Monday, September 16, 2013

Higher markets when Summers withdraws as a candidate for the Federal Reserve

Dow shot up 162, advancers ahead of decliners better than 5-1 & NAZ added a mild 12.  The MLP index rose 2 to the 437s & the REIT index went up 3+ to the 271s.  Junk bond funds & Treauries rallied.  Oil declined to a 2-week low as a plan to eliminate Syria’s chemical weapons reduced the risk of a disruption in MidEast oil exports.  Gold gained ground.

AMJ (Alerian MLP Index tracking fund)

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CLV13.NYM...Crude Oil Oct 13...106.65 Down ....1.56  (1.4%)

GCU13.CMX...Gold Sep 13.......1,317.40 Up ...9.00 (0.7%)

Industrial production in the US rose in Aug as a bounce back in motor vehicle assembly lifted manufacturing output, a hopeful sign for the economy after growth got off to a slow start in Q3.  Industrial output increased 0.4% last month after being flat in Jul, according to the Federal Reserve (in line with expectations).  Manufacturing production advanced 0.7%, reversing the prior month's 0.4% drop, as automobile assembly rebounded 5.2% after slumping 4.5% in Jul.  Factory activity hit a speed bump early in the year.  The industrial production report pointed to some underlying momentum, which could support views of only a mild slowdown in economic growth in Q3.  Gains in industrial production were almost broad-based, though utilities output fell for a 5th consecutive month.  Mining production rose 0.3%, but that was a big step back from a 2.4% increase in Jul.  Last month, the amount of industrial capacity in use edged up to 77.8% from 77.6% in Jul.  Industrial capacity utilization, a measure of how fully firms are using their resources, was 2.4 percentage points below its long-run average.  Officials at the FED tend to look at utilization measures as a signal of how much "slack" remains in the economy, & how much room growth has to run before it becomes inflationary.

Industrial Production in U.S. Rises by Most in Six Months

However, manufacturing in the NY region expanded less than forecast in Sep even as orders & shipments picked up, while factories’ outlooks improved.  The Federal Reserve Bank of New York’s general economic index eased to 6.3 from 8.2 last month.  Readings greater than zero signal expansion in NY, northern NJ & southern Connecticut.  The forecast called for a reading of 9.1.  But a measure of the 6-month outlook climbed to the highest since Apr 2012.  Factories are seeing sustained US consumer demand & business investment as the economy shakes off the effects of fiscal drag & overseas markets improve.  Further gains in housing & auto industries are also bolstering growth in manufacturing, which accounts for about 12% of the economy.

Manufacturing in New York Area Expands Less Than Forecast

U.S. Secretary of State John Kerry

Photo:   Bloomberg

Secretary Kerry met with French President Hollande & his counterparts from France & the UK to build support for a plan to eliminate Syria's chemical weapons.  He plans also to meet ministers from Turkey & Saudi Arabia, both backers of the rebel forces seeking to topple Syrian President Assad.  The Paris discussions come as the UN prepares to release, as early as today, an inspection team’s report on a chemical weapons attack that the U.Ssays killed more than 1400.  Speaking after a meeting yesterday with Israeli Prime Minister Netanyahu, Kerry said the use of force remains an option if Assad fails to comply with the plan.  Kerry negotiated the accord with Russian Foreign Minister Lavrov.  The agreement establishes a framework for finding, securing & destroying Assad’s stocks of poison gas.  The deal calls for early signs of progress, giving Assad a week to submit (& hide) an inventory of his toxic weapons, with initial inspections in Syria by Nov.  Resolution of this mess is far from being a done deal.

U.S. Lines Up Allied Support for Chemical Weapons Plan

Larry Summers said he wasn't interested in running the Federal Reserve & stocks rallied. Not sure that annoucnement was worth all that much, but it sounded good to traders.  Meanwhile the economy is lumbering along with only moderate grade, good enough for a grade of C, but far short of a grade of A.  Oct 1 is around the corner & that's when the federal gov will need money to pay its bills.  The Syrian mess still has a lot of details to work out.  This is also the 5th anniversary of the Lehman collapse.  The FOMC has its big meeting this week when it will make decisions about tapering bond purchases without a leader appointed for next year.

Dow Jones Industrials

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