Tuesday, July 9, 2013

Dow higher for 4 straight days on earnings hopes

Dow climbed 75, advancers ahead of decliners 3-1 & NAZ 19.  The MLP index rose 2 to the 458s & the REIT index gained 4 to the 282s.  Junk bond funds went up as did Treasuries.  Oil is over $103 & gold futures climbed for the 2nd straight day as accelerating inflation in China boosted the appeal of the metal as a hedge, while demand increased for jewelry, coins & bars.

AMJ (Alerian MLP Index tracking fund)

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CLQ13.NYM...Crude Oil Aug 13...103.66 Up ...0.52 (0.5%)

Live 24 hours gold chart [Kitco Inc.]

The € slid to a 3-month low against the dollar after an official at the ECB signaled it may remain accommodative for more than a year, further diverging from policy in the US.  The shared currency slid versus most major peers after ECB Executive-Board Member Joerg Asmussen said the bank’s forward guidance, which is that interest rates will stay low for an extended period, goes beyond 12 months.  Big Ben speaks tomorrow on economic policy amid bets he’ll soon begin reducing monetary stimulus.  South Africa’s rand climbed as risk appetite increased.  The € fell 0.8% to $1.277 & touched $1.2755, the lowest since Apr 4.  The € stayed lower after the ECB said Asmussen didn’t intend to give guidance on rates for an exact period.  Draghi made an unprecedented pledge last week after an ECB policy meeting to keep the bank’s monetary policy stance accommodative for as long as needed to spur economic growth.  The benchmark interest rate is a record-low 0.5%.  The € extended losses as S&P cut Itlay's long-term credit rating to BBB, 2 levels above junk, from BBB+, citing “the effects of further weakening growth.”

Euro Drops to 3-Month Low on Outlook for ECB Policy; Rand Climbs

<p> A municipal worker sits in front of the entrance of Greek Parliament during a protest in central Athens, on Tuesday, July 9, 2013, as a demonstrator holds a banner which reads "Greek Parliament thieves". Greek municipal workers went on strike for the second day Tuesday to protest their inclusion in a government plan to reduce the number of civil servants and meet criteria for the country to continue receiving vital funds from its international bailout. (AP Photo/Petros Giannakouris)

Photo:   Yahoo

Greek officials announced the first details of a major staff cuts for its bloated public sector, sparking anger among unions who pledged to extending strikes & occupy city hall buildings.  Euro area finance ministers granted loan installments worth €6.8B ($8.7B), despite the conservative-led gov missing a deadline to place 12K public sector workers in an involuntary transfer scheme.  Greece has also promised to cut a further 15K jobs by the end of next year.  The gov said it had been given 3 months by rescue lenders to catch up, & announced it was placing 4K workers, including school guards, elementary school teachers, on an 8-month suspension with reduced pay before the end of Jul.  The announcement marked a shift in Greece's grueling austerity program which has so far relied heavily on pay cuts & tax hikes to try & balance its budget which has hammered the private sector & dragged the country into a 6th year of recession.  In response to the latest measures, a local gov workers' union said it would extend rolling 24-hour strikes for the rest of the week.  "We are recommending that our members continue their protest campaign, with the occupation of municipal buildings," Themis Balasopoulos, leader of the protesting POE-OTA union said.

Greece gets 3-month extension for staff cuts Associated Press

Obama Seeks More Efficient Government in 2nd Term

Photo:   Bloomberg

The Obama administration projects that the federal budget deficit will drop to the lowest level in 5 years, $759B for the year ending Sep 30, as the economy improves & tax collections increase.  The OMB's said that the economy may grow 2% this calendar year.  That’s slower than the 2.3% growth rate predicted 3 months ago & the forecast by analysts is for a 1.9% gain.  Next year, the administration projects the economy will grow 3.1%, down from 3.2% seen in Apr.  Analysts are forecasting a increase of 2.7% in 2014.  The administration partly blamed $81B in automatic spending cuts for being “a drag on growth in recent months”  & cited slow growth in Europe & China.  “As a consequence, the economy was under additional fiscal pressure during the first half of 2013, leading to a reduction in the forecast for growth,” the report said.  “As various headwinds die down, and the proposed budget replaces sequestration, the administration expects more rapid growth.”  Unemployment may average 7.5% this year, down from the 7.7% predicted in Apr.  “Unemployment is now projected to decline somewhat more rapidly than in the budget projections,” the report said.  Increased tax collections of $65B more than was expected in Apr helped to reduce the deficit forecast.

Obama Sees 2013 Deficit Lowest in Five Years, GDP Growth at 2.0%

Risk appetite is back in vogue.  The beaten up high yield sectors have found found friends recently.  The MLP index is up 26 from its lows a couple of weeks ago & the REIT index has risen 28.  Even junk bond funds are joining in the rally.  Now all companies have to do is deliver impressive earnings & outlooks for more growth.  I have my doubts but Dow is only 100 below the May 28 record. 

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