Friday, September 13, 2013

Markets rise on easing Syrian tensions

Dow climbed 75, advancers ahead of decliners 3-2 & NAZ went up 6.  The MLP index dropped 4+ to the 434s (lowest in more than 6 months) & the REIT index went up a fraction in the 267s.  Junk bond funds were mixed & Treasuries gained a little ground.  Oil was flattish.  Gold posted the biggest weekly drop since Jun (to the low 1300s) on speculation that the Federal Reserve will cut fiscal stimulus next week, while talks started on a plan for Syria to surrender its chemical weapons.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

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U.S. 2-year


U.S. 10-year


CLV13.NYM..Crude Oil Oct 13....107.31 Down ...0.08  (0.1%)

Live 24 hours gold chart [Kitco Inc.]

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

Photo:   Bloomberg

In Sep, consumer confidence in the US declined to the lowest level since Apr, indicating household spending may take time to pick up.  The Thomson Reuters/University of Michigan preliminary index of consumer sentiment this month fell to 76.8 from 82.1 in Aug.  The forecast called for 82.  Payrolls had the smallest back-to-back gains in a year & mortgage interest rates are hovering close to a 2-year high, weighing on confidence.  The restrained pace of hiring makes it harder to spur consumers’ purchases, which account for about 70% of the economy.  The index averaged 64.2 during the 18-month recession that ended in Jun 2009, & 89 in the 5 years leading up to the slump that began in Dec 2007.  The Michigan sentiment survey’s current conditions index, which takes stock of Americans’ view of their personal finances, fell to a 5-month low of 91.8 in Sep from 95.2 in Aug.  The measure of expectations 6 months from now plunged to 67.2, the lowest since Jan, from 73.7 last month.  Americans expect an inflation rate of 3.2% over the next year, up from 3% in the prior month.  Over the next 5 years, they expect a 3% rate of inflation, up from 2.9%.  Rising mortgage rates may be reining in confidence.  The rate on a 30-year fixed loan was 4.57% as of  yesterday, close to the highest level since Jul 2011, according to Freddie Mac.

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

In this photo of July 31, 2013, school uniforms by Arizona are displayed at JC Penney in New York. The government reports how much U.S. businesses adjusted their stockpiles in July on Friday, Sept. 13, 2013. (AP Photo/Mark Lennihan)

Photo:   Bloomberg

US businesses restocked their shelves & warehouses in Jul at the fastest pace since Jan as their sales rose, a hopeful sign for economic growth.  Business stockpiles increased 0.4% in Jul from Jun, the Commerce Dept said, after ticking up just 0.1% the previous month.  Total business sales rose 0.6% in Jul, up from just 0.2% in Jun.  Rising stockpiles can be a good sign for the economy because they suggest companies expect greater sales.  Greater inventory building also means businesses ordered more goods, boosting factory production & economic growth.  And higher sales mean that companies are less likely to be stuck with excess goods.  Business stockpiles in Jul stood at $1.66T, 3.2% higher than a year ago.  Retail stockpiles grew 0.8%, manufacturers increased theirs 0.2% & wholesalers added just 0.1%.  Manufacturers account for about 40% of business inventories, retailers about 1/3 & wholesalers the rest.  Faster restocking contributed nearly 0.6 percentage points to GDP growth in Q2 when the economy expanded 2.5% at an annual pace.  But growth may slow in Q3 to an annual rate of 2% or less.  Consumers remain cautious & businesses have cut back on their spending on industrial machinery & other factory goods.

US businesses boost stockpiles as sales grow Associated Press

Kerry Says Talks Progressing With No Breakthrough Seen

Photo:   Bloomberg

Secretary John Kerry reported a “constructive” start to talks with Russia over Syria’s chemical weapons, while giving no sign of a breakthrough in negotiations.  “We would both agree that we had constructive conversations regarding that, but those conversations are continuing,” Kerry said after initial meetings with Russian Foreign Minister Sergei Lavroy.  Obstacles included a US refusal to take military options off the table, a Russian official said.  For its part, the US has demanded that Syria be held to tight timelines in putting its chemical warfare agents under intl control.  UN Secretary-General Ban Ki-Moon said that a report by UN inspectors will confirm that chemical weapons were used Aug 21, in what the US says was a regime attack that killed more than 1400 in an opposition-controlled area near Damascus.  The UN team wasn’t permitted under its mandate to assign responsibility for the attack, & Syria & Russia have blamed anti-regime “terrorists.”  While it is up to the Syrian people to decide whether to oust President Bashar al-Assad, Ban said, the regime’s leader has “committed many crimes against humanity” & will be held accountable when the conflict is over.  This is the usual example of all talk, but nothing gets done.

Stocks went up again today, but not on conviction.  Volume was low.  Hopes are that the Syrian mess will take care of itself, then go away.  Big Ben speaks next week & his likely comments are already baked into the market.  High yield sectors have been hit with selling & are significantly below their yearly highs.  Even the MLP index, which has been less affected by selling, is 34 below the record high made in May.  But Dow is off just 300 from its record high in Aug, as if it didn't have a care in the world.

Dow Jones Industrials

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