Wednesday, August 29, 2012

Markets little changed in holiday trading

Dow was 4 lower, advancers ahead of decliners 4-3 & NAZ fell 3.  The Financial Index was up a fraction in the 203s (near its almost 4 month highs).  The MLP & REIT indices were flattish, junk bond funds edged higher & lost ground.  Oil was lower as storm damage in the Gulf should be less than feared & gold held steady.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

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U.S. 2-year


U.S. 10-year


CLV12.NYM....Crude Oil Oct 12...95.92 ...Down 0.41  (0.4%)

GCQ12.CMX...Gold Aug 12...1,665.20 ...Down 1.30  (0.1%)

Get the latest daily market update below:

  • A man pushes his shopping cart down an aisle at a Home Depot store in New York, July 29, 2010. REUTERS/Shannon Stapleton
Photo:   Yahoo

The economy fared slightly better than initially thought in Q2, but the pace of growth remained too slow to shut the door on further monetary easing from the Federal Reserve (FED).  GDP expanded at a 1.7% annual rate, according to the Commerce Dept as stronger export growth offset a pull-back in restocking by businesses wary of sluggish domestic demand.  That was up from the initial estimate of 1.5% growth rate released last month & in line with expectations.  The economy grew at a 2.0% pace in Q1.  The report also showed that after-tax corp profits unexpectedly rose at a 1.1% rate after sinking 8.6% in Q1.  While the composition of economic activity was fairly favorable, growth remains well below the 2-2½% rate required to hold the unemployment rate steady, which could compel the FED to offer additional stimulus at the Sep 12-13 meeting.

European Central Bank President Mario Draghi

Photo:   Bloomberg

ECB President Draghi hit back at German criticism of his plan to intervene in bond markets & reminded Europe’s largest economy of its responsibility to anchor the €.  The ECB “will always act within the limits of its mandate,” Draghi wrote in a commentary.  “Yet it should be understood that fulfilling our mandate sometimes requires us to go beyond standard monetary policy tools.”  Bundesbank President Weidmann & some German politicians have lashed out at Draghi’s plan to resume gov bond purchases to lower borrowing costs in countries such as Italy & Spain.  Draghi’s response comes as Chancelloro Merkel has signaled broad support for ECB bond buying.  Today she hosts Italian Prime Minister Monti.  “The ECB is not a political institution,” Draghi wrote. “But it is committed to its responsibilities as an institution of the European Union. As such, we never lose sight of our mission to guarantee a strong and stable currency. The banknotes that we issue bear the European flag and are a powerful symbol of European identity.”  Weidmann has said he’s against ECB bond purchases because they risk increasing gov reliance on the central bank & won’t solve Europe’s debt crisis.  “Such policy is too close to state financing via the money press for me,” he said.  So much for a united euro front.

Draghi Hits Back at German Criticism of ECB Bond Plan

Gov efforts to reverse China's economic slump are taking effect & growth is "stabilizing at a slow pace," the head of the country's planning agency said.  The statement by the minister in charge of the National Development & Reform Commission came amid mixed signals that show some activity picking up but export orders & corp profits weakening.  "The government's policies and measures have been effective and the country's economic growth is stabilizing at a slow pace," the official Xinhua News Agency paraphrased Zhang Ping as saying.  The report gave no other details or a forecast of when economic growth that fell to a 3-year low of 7.6% in Q2 might rebound.  China cut interest rates twice in Jun & is trying to pump up the economy by approving a wave of new industrial investments.  But authorities have resisted calls for more aggressive stimulus after huge spending in response to the 2008 crisis fueled inflation & a wasteful building boom.  Premier Wen Jiabao has expressed confidence China can meet its economic targets but warned last month the job situation will become "more complex and severe."  The Communist Party's official growth target this year is 7.5%  Forecasters expect growth to rebound late this year or in early 2013 but say a recovery will be too weak to drive global growth without improvement in the US & Europe.

Official: China's Growth Stabilizing at Slow Pace

Once again, there is not a lot going on in the markets.  Even news out of Europe & China represents only talk.  Big Ben will share his thoughts on Fri but that looks like it will not provide new information about new moves by the FED.  Dow remains steady as she goes near 13.1K.

Dow Jones Industrials

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