Thursday, July 11, 2013

Dow surges to a new record on Bernanke comments

Dow rose 169, advancers over decliners 6-1 & NAZ added 57.  The MLP index rose 5+ to 465 & the REIT index went up 7 to the 279s.  Junk bond funds continued 1-2% higher & Treasuries also had a strong rally.  Oil fell back to the 104s (not the 101s shown below).  Gold rallied to a 2-week high after Big Ben said yesterday that the US needs “highly accommodative monetary policy for the foreseeable future.”

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLX13.NYM...Crude Oil Nov 13...101.58 Down ...0.71  (0.7%)

Live 24 hours gold chart [Kitco Inc.]

<p> FILE - In this April 8, 2013, photo, copies of President Barack Obama's budget plan for fiscal year 2014 are prepared for delivery at the U.S. Government Printing Office in Washington. The Treasury reports on the budget deficit for June on July 10, 2013. (AP Photo/J. Scott Applewhite, File)

Photo:   Yahoo

The federal gov reported a rare surplus of $116B in Jun, the largest for a single month in 5 years, keeping the country on track for its lowest annual deficit in 5 years.   But the surplus was due in part to $66B in div payments from Fannie Mae & Freddie Mac.  Thru the first 8 months of the budget year, the deficit has totaled $510B, according to the Treasury, $394B lower than the same period last year.  The Congressional Budget Office forecasts the annual deficit will be $670B (what would have been a record just a few years ago).  If correct, that would be well below last year's deficit of $1.1T but still be the 5th-largest deficit in US history.  The administration also estimates a lower annual deficit, although it projects a slightly higher figure at $759B.  Economic growth & higher tax rates have boosted the tax revenue this year while spending has barely increased.  The div payments from Fannie & Freddie also helped.  Each deficit adds to the national debt, currently $16.7T.  The improving deficit picture has taken pressure off negotiations to raise the federal borrowing limit, although that battle is likely to resurface in the fall.

U.S. Posts Widest Budget Surplus Since 2008 on Stronger Receipts

Loan applications for purchases of new homes in the US tumbled last month, a sign rising mortgage rates may have damped demand for builders, according to the Mortgage Bankers Association (MBA).  The Builder Application Survey showed a 15% decline in loan submissions in Jun from the previous month.  The newly created gauge tracks application volume from mortgage units of large homebuilders across the country.  The index may be an indicator of new-home sales, since the mortgage application is typically made around the time the sales contract is signed.  The average rate for 30-year fixed mortgage climbed to 4.51%, the highest in almost 2 years, according to Freddie Mac.  The rate, which has climbed from a near-record low of 3.35% in early May, has risen on expectations that the Federal Reserve will reduce bond purchases as the economy returns to health.  The MBA survey captures about 20% of the new-home sales market, with greater participation by lenders affiliated with larger builders.

Home-Loan Applications for New Houses Fall 15%, MBA Says


Photo:   Bloomberg

Tech companies are paying out divs at the fastest pace in more than a decade, boosting cash returns to appease investors dismayed by slowing growth.  Led by Apple (AAPL), Cisco (CSCO) & Microsoft (MSFT), tech companies in the S&P 500 distributed $10.8B in divs in Q2, up from $5.1B in the same period in 2010.  Their average yield, a metric for measuring payments in the past 12 months as a percentage of market value, stands at 1.2% for technology companies, the first time it has exceeded 1% in at least 15 years.  These companies have $590B of cash on hand, up from $509B a year ago & $436B two years ago.  Div payouts are likely to keep rising as once-cash-strapped startups become larger, slower-growth companies.  There are expectations that holdouts such as Google (GOOG) may follow.

Apple to Cisco Lead Record Dividends as Google Becomes Rare Holdout: Tech

Dow is up an amazing 800 from Jun 24.  Spreading good word about QE3 can do wonders to bring out stock buyers.  This is a vivid reminder that QE3 is driving this market, not earnings.  The high yield sectors have had mixed recoveries.  The MLP index is near its record while the REIT index is still off 35 from its recent high & junk bond funds are more than 10% below recent highs.  Tomorrow, the first big banks will report & they should have good numbers considering borrowing costs are so low.  Their guidance going forward will be more telling. 

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