Monday, September 23, 2013

Markets retreat on worries about the next move by the Fed

Dow slid 49, decliners over advancers 3-2 & NAZ dropped 9.  The MLP index fell 2+ to the 443s (after a big gain last week) & the REIT lost 1+ to the 272s.  Junk bond funds were lower & Treasuries gained ground.  Oil & gold also saw selling.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLX13.NYM...Crude Oil Nov 13....103.46 Down ...1.29  (1.2%)

Live 24 hours gold chart [Kitco Inc.]

NY Fed President William C. Dudley

Photo:   Bloomberg

Federal Reserve Bank (FED) of New York President Bill Dudley said policy makers must “forcefully” push against economic headwinds as the US has yet to show “any meaningful pickup” in momentum.  “The economy still needs the support of a very accommodative monetary policy,” Dudley, vice chairman of the FOMC, said today in a speech.  “Improving economic fundamentals versus fiscal drag and somewhat tighter financial conditions are pulling the economy in opposite directions, roughly canceling each other.”  The FOMC last week unexpectedly refrained from reducing their $85B in monthly bond buying, saying they need to see more signs of sustained labor-market gains.  Big Ben said on Sep 18 the FED will alter record accommodation based on “what’s needed for the economy” & not “let market expectations dictate our policy actions.”  Dudley said any decision to taper bond purchases shouldn’t be seen as a sign the benchmark interest rate will be raised any sooner, & that the FED may wait “a long time” to raise the rate after breaching its 6.5% unemployment threshold.  He has consistently supported the monetary easing policies.  Dudley said the economy is “slowly healing” & faces headwinds including “the large amount of fiscal drag” from tax increases & budget cuts, as well as the “tightening of financial-market conditions” that has occurred since May.  This was a carefully planned "leak" by the FED.

Dudley Says Fed Must ‘Forcefully’ Push Against Headwinds

The Surface logo is illuminated on a stage prior to the introduction Microsoft's new Surface tablet computer, Monday, Sept. 23, 2013 in New York. Microsoft is introducing new Surface tablet computers and accessories, including a professional model that allows people to use it more like a laptop or a desktop. (AP Photo/Mark Lennihan)

Photo:   Yahoo

Microsoft, a Dow stock, introduced new Surface tablets, including a professional model that allows people to use it more like a laptop or a desktop computer.  The company is trying to boost its tablet business as sales of traditional desktop & laptop computers decline.  The Surface Pro 2 is targeted at professionals who want the full power of a laptop in a tablet-style device.  The kickstand built into the device is redesigned to make it easier to use on laps.  In the past, it worked best on a flat surface such as a table.  The Pro 2 also offers a 75% improvement in battery life over the previous model & has a new cover accessory that extends battery life even further.  An optional docking station allows the Pro 2 to be used like a laptop.  A cheaper model, Surface 2, offers a better screen & other improvements over last year's Surface RT.  The Surface 2 starts at $449, & the Surface Pro 2 at $899.  It will be available on Oct 22 in the US & other markets.  The updated Windows 8 operating system will be released on Oct 17.  Among other things, Windows 8.1 will be usable on smaller touch screens, which have become popular because they are cheaper & easier to carry.  The current version was limited to tablets with 10-12" screens.  The screen on both new Surface models remains at 10.6".  The stock lost a nickel.

Microsoft Tries Again to Woo Tablet Customers With Updated Surface Devices

Microsoft (MSFT)

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Holiday hiring by US retailers may fall 6.9% this year as shaky consumer confidence & more efficient store practices reduce demand for seasonal workers, according to Challenger, Gray & Christmas.  Retailers will hire about 700K temporary staff this year, down from 752K last year, the employment consulting firm said today.  Last year’s hiring was a 12-year high & up 14% from 2011.  The forecast signals retailers are approaching the holiday season with caution after Q2 results showed shoppers were restraining purchases on non-essential items.  The Thomson Reuters/University of Michigan preliminary index of consumer sentiment this month fell to the lowest level since Apr.  “While the economy and the job market are improving, it has now been four years since the recession officially ended and millions of Americans are still unemployed or underemployed,” CEO John Challenger said.  “As a result, consumers remain uneasy, which is evidenced by wide monthly mood swings in confidence surveys.”  Retail sales at stores may rise 2.4% in Nov-Dec, down from a 3% increase in 2012 & a 4% gain in 2011, ShopperTrak said last week & store traffic may drop 1.4% from last year.  Deloitte LLP said today that retail sales including online & other non-store purchases may rise as much as 4.5% from Nov-Jan, in line with last year’s gain.  Stores traditionally start hiring for the holiday season, which starts on Black Friday & ends at Christmas, in Oct.  The holiday shopping period is important for retailers’ sales figures, & this year’s holiday season is 6 days shorter than last year, making up only 25 days instead of the 31 shopping days in 2012.

U.S. Retailers’ Holiday Hiring Seen Falling 6.9% by Challenger

This was another listless day.  But the bulls would hardly know that with the Dow only 260 below the record reached last week.  As I mentioned last week, the clock is ticking on the time left in this fiscal year.  The Reps & Dems are very far apart & it seems like there is a good chance there will be some federal layoffs.  However, the gov will not collapse.  It takes in something like $2.8T annually which can pay a lot of bills.  But with a reduced deficit of "only" $0.6T, there will be squeezing when it comes to paying bills.  Gov workers are in charge of the squeezing & they will make it as painful as they can.  Stocks could have a tough week.

Dow Jones Industrials

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