demand.  Prices dropped in 67 cities of the 70 tracked by the gov from Oct, the National Bureau of Statistics said.  Prices fell in 69 cities in Oct.  The central bank’s surprise reduction in benchmark rates in Nov has added to mortgage-rate discounts banks were offering first-home buyers, bolstering sales & reducing developers’ pressure to cut prices.  Housing sales may rise next year, reversing a slump in the first 11 months of this year amid tight credit & an economic slowdown.  Nov new-home prices in Nanjing, Hefei & the first-tier city of Shenzhen were unchanged from Oct.  New-home prices in Beijing declined 0.2% from Oct & fell 0.4% in Shanghai.  Any recovery in the market remains tentative.  From a year earlier, new-home prices in Nov declined in 68 of the 70 cities, compared with 67 in Oct.  New-home prices in the first-tier cities of Beijing, Shanghai, Shenzhen & Guangzhou all declined last month from the same period last year.

China Home Prices Fall in Fewer Cities as Market Stabilizes

The buyers were not hiding today.  They are out in force although market breadth is less spectacular than it could be given the size of the advance.  Economic data was favorable & Janet had very kind words yesterday which made traders happy.  Oil is a little higher but MLPs are not benefiting from the advance.  What had been a tame sector is learning to live with high volatility.

Dow Jones Industrials