Friday, September 27, 2013

Lower markets on concerns about DC budget battle

Dow slipped 70, decliners over advancers 2-1 & NAZ lost 5.  The MLP index was off 3+ to 445 & the REIT index fell 1+ to 271.  Junk bond funds were mixed & Treasuries gained, with the 2.6% yield on the 10 year Treasury down from its recent high near 3%.  Oil tumbled for a 3rd week on forecasts that the US budget impasse may hurt growth in the world’s largest oil-consuming country, as easing tension in Syria reduced supply concerns.  Gold rose to a one-week high after Federal Reserve Bank of Chicago President Charles Evans said more signs of strength in the economy are needed to reduce asset purchases.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

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U.S. 2-year


U.S. 10-year


CLX13.NYM...Crude Oil Nov 13...103.09 Up ...0.06 (0.1%)

GCV13.CMX...Gold Oct 13...1,339.00 Up ...15.40 (1.2%)

Consumer Sentiment in U.S. Falls to Lowest Level Since April

Photo:   Bloomberg

Confidence among consumers declined to a 5-month low in Sep as Americans’ views on the economy dimmed.  The Thomson Reuters/University of Michigan final index of sentiment decreased to 77.5 from 82.1 in Aug.  The estimate called for a drop to 78, after a preliminary reading of 76.8.  Higher mortgage rates that threaten to slow momentum in the housing market may be making Americans less sanguine about the economic outlook.  Stronger job & wage growth would help bolster spending for those lower-income households that aren’t benefiting from the recent upswing in stocks & home prices.  The Michigan sentiment survey’s current conditions index, tracking Americans’ view of their personal finances, decreased to 92.6 from 95.2 last month & the gauge of expectations 6 months from now declined to 67.8 from 73.7 in Aug.

Consumer Sentiment in U.S. Falls to Lowest Level Since April

  • In this Wednesday, Sept. 18, 2013 photo, a consumer exits a store with a sale sign posted in the windows in Philadelphia. The government reports how much consumers spent and earned in August on Friday, Sept. 27, 2013. (AP Photo/Matt Rourke)
Photo:   Yahoo

US consumers increased spending slightly last month as their income grew at the fastest pace in 6 months, pointing to only modest economic growth in Q3.  Consumers' spending on goods & services rose 0.3% in Aug, according to the Commerce Dept.  That's barely ahead of a 0.2% gain in Jul, which was slightly more than the 0.1% reported last month.  Income rose 0.4%, the best gain since Feb & up from a 0.2% Jul increase.  Private wages & salaries rose 0.5%, while gov wages & salaries rose 0.2.  Gov figures would have been higher if not for forced federal furloughs that reduced wages & salaries by $7.3B.  Consumer spending drives 70% of economic activity & it is believed that this increase is not enough to accelerate economic growth in Q3 from the 2.5% annual rate Q2.

Consumer Spending in U.S. Climbs 0.3% as Incomes Pick Up

Senate Majority Leader Harry Reid

Photo:   Bloomberg

The Senate voted to finance the gov thru Nov 15 after removing language to choke off funding for the health care law, putting pressure on the House to avoid a federal shutdown set to start Oct 1.  The chamber, on a party-line vote of 54-44, passed the spending measure & sent it back to the House, after stripping a provision backed by Reps to defund Obamacare.  “The country’s not going to be extorted,” Harry Reid said after the vote, warning that the gov would close if the House didn’t accept the Senate’s bill.  “This is no way to govern, and it has to end.”   The Senate vote sets up a weekend of negotiating & brinkmanship that could continue until spending authority expires on Mon night.  House Reps are insisting that the short-term spending bill include limits on the health-care law’s reach, a demand that Dems won’t accept.  House Reps haven’t identified their next move.  They’ll meet tomorrow to discuss strategy for the spending bill, including a potential vote this weekend.  Of course, these are the same guys who took weeks for vacation prior to Labor Day.  They could have come back early to get this work done then.  They don't care!

Senate Passes Stopgap Bill While House Lacks Clear Plan

Dow is back to a 3 week low (although still up more than 400 in Sep) while the fiscal mess in DC drags on.  Even after passing a wimpy compromise at the last minute (maybe even later), very little will be resolved.  It will only fund the gov for a few weeks.  Then the next budget extension will mean we have to go thru this again.  In the interim, raising the debt ceiling needs to be settled & that solution looks far off.  If anything, that is more serious.  The gov is addicted to deficits which means it constantly has to borrow more money.  Dow is not greatly disturbed, only off 400+ from recent record highs.

Dow Jones Industrials

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