Friday, September 20, 2013

Markets little changed after comments from the Federal Reserve

Dow slid 17, decliners over advancers more than 3-2 & NAZ gained 9.  The MLP index fell 3 to 446 after its jump of 19 in the last 2 days & the REIT index dropped 2 to the 276s.  Junk bond funds were lower & Treasuries did little.  Oil dropped for a 2nd day as Libya’s oil production rebounded & the threat of military strikes against Syria receded, damping concern that MidEast supplies may be disrupted.  Gold pulled back after yesterday's big gain.

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...105.75 Down ...0.64  (0.6%)

GCU13.CMX...Gold Sep 13.......1,368.30 Down ....1.10  (0.1%)

Federal Reserve Bank of St. Louis President James Bullard

Photo:   Bloomberg

Federal Reserve Bank (FED) of St. Louis President Bullard, who has backed record stimulus, said a small tapering of bond buying is possible next month after the FED made a close call this week in deciding not to slow purchases.  “That was a borderline decision” after “weaker data came in,” Bullard said today.  “The committee came down on the side of, ‘Let’s wait.’”  Bullard called the Oct a “live meeting,” because “it’s possible you could get some data that change the complexion of the outlook & could make the committee be comfortable with a small taper in October.”  The FED this week unexpectedly refrained from reducing its monthly asset purchases, saying it needs to see more signs of sustained labor market gains.  Big Ben said the central bank would decide on whether to taper purchases based on “what’s needed for the economy.”  Markets shouldn’t have been surprised by the decision because FOMC has repeatedly said the decision to slow, or taper, would be “data dependent,” Bullard said.  “I’m a little dismayed at those in markets that are saying they’re surprised by this,” Bullard added.  The FED said that, “if the economy was going to improve in the second half of the year, and if we saw that improvement, we would taper.”

Sales of U.S. Existing Homes Unexpectedly Climb to Six-Year High

Photo:   Bloomberg

Sales of previously owned homes in the US unexpectedly rose in Aug to the highest level in more than 6 years as buyers rushed to lock in interest rates before they increased further.  Purchases climbed 1.7% to a 5.46M annual rate, the most since Feb 2007, according to the National Association of Realtors.  The forecast called for 5.25M.  The housing data reflect transactions begun in Jun or Jul, when buyers were trying to get loans at mortgage rates near record lows. The Realtors’ chief economist said sales will probably cool, which combined with figures showing a slump in new-home demand & weaker-than-projected construction explains why the FED decided to maintain stimulus. 

Home Sales Climb as Americans Rush to Lock in Rates: Economy

Home Depot, a Dow stock, plans to end medical coverage for about 20K part-time employees & direct them to gov-sponsored exchanges scheduled to open next month as companies revamp benefits to fit Obamacare.  Employees with fewer than 30 hours a week will no longer be offered limited liability medical coverage.  That's 5% of the 340K enrolled in the plan.  Other employers have been cutting benefits ahead of next month’s roll-out of gov exchanges that were designed to give uninsured Americans a chance to buy taxpayer-subsidized medical coverage.  Obamacare exchanges are scheduled to open Oct 1 to sell policies that take effect Jan 1.  HD said it is maintaining coverage for full-time workers, though those people will pay more next year, reflecting a rise in the cost of health care.  Whether part-timers pay more under the health law’s insurance marketplaces will depend on the type of plans they choose.  The company will continue offering part-time employees coverage for dental, vision, critical illness, disability & back-up dependent care.  Trader Joe’s, the closely held grocery store chain, said last week it will end health benefits for part-time workers next year.  Employees will get $500 to help them buy insurance elsewhere.  Obamacare is causing moe confusion for small employers.  HD lost 18¢.

Home Depot Plans to Send 20,000 Part-Timers to U.S. Health Care Exchanges

Home Depot (HD)

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Traders are still digesting comments coming from the FED about intentions on tapering.  The FED will continue to give send message to keep everybody guessing, which is what it is doing.  The Syrian mess has quieted down, a bit.  But that remains a fuzzy situation as the UN is trying to figure out how to handle it.  As usual, it is all talk but no action.  This should be a quiet & lazy day for the markets.  Next week dysfunctional DC will be center stage as the politicos work on the fiscal budget for the new year that starts in 10 days.  

Dow Jones Industrials

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