Tuesday, June 25, 2013

Higher markets on improved consumer confidence

Dow rose 104, advancers over decliner 2-1 & NAZ was up 18.  The MLP index recovered 3+ to the 435s & the REIT index rose 1+ to the 267s.  But junk bond funds were mixed to lower & Treasuries also pulled back, bringing higher yields.  Oil & gold, along with other commodities, were flattish.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLQ13.NYMCrude Oil Aug 1395.77 Up 0.59 (0.6%)

GCM13.CMXGold Jun 131,280.10 Up 3.30 (0.3%)

A single family home is shown with a sale pending in Encinitas, California May 22, 2013. REUTERS/Mike Blake

Photo:   Yahoo

In May, sales of new US single-family homes rose to the highest level in nearly 5 years as the housing market continues to rebound.  The Commerce Dept said sales increased 2.1% to an annual rate of 476K units, the highest level since Jul 2008 (prior to the Lehman collapse).  It was the 3rd straight month of gains.  Sales increased 3.3% in Apr & the forecast was for a rise to a 462K unit rate.  Compared with May 2012, sales were up 29%.  Home sales data will be closely watched in the coming months for signs of strain from the rise in mortgage rates.  Last month, the inventory of new homes on the market increased 2.5% to 161K, the highest since Aug 2011, as builders ramp up production to meet the growing demand.  Still, supply remains tight, putting upward pressure on prices.  At May's sales pace it would take 4.1 months to clear the houses on the market, up from 4.0 months in Apr.  A supply of 6.0 months is normally considered as a healthy balance between supply & demand.

New Home Sales Near Five-Year High, Prices Rise  Reuters

<p> In this Wednesday, May 15, 2013 photo, pedestrians walk in and out of the Walgreens flagship store in the Empire State Building, in New York. The private Conference Board reports on consumer confidence for June, on Tuesday, June 25, 2013. (AP Photo/Mark Lennihan)

Photo:   Yahoo

Americans' confidence in the economy rose to its highest level in more than 5 years, bolstered by a more optimistic outlook for hiring.  The Conference Board said that its consumer confidence index jumped to 81.4 in Jun, the best reading since Jan 2008.  That's up from the May reading of 74.3, which was revised slightly downward from 76.2.  The report shows consumers are more positive about current economic conditions & have a more optimistic view of the economy & job market in the next 6 months.  Lynn Franco, director of economic indicators at the Conference Board, said that "suggests the pace of growth is unlikely to slow in the short-term, and may even moderately pick up."  Americans have been resilient this year, despite tax increases & steep gov spending cuts.  Consumer spending rose at the fastest pace in 2 years in Q1, helping the overall economy grow at a 2.4% annual pace.  So far, reports on consumer spending in Q2 have been mixed.  In April, consumer spending fell as income was unchanged.  But spending appears to have rebounded in May, based on a preliminary report on retail sales.  Americans spent more on cars, home improvements & sporting goods, boosting retail sales 0.6%.

Consumer Confidence in U.S. Increased More Than Forecast in June

Orders for U.S. Durable Goods Rose More Than Forecast in May

Photo:   Bloomberg

Orders for durable goods in the US rose more than forecast in May, reflecting broad-based gains that signal manufacturing is stabilizing.  Bookings for goods meant to last at least 3 years climbed 3.6% for a 2nd month, according to the Commerce Dept, beating a 3% increase forecast.  Excluding transportation, where demand is volatile, orders advanced 0.7%, also topping projections.  Growing demand for cars & trucks along with gains in homebuilding are helping counter weakness in export markets.  Businesses may also decide to replace aging equipment, which will help bolster expansion in H2.

Orders for U.S. Durable Goods Rose More Than Forecast

Buyers finally returned after tough times for the markets in recent days.  So far, this can only be chalked up to buying on the dip.  Comments from central bankers in the US & China, trying to calm fears about a credit crunch, seem to have worked.  But tomorrow is a new day & the yield on the 10 year Treasury is back to 1 percentage point higher than it was 2 months ago.  That's a dramatic rise which caused the stock market to sell off.  Dow has risen 2.6K higher in the last year on mixed economic news in the US & overseas.  It remains overbought.

Dow Jones Industrials

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