Friday, March 1, 2013

Markets edge higher on macro economic reports

Dow went up 35, advancers barely ahead of decliners & NAZ added 9.  The Financial Index was up a fraction to the 237s.  The MLP index slid 1 to just above 430 & the REIT index gained 1 to 281 (where it's been for more than a month).  Junk bond funds were higher & Treasuries also gained to their best levels in more than a week.  Oil fell to just above 90 (wasn't too long ago that 100 was in sight) & gold lost chump change, but is below the important 1600 level.

Dow Jones Industrials

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLJ13.NYM...Crude Oil Apr 13....90.68 ...Down 1.37  (1.5%)

Live 24 hours gold chart [Kitco Inc.]

U.S. President Barack Obama speaks about the sequester after a meeting with congressional leaders at the White House in Washington March 1, 2013. Obama pressed the U.S. Congress on Friday to avoid a government shutdown when federal spending authority runs out on March 27, saying it is the "right thing to do." REUTERS/Kevin Lamarque (UNITED STATES - Tags: BUSINESS POLITICS) - RTR3EG78

Photo:   Yahoo

The gov stumbled headlong toward wide-ranging spending cuts that threaten to hinder the economic recovery, after the president & congressional leaders failed to find an alternative budget plan (What a surprise???) put in place during a bout of deficit-reduction fever in 2011 (& the idea came from the pres), the automatic cuts can only be halted by agreement between Congress & the White House.  The deal proved elusive in talks at the White House, so gov agencies will now begin to hack $85B out of their budgets.  Dems predict the cuts could soon cause air traffic delays, furloughs for hundreds of thousands of federal employees & disruption to education.  That's because they intend to punish taxpayers for harming gov employees.  While the IMF warned that the belt tightening could slow US economic growth by at least 0.5 of a percentage point this year, that is not a huge drag on an economy that is picking up steam.  Obama was resigned to gov budgets shrinking (what's shrinking is INCREASED SPENDING).  "Even with these cuts in place, folks all across this country will work hard to make sure that we keep the recovery going, but Washington sure isn't making it easy," he said after meeting Rep & Dem congressional leaders.  Can you spell dysfunctional?

Manufacturing in U.S. Grew in February by Most Since June 2011

Photo:   Bloomberg

American factories expanded in Feb at the fastest pace in almost 2 years, spurred by a jump in orders that is helping propel an economy about to be tested by federal gov cutbacks.  The Institute for Supply Management factory index rose to 54.2, the highest reading since Jun 2011.  Companies are benefiting from growing demand as businesses boost spending & economies in emerging markets pick up.  Combined with a rebound in housing & sustained gains in household purchases, the factory gains can help lift growth, after the economy stagnated in Q4.  The pickup at US factories comes as the rest of world’s producers struggle to rebound.  2 Chinese manufacturing indices showed a slower-than-estimated pace of expansion in Feb & in the UK, manufacturing unexpectedly shrank last month as orders plunged.  Factories in the euro region contracted for a 19th straight month.

U.S. Michigan Consumer Sentiment Index Rose to 77.6 in February

Photo:    Bloomberg

Confidence among American households rose more than projected in Feb in a gain that could boost consumer buying, the largest part of the economy.  The Thomson Reuters/University of Michigan final index of consumer sentiment climbed to 77.6 from 73.8 in Jan, although the gauge was projected to match the preliminary reading of 76.3.  Consumers are contending with an increase in payroll taxes & concerns that federal spending cuts starting today may hold back economic expansion.  The survey’s current condition index, which measures whether Americans think it’s a good time to make big investments & gauges consumers’ view of their personal finances, rose to 89 in Feb from 85 in the prior month.  The preliminary reading was 88 for Feb.  The index of expectations 6 months from now, which more closely projects the direction of consumer spending, rose to 70.2 from 66.6 the month before.  The preliminary reading was 68.7 for Feb.  Consumers in today’s confidence report said they expect an inflation rate of 3.3% over the next 12 months, the same as in Jan.  Over the next 5 years, Americans expected a 3% rate of inflation, up from the Jan reading of 2.9.

U.S. Michigan Consumer Sentiment Rises Above Estimate

Auto sales for Feb are coming out with mixed results.  The data today should have taken the markets much higher but the DC fiscal mess is too much to ignore (as they have so far this year).  Cutbacks (really slowing the growth of spending) are run by gov employees who see their jobs threatened (you know, the guys making 6 figure salaries with fabulous benefits) & are intent on punishing taxpayers with cuts that will bite hard.  Cutbacks mean that instead of growing at 8%, their budgets only grow 5%.  This is not the type of reduced spending that US consumers have to deal with when their paychecks were reduced 2% from increased Social Security tax.  Next week the politicos will take another look at the mess, but solutions are far away.  Dow has taken the additional uncertainty very well, but on the other hand the bulls have not been able take it to new record levels.  Apple (AAPL), the company with the largest market cap in the world, fell 10 to 431 & is off 270 from its recent highs.  This disconnect will narrow & I'm not looking for AAPL to go up.

Dow Jones Industrials

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