Monday, August 12, 2013

Markets meander, looking for direction

Dow slid 5, advancers just ahead of decliners & NAZ gained 9 helped by Apple (AAPL).  The MLP index was off 4 to 443 & the REIT index fell 2+ to the 275s.  Junk bond funds were mixed & Treasuries were flattish although the 10 year bond sold off.  Oil was pretty much even, but gold shot up to a 2 month high.

AMJ (Alerian) MLP Index tracking fund)

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CLU13.NYM...Crude Oil Sep 13...106.03 Up ...0.06 (0.1%)

Live 24 hours gold chart [Kitco Inc.]

U.S. Budget Gap Shrinks in Year Through July on Higher Revenue

Photo:   Bloomberg

The US ran a budget deficit in Jul, as revenue increased from a year earlier due to tax hikes & a strengthening economy, according to the Treasury.  The gov spent $98B more than it took in last month, with the deficit driven by spending on healthcare programs, pensions for the elderly & the military.  The forecast called for a deficit of $96B.  The US customarily runs deficits in Jul as there are few tax deadlines during the month.  The country has run full-year budget deficits continuously since 2001, & the amount of red ink has grown immensely since 2009 when a surge in unemployment fueled higher spending on the social safety net.  This year the deficit appears on track to narrow substantially, largely because DC ratcheted austerity efforts by raising tax rates, which has helped tax receipts.  It has also cut the federal budget, although in Jul total spending rose to $298B from $254B in the same month of 2012.  Another factor that has been leading to a lower deficit is the steam that appears to be the US economy that is also lifting tax receipts, which rose to $200B from $185B in Jul 2012.  So far in the current fiscal year, which began in Oct, the federal gov has run $607B into the red, a narrowing from the $974B deficit chalked up in the same 10 months of fiscal year 2012.  The data is pretty much was estimated this AM.

U.S. 10-Month Budget Gap Narrows on Higher Revenue

<p> Greece's Deputy Finance Minister Christos Staikouras talks to reporters while presenting budget figures at the finance ministry in central Athens, on Monday, Aug. 12, 2013. Staikouras said that preliminary figures show the state budget had a primary surplus _ excluding interest payments on outstanding debt _ of 2.6 billion euros ($3.5 billion) for January-July. (AP Photo/Petros Giannakouris)

Photo:   Yahoo

According to finance ministry data, Greece is beating its budget targets by a wide margin this year, a sign the country's painful cost cuts & tax increases, combined with intl bailout funds, are paying off.  The economy, however, remains deep in recession & unemployment at a record high.  Deputy Finance Minister Christos Staikouras said preliminary figures show the state budget had a primary surplus (excluding interest payments on debt) of €2.6B ($3.5B) for Jan-Jul.  That is better result than its target of a €3.1B ($4.2B) deficit, & marks the first time the gov has logged a significant primary surplus.  The actual deficit, including interest payments, came in at €1.9B, also better than the targeted €7.5B deficit, the finance ministry's figures showed.  In the same period last year, the country posted a €13.2B deficit.  The deficit now stands at 1% of GDP, from 6.8% in the same period last year, Staikouras said.  The improvements were achieved by a combination of cutting spending & increased revenues in some taxes.  It was also helped by a one-off payment of about €1½B from other European central banks.  The money came from Greek gov bonds that the ECB had bought earlier during the financial crisis.  Rather than keep the money accrued on the bonds, the ECB handed it down to the 17 national central banks in the eurozone, who in turn gave it to the Greek gov.  However the economy remains in trouble.  Unemployment hit a record of 27.6% in May & almost 2/3 of young people are without a job.  The country is mired in the 6th year of a deep recession that has seen the economy shrink by about 25%, though the latest figures suggested a slight easing in the drop.  The statistical authority said economic output shrank 4.6% in Q2, compared with the same period last year.  That's less than the 5.6% it contracted in Q1.

Greece beats budget targets so far this year Associated Press

Retail Sales Probably Climbed in July

Photo:   Bloomberg

Retail sales probably rose for a 4th consecutive month in Jul, showing the US economy is breaking free of the effects of higher taxes & budget cuts.  Purchases are expected to climb 0.3% after a 0.4% advance in June.  Other data should show gains in manufacturing, residential construction & consumer prices last month.  Employment gains & increased household wealth tied to higher home & stock prices are giving Americans the confidence to spend, brightening the economic outlook.  Low borrowing costs are spurring vehicle sales, helping bolster industrial production at the same time builders start work on more homes.  Payrolls have increased an average 192K a month this year thru Jul compared with 182K in 2012.  The jobless rate in Jul fell to 7.4%, the lowest since Dec 2008 & down from 7.8% at the end of last year.  Automakers are enjoying their best year since 2007, with US sales on track to reach 15.8M, according to Autodata.  A report from the Federal Reserve on Thurs is projected to show production at the nation’s factories, mines & utilities climbed 0.3% in Jul.

Retail Sales Probably Climbed in July: U.S. Economy Preview

Stocks had another non-event day.  The general background news wasn't bad, but buyers were not inspired.  AAPL jumped 12 to 467 after it leaked stories about a new iPhone coming out after Labor Day (the ideas for the stories do not drop from the sky).  As usual, details are fuzzy, but AAPL fans are assuming it will be another winner.  That enthusiasm did not spill over to the rest of the market. The high yield sectors remain in the doldrums, not a good sign for the rest of the market

Dow Jones Industrials

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