Tuesday, August 13, 2013

Markets waver after comments about Federal Reserve tapering bond purchases

Dow went up 31, decliners ahead of advancers 4-3 & NAZ advanced 14 helped by another good day for Apple (AAPL) gaining 22.  The MLP index was off 3+ to the 439s & the REIT index dropped 4 to the 271s.  Junk bond funds edged lower & the 10 year Treasury sank, taking its yield up 11 basis points to 2.71%.  Oil rebounded in the PM.  Gold fell for the first time in a week as signs of gains in the US economy boosted speculation that the Federal Reserve will scale back monetary stimulus, while the dollar’s rally eroded the appeal of the metal.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLU13.NYM...Crude Oil Sep 13...106.89 Up ...0.78  (0.7%)

Live 24 hours gold chart [Kitco Inc.]

<p> FILE - In this Friday, Nov. 23, 2012 file photo, a cashier hands a customer his change and receipt during a transaction at a Sears store, in Henderson, Nev. The rate of credit card payments at least 90 days overdue fell in the second quarter of 2013 to 0.57 percent. That's the lowest level since 1994, credit reporting agency TransUnion said Tuesday, Aug, 2013. (AP Photo/Julie Jacobson, File)

Photo:   Yahoo

Americans remain stingy about carrying credit card balances & are making more of an effort to make timely payments, trends that have helped whittle the rate of late payments on credit cards down to the lowest level in nearly 20 years.  The rate of credit card payments at least 90 days overdue fell in Q2 to 0.57%, the lowest level since 1994, according to credit reporting agency TransUnion.  The delinquency rate declined from 0.63% in the same period last year, & also was down from 0.69% in Q1.  The latest late-payment rate is the 2nd-lowest recorded by TransUnion since Q2-1994, when the rate was 0.56%, & it's running ahead of the historical average of 1.03.  Many Americans remain reluctant to take on high-interest credit card debt after taking steps to increase savings & pay down balances during the last recession.  Credit card debt dropped $2.7B in Jun & remains 16.5% below its Jul 2008 peak, according to the Federal Reserve.  Nearly 4 years after the recession, the US economy & job market are far from fully recovered, though they are making steady progress.  The unemployment rate fell to a 4½-year low of 7.4% last month, down from 7.6% in Jun, but that's well above the 5-6% rate associated with a healthy economy.  Average credit card debt per borrower slipped to $4965 in Q2 from $4971 in the same period last year & rose from $4875 in Q1.  The number of new credit card accounts rose 5.6% from the same period in 2012.  The share of cards issued to borrowers with less-than-perfect credit was essentially flat at 27.3% versus 27.4% a year earlier.  But that's still well below the 45% share going to non-prime borrowers before the recession.

Average credit card debt per borrower dips in 2Q Associated Press

Federal Reserve Bank (FED) of Atlanta President Dennis Lockhart, who has backed the $85B in monthly bond purchases, said policy makers may start slow buying at any of their next few meetings amid “uneven performance” by the economy.  “The first adjustments to asset purchases, when they occur, should be the beginning of a process with steps that will be determined as later information arrives and certainty about the direction of the economy accumulates,” Lockhart said.  “A decision to proceed -- whether it is in September, October, or December -- ought to be thought of as a cautious first step.”  FED regional bank officials last week indicated greater willingness to reduce bond buying.   Lockhart told reporters after his speech that monthly data on employment would be the most important factor he’ll weigh in considering whether to favor a slowing of purchases next month. “I wouldn’t rule out September at all,” he said.  “I certainly want to see whatever little indication we get in the data between now and September.”  “Very weak employment numbers would be one” factor that could avert tapering next month, along with “a sudden pickup in disinflation indicators,” he continued.

Lockhart Says QE Taper Possible at Any of Next Three Meetings

Inventories at US companies were little changed in Jun as sales improved, signaling manufacturers will be growing orders.  Stockpiles held at $1.66B after dropping 0.1% in May, according to the Commerce Dept.  The May figure was revised from an originally reported 0.1% increase.  The estimate projected a 0.2% advance.  Sales rose 0.2% in Jun.  Companies may gain confidence to replenish stockpiles as consumer demand for housing, automobiles & clothing improves.  Merchants had enough goods on hand in Jun to last 1.29 months at the current sales pace, matching the previous month.  Retailers’ stockpiles, the only part of today’s inventory report not previously released, rose 0.1% in Jun while sales jumped 0.8%.  The value of inventory at motor vehicle & parts dealers increased 0.5% as demand climbed 2.9%.  Factory inventories rose 0.1% in Jun, while wholesaler stockpiles dropped 0.2%.

Companies in U.S. Kept Inventories Lean in June as Sales Rose

Comments made by FED officials are not random.  They are carefully planned & approved by Big Ben.  This is part of a program to keep 'em guessing about plans for exiting its bond buying program.  But every time there is a whiff about keeping the bond buying program intact, markets rally.  That's not what long term investing is about, especially when the the end of the program is not that far away.  Then stocks will sell off.  Already yield sensitive securities are feeling that pressure.

Dow Jones Industrials

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