Thursday, August 29, 2013

Markets rise on economic data

Dow rose 80, advancers over decliners 2-1 & NAZ added 41.  The MLP index was off 1 to the 441s & the REIT index was flat in the 262s.  Junk bond funds crawked higher & Treasuries fluctuated.  Oil fell from a 2-year high as the prospect of imminent attacks on Syria receded & as better-than-expected US economic data raised speculation the Federal Reserve (FED) will taper its stimulus.  Gold also pulled back after recent gains.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLV13.NYM....Crude Oil Oct 13...109.29 Down .....0.81  (0.7%)

GCU13.CMX...Gold Sep 13.......1,406.30 Down ...12.30  (0.9%)

Workers assemble built-in appliances at the Whirlpool manufacturing plant in Cleveland, Tennessee August 21, 2013. REUTERS/Chris Berry

Photo:   Yahoo

The US economy accelerated more quickly than expected in Q2 thanks to a surge in exports, bolstering the case for the FED to wind down a major economic stimulus program.  GDP grew at a 2.5% annual rate in Q2, according to revised estimates released by the Commerce Dept.  That was more than double the pace clocked in Q1.  The reports could boost confidence that the economy is turning a corner despite gov austerity measures & a still-high jobless rate.  The initial estimate was that GDP expanded at a 1.7%.  But recent data on trade showed that exports climbed during the period at their fastest pace in over 2 years.  The gov also said data from retailers showed that businesses had restocked their shelves at a faster pace than initially estimated.  Economists had forecast the economy growing at a 2.2% pace.  The economy may accelerate further in H2 as austerity measures begin to weigh less on national output.  That drag was evident in Q2, when spending contracted at all levels of gov.  Indeed, this data showed the economic drag from spending cuts was greater than initially estimated.  Still, the data could make officials at the FED more confident in their plan to begin reducing monthly bond purchases later this year.  In Q2, higher taxes appeared to hold consumers back.  Consumer spending slowed to a 1.8% growth pace after rising at a 2.3% rate in Q1.  Corp profits, however, unexpectedly climbed in Q2.  After subtracting taxes paid by corps, profits rose at a 4.2% annual rate, the fastest gain since late 2011.

Jobless Claims in U.S. Decreased More Than Forecast Last Week

Photo:   Bloomberg

The number of Americans seeking unemployment benefits remained near the lowest level in more than 5 years last week, a sign that companies are cutting few jobs.  First-time applications for benefits fell 6K to 331K, according to the Labor Dept.  The 4 week average inched to over 331K after falling to its lowest level since Nov 2007 the previous week.  Applications for unemployment benefits reflect layoffs.  At the depths of the recession in Mar 2009, they numbered 670,K.  The average has fallen 10% this year.  All told, nearly 4.5M received unemployment benefits in the latest week, about 30K more than in the previous week.

Jobless Claims in U.S. Fell More Than Forecast Last Week

Boeing Cargo-Jet Sales at Post-2009 Low on Global Slump

Photo:   Bloombegr

Boeing, a Dow stock, is headed toward its fewest cargo-jet orders since the 2009 recession as demand wanes for the overnight shipments that once drove purchases.  With 13 sales thru Jul, its tally was just 1/5 the total of 6 years earlier.  Airbus, which didn’t begin shipping freighters until 2010, has no orders this year, & the market for secondhand passenger aircraft being converted to fly cargo has dried up.  Airfreight operators are deferring acquisitions & parking older planes after worldwide shipment volumes were unchanged H1, according to the International Air Transport Association trade group.  A persisting order drought may threaten the $240B in industrywide freighter sales that BA predicts over the next 20 years.  The global air-cargo fleet is 6% smaller than a year ago & has shrunk almost 14%from a pre-recession peak, according to Air Cargo Management Group.  BA describes the slump as an anomaly in a business that it projects will increase 5% annually thru 2032 as world economic growth recovers & cargo airlines swap older jets for fuel-sipping models.  The company expects industrywide sales of 850 new freighters over the next 2 decades while 1450 passenger airplanes will be converted to haul cargo.  “It’s our belief and our analysis that once trade turns around, we’ll see growth again in the cargo market,” Randy Tinseth, VP for marketing, said.  “We don’t think it’s a question of if, it’s a question of when.”  The stock went up 1.73.

Boeing Cargo-Jet Sales at Post-2009 Low on Global Slump

Boeing (BA)

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Stocks are having a good day in response to the economic data.  Of course, the other side of the coin says that it will give the FED courage to taper its bond buying program, maybe beginning in a few weeks.  Stocks have become addicted to that stimulus & its withdrawal will hurt.  Volume continues light, these price movements don't mean a lot.
Dow Jones Industrials

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