Wednesday, September 4, 2013

Markets rally after strong US auto sales in August

Dow rose 96, advancers over decliners 2-1 & NAZ went up 36.  The MLP index fell 3+ to the 432s & the REIT index rallied, going up 1+ to 260.  Junk bond funds crawled higher & Treasuries lost ground, taking the yield on the 10 year bond back to 2.9%.  Oil & gold sold off, with gold below 1400. 

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...107.21 Down ...1.33  (1.2%)

Live 24 hours gold chart [Kitco Inc.]

  • Matthew Staver | Bloomberg | Getty Images
Photo:   Yahoo

Conditions continued to improve in the US over the past 3 months, suggesting that the economy is reaching the point where monetary easing can be pulled back.  The Federal Reserve (FED) said growth was moving at a "modest to moderate pace" with improvements coming across all districts.  "Consumer spending rose in most districts, reflecting, in part, strong demand for automobiles and housing-related goods," the FED said in its Beige Book report.  Increased activity also was reported in travel & tourism, nonfinancial services & manufacturing, which the central bank said had grown "modestly."  The FED is buying $45B a month of Treasurys & another $40B in mortgage-backed securities.  However, with its balance sheet almost $3.7T, Big Ben has begun to contemplate an exit at least from the bond-buying aspect of its historically aggressive monetary easing.  Bernanke has said an unemployment rate in the range of 7.0% would be a good benchmark for ending QE, while 6.5% would be necessary before raising its policy rate, which remains near zero as it has since the financial crisis.  Yields keep rising on all forms of debt.

Upbeat Fed Outlook Suggests QE Tapering Is Near  CNBC

Buildings in Shanghai

Photo:   Bloomberg

China's leaders are extending a clampdown on credit, prompting analysts to caution that the economy is vulnerable to weakening after the pickup so far this qtr.  New yuan loans were probably little changed in Aug, after aggregate financing, the broadest measure of credit, posted a 4th straight drop in Jul, the longest streak in 11 years of data.  Estimates point to the fastest industrial-output gain since Dec & the slowest producer-price decline in 6 months.  The moderation in credit after a record Q1 financing boom stands to cap an economic rebound being driven by a recovery in confidence & the gov's support measures, such as faster spending on railways.  Overcapacity & pressure to clean up debt loom as challenges which could result in growth slowing to 7.2% in 2014 from 7.6% this year.  Analysts see growth slowing to 7.3% in Q4, the weakest in more than 4 years, after 7.5% in Q3.  The nation’s leaders are signaling that limits on the pace of growth are part of revamping the economy.  President Xi Jinping said China would “rather bring down the growth rate to a certain extent in order to solve the fundamental problems” hindering long-run development.  Premier Li Keqiang said that “we are able to and have conditions to meet China’s major economic and social development tasks this year.”

China Record Drop in Credit Growth Puts Momentum at Risk

JK Shin, head of Samsung Mobile Communications, presents the Samsung Galaxy Gear in Berlin, Germany, Wednesday, Sept. 4, 2013. Samsung has unveiled a highly anticipated digital wristwatch well ahead of a similar product expected from rival Apple. The so-called smartwatch is what some technology analysts believe could become this year's must-have holiday gift. Samsung unveiled the Galaxy Gear on Wednesday in Berlin ahead of the annual IFA consumer electronics show. (AP Photo/Gero Breloer)

Photo:   Yahoo

Samsung unveiled its highly anticipated digital wristwatch, beating Apple to what could become this year's must-have holiday gift item.  The smartwatches, which can perform tasks such as displaying email & Twitter messages on a device worn around the wrist, have been around for several years but have failed so far to inspire great interest among ordinary consumers.  But with smartphone behemoths bringing out new watches, there is a chance of wearable computers to break into the mainstream.  "With Gear you're able to make calls and receive calls, without ever taking your phone out of your pocket," Samsung's said at the launch in Berlin.  The Gear uses the Android operating system, just like many of the phones & tablets made by Samsung.  The Gear can act as an extension to a smartphone by discreetly alerting users to incoming messages & calls on its display screen, which measures 1.63" diagonally.  The strap, which comes in 6 different colors, holds a basic camera that can be used to shoot photos & video.  The Gear works with popular social media & fitness apps.  With smartphones and tablets now ubiquitous, electronics companies are trying to create a new category of products to lure consumer spending.  That includes building advanced computing technology into everyday objects such as wristwatches & glasses.  The Gear will be compatible initially with 2 Samsung products also unveiled today, the Galaxy Note III, which is a smartphone with a giant 5.7" screen & a digital pen, & the Galaxy Tab 10.1, a tablet computer with a 10.1" screen comparable to a full-sized iPad.  But Samsung promised to update other Galaxy phones & tablets to work with the Gear in future.  The Gear goes on sale in the US & Japan next month.  The rest of the world will get their hands on it sooner, on Sep 25, with prices starting at $299 (about twice the price of currently available devices).  Consider this the 1.0 version, improvements will be needed.  AAPL stock rose 10 on the news about more competition.  Its new product announcement comes next week.

Samsung $299 Galaxy Gear Tests Demand for Smart Watches

Apple (AAPL)

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Stocks had a good day led by techs.  Not sure why.  Yield sensitive stocks continue to have  tough time finding friends with thoughts of higher interest rates.  With one minor exception the MLP index is at its lowest level in almost 6 months.  Meanwhile everybody is guessing what the next move will be regarding Syria.  Fri brings the big jobs report & that will be digested by officials at the FED.  So far Dow is up about 100 in the early days of Sep.  Not bad all considered.

Dow Jones Industrials

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