Dow added 63,advancers over decliners almost 4-1 & NAZ was up 33. The Financial Index rose 2 to 219, a new yearly high. The MLP index was up 1 to 401 (10 below its record high reached in early 2012) & the REIT index rose 2½ to the 276s, a new 4 year high. Junk bond funds gained & Treasuries had one of their biggest sell offs in history with the yield on the 10 year Treasury soaring 13 basis points to 1.89%. Oil rallied, getting close to $100 & gold was also higher.
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More expensive gas drove up consumer prices in Aug by the most in 3 years. But outside energy, inflation was tame. The Labor Dept said that consumer prices rose 0.6% last month, the first increase since Mar & higher gas prices accounted for 80% of the increase. Food prices rose 0.2%. Excluding the volatile food & energy categories, core prices edged up 0.1% for the 2nd straight month. Rents, medical care & new cars got more expensive, while clothing, furniture & airline fares fell in price. Lower inflation will allow the Federal Reserve (FED) to stick with programs announced aimed at lifting the economy. In the past 12 months, prices have increased 1.7%, down from a peak of 3.9% in Sep% 2011 & below the FED inflation target of 2%. Core consumer prices rose 1.9% in the past 12 months, the smallest annual increase in a year. Aug prices rose largely because gas prices have jumped in recent weeks. The average price for a gallon of gas nationwide was $3.87, up 16¢ in the past month. The modest increase in food prices indicates the drought in the Midwest is not yet pushing up grocery prices. That should happen in the comings months.
U.S. Consumer Price Index Increases by Most Since 2009
Photo: Yahoo
US industrial production fell in Aug by the largest amount in more than 3 years as factories produced fewer cars & other manufactured goods & Hurricane Isaac triggered shutdowns along the Gulf Coast. Industrial production dropped 1.2% compared to Jul, according to the FED, the biggest setback since a 1.7% decline in Mar 2009 when the country was in recession. Manufacturing output, the most important component, fell 0.7%, led by a 4% drop in output at auto plants. Manufacturing helped lift the country out of the recession, but it slowed in the spring as consumers cut back on spending, businesses invested less in machinery & demand for US exports was hurt by a global weakness. US factory activity shrank for a 3rd straight month in Aug, according to the Institute for Supply Management's survey of manufacturing conditions. Growth slowed in Q2 to an annual rate of just 1.7%, down from 2% in Q1 & 4.1% in Q4 2011. Weakness in manufacturing was widespread. Production fell at factories making machinery, computers, airplanes & furniture. Even with the Aug decline, output at manufacturing plants is still 20.7% above the recession low in Jun 2009.
European govs put off decisions on aid for Spain & a loosening of Greece's loan terms, counting on the ECB's bond-buying pledges to provide interim relief from market turmoil. Finance ministers meeting in Cyprus looked to a fresh set of reforms to rebuild confidence in Spain’s economic management & said the fate of Greece’s €240B ($314B) rescue program won’t be decided until late Oct, possibly at a crisis summit of leaders. The central bank, which helped drive the € to a 4- month high, warned that it has only bought time for govs to deliver the deficit-cutting & growth-boosting steps needed to stabilize the economy. “The amount of time that we have -- it’s a very difficult question to answer,” ECB President Draghi told reporters after meeting the euro-region ministers in Cyprus. “You have to ask the markets. If we continue going this way, then one has to be very optimistic.” The € rose to $1.31, the highest since May 4. Spain’s extra 10-year borrowing cost over German levels narrowed by 3 basis points to 404 basis points.
Europe Bides Time on Spain as ECB Relied Upon to Soothe Markets
Stocks are flying high as if there were no worries. Dow hasn't been this high since early 2008. But all is not well. For starters, nobody is sure what good the mortgage program will do to help reduce high unemployment. Mortgage rates are already at record lows. The fiscal cliff keeps getting nearer & buying more mortgages will not cure that. Europe still has enormous financial problems & China is growing an an unsatisfactory rate. In addition, rising gas prices at the pump need to get more attention. But I have to admit, high stock prices feel good when I like at mine.
AMJ (Alerian MLP Index tracking fund)
Treasury yields:
U.S. 3-month | 0.097% | |
U.S. 2-year | 0.250% | |
U.S. 10-year | 1.868% |
| CLV12.NYM | ....Crude Oil Oct 12 | ...99.55 | ... 1.24 | (1.3%) |
| GCU12.CMX | ...Gold Sep 12 | ......1,774.50 | ... 5.40 | (0.3%) |
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More expensive gas drove up consumer prices in Aug by the most in 3 years. But outside energy, inflation was tame. The Labor Dept said that consumer prices rose 0.6% last month, the first increase since Mar & higher gas prices accounted for 80% of the increase. Food prices rose 0.2%. Excluding the volatile food & energy categories, core prices edged up 0.1% for the 2nd straight month. Rents, medical care & new cars got more expensive, while clothing, furniture & airline fares fell in price. Lower inflation will allow the Federal Reserve (FED) to stick with programs announced aimed at lifting the economy. In the past 12 months, prices have increased 1.7%, down from a peak of 3.9% in Sep% 2011 & below the FED inflation target of 2%. Core consumer prices rose 1.9% in the past 12 months, the smallest annual increase in a year. Aug prices rose largely because gas prices have jumped in recent weeks. The average price for a gallon of gas nationwide was $3.87, up 16¢ in the past month. The modest increase in food prices indicates the drought in the Midwest is not yet pushing up grocery prices. That should happen in the comings months.
U.S. Consumer Price Index Increases by Most Since 2009
US industrial production fell in Aug by the largest amount in more than 3 years as factories produced fewer cars & other manufactured goods & Hurricane Isaac triggered shutdowns along the Gulf Coast. Industrial production dropped 1.2% compared to Jul, according to the FED, the biggest setback since a 1.7% decline in Mar 2009 when the country was in recession. Manufacturing output, the most important component, fell 0.7%, led by a 4% drop in output at auto plants. Manufacturing helped lift the country out of the recession, but it slowed in the spring as consumers cut back on spending, businesses invested less in machinery & demand for US exports was hurt by a global weakness. US factory activity shrank for a 3rd straight month in Aug, according to the Institute for Supply Management's survey of manufacturing conditions. Growth slowed in Q2 to an annual rate of just 1.7%, down from 2% in Q1 & 4.1% in Q4 2011. Weakness in manufacturing was widespread. Production fell at factories making machinery, computers, airplanes & furniture. Even with the Aug decline, output at manufacturing plants is still 20.7% above the recession low in Jun 2009.
European govs put off decisions on aid for Spain & a loosening of Greece's loan terms, counting on the ECB's bond-buying pledges to provide interim relief from market turmoil. Finance ministers meeting in Cyprus looked to a fresh set of reforms to rebuild confidence in Spain’s economic management & said the fate of Greece’s €240B ($314B) rescue program won’t be decided until late Oct, possibly at a crisis summit of leaders. The central bank, which helped drive the € to a 4- month high, warned that it has only bought time for govs to deliver the deficit-cutting & growth-boosting steps needed to stabilize the economy. “The amount of time that we have -- it’s a very difficult question to answer,” ECB President Draghi told reporters after meeting the euro-region ministers in Cyprus. “You have to ask the markets. If we continue going this way, then one has to be very optimistic.” The € rose to $1.31, the highest since May 4. Spain’s extra 10-year borrowing cost over German levels narrowed by 3 basis points to 404 basis points.
Europe Bides Time on Spain as ECB Relied Upon to Soothe Markets
Stocks are flying high as if there were no worries. Dow hasn't been this high since early 2008. But all is not well. For starters, nobody is sure what good the mortgage program will do to help reduce high unemployment. Mortgage rates are already at record lows. The fiscal cliff keeps getting nearer & buying more mortgages will not cure that. Europe still has enormous financial problems & China is growing an an unsatisfactory rate. In addition, rising gas prices at the pump need to get more attention. But I have to admit, high stock prices feel good when I like at mine.
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