Tuesday, September 17, 2013

Markets rally ahead of Federal Reserve meeting

Dow went up 34, advancers over decliners 2-1 & NAZ jumped 27.  The MLP index fell 2+ to 430 (its low since Feb with one minor exception) & the REIT index was off a fraction to 270.  Junk bond funds slide lower while Treasuries had modest gains.  Oil & gold pulled back, with gold near the important 1300 resistance level.

AMJ (Alerian MLP Index tracking fund)

stock chart

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLV13.NYM...Crude Oil Oct 13...105.14 Down ....1.45  (1.4%)

Live 24 hours gold chart [Kitco Inc.]

Countries should observe “speed limits” & avoid narrowing fiscal deficits too quickly, even when they face pressure from investors justifying a large debt reduction, according to IMF.  “As we have seen for some euro-area members, countries in a weak fiscal position that are facing market pressure or have lost market access have undertaken large and front-loaded adjustments,” according to a report by the IMF.  The research compiles lessons from the global financial crisis & the debt turmoil that  followed in Europe.  “In many countries, fiscal imbalances are of such magnitude that addressing them in the near term would require adjustment on a scale that would dramatically impact economic activity and would have devastating consequences for the provision of government services,” the report said.  The IMF has been softening its support for fiscal austerity in recent years as its Chief Economist Blanchard argued that budget cuts had caused a deeper-than-expected reduction in European growth.  Countries including Greece & Portugal, which received joint loans from the IMF & the other euro-region nations, were granted more time to meet deficit targets.  “Even for countries under market pressure there are ‘speed limits’ that govern the desirable pace of adjustment,” the report said.

IMF Says Budget Cutting Needs ‘Speed Limits’ Even Under Pressure

Poverty in U.S. Remains High as Incomes Stall, Census Says

Photo:   Bloomberg

Poverty in the US remained close to a 2-decade high & incomes continued to stagnate as the nation struggled to fully recover from the worst economic slump since the Great Depression, Census Bureau data show.  The proportion of people living in poverty was 15% in 2012.  Both numbers weren’t statistically different from the previous year.  The data released today show the economic expansion hasn’t broadened to all Americans.  Rising stock prices & home values have boosted the finances of the more affluent, while those on the lowest tiers contend with high unemployment & stagnant wages.  If there was any good news, it was that things stopped getting worse in 2012.  “For the first time in five years, neither median household income decreased nor the percent of the population in poverty increased,” David Johnson, chief of the social, economic & housing division at the Census Bureau, said.  There were 46.5M living in poverty, including 16.1M children, the agency said.  The poverty rate remains 2.5 percentage points higher than in 2007, the last year before the worst of the recession.  It was above 15% from 2010-2012, the highest since 1993, when it was at 15.1%. 

U.S. Poverty Remains High as Incomes Stall, Census Says

Consumer Prices in U.S. Rose Less Than Forecast in August

Photo:   Bloomberg

The cost of living in the US rose less than forecast in Aug, a sign it will take time for inflation to reach the goal of the FOMC as its members consider trimming stimulus designed to bolster the economy.  The consumer-price index increased 0.1%, the least in 3 months, after a 0.2% gain in Jul, Labor Dept figures showed.  The core measure, which strips out food & fuel, also rose 0.1%.  Central bankers have said they are watching prices to ensure the US doesn’t slip into a prolonged period of disinflation that threatens the expansion.  It is expected that the FOMC tomorrow will probably announce lowering the monthly pace of bond purchases by $10B, to $75B, according to a recent survey, down from expectations of a $20B reduction in a Jul survey.

Cost of Living in U.S. Increases Less Than Forecast: Economy

Stocks had another good day with tech stocks adding a little extra for NAZ.  After the advance in Sep, Dow is within 100+ of its record high reach at the start of Aug.  Buying is puzzling because there was no fundamental economic news to back it up.  Maybe the lack of an attack on Syria gave strength to the buyers.  But now is the time to get serious.  The FOMC meeting tomorrow should be a non event with the news baked into the markets.  Then there's the fiscal mess in DC, & the Reps are out for blood after Obama's speech yesterday.  Once again, Dow is not concerned.

Dow Jones Industrials

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