Wednesday, September 18, 2013

Markets waffle, awaiting Fed announcement

Dow was off 39, decliners over advancers 2-1 & NAZ gained 1.  The MLP index slid a fraction in the 429s & has a weak short term chart (below).  The REIT index fell 1+ to the 268s.  Junk bond funds were a little lower as were Treasuries.  Oil found some buyers while gold fell to 1300, an important support level.

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...106.05 Up ...0.63 (0.6%)

GCU13.CMX...Gold Sep 13.......1,305.10 Down ...4.40  (0.3%)

FILE - In this Thursday, Aug. 1, 2013, file photo, a new home is under construction in Omaha, Neb.Th e Commerce Department reports the pace at which builders broke ground on homes in August on Wednesday, Sept. 18, 2013. (AP Photo/Nati Harnik, File)

Photo:   Yahoo

US builders started work in Aug on the most single-family homes in 6 months & requested permits to construct even more in future months.  The figures suggest housing remains a driver of economic growth despite higher mortgage rates.  Construction of single-family homes started rose 7% to an annual rate of 628K according to the Commerce Dept.  That's the fastest rate since Feb & builders sought 627K permits to construct future single-family homes, 3% more than Jul (the best pace in 5 years).  Overall, builders broke ground last month on houses & apartments at an annual rate of 891K, up from a rate of 883K the previous month.  The gain in single-family homes was offset by a decline in volatile demand for apartments.  Total permits fell to a rate of 918K from 954K in Jul, also because of a decline in apartments.  Housing starts are 19% higher than a year ago.  The housing market has been recovering steadily over the past year, helped by lower mortgage rates & steady job growth.  The gains have contributed to economic growth at a time when consumers & businesses have spent more cautiously.  But mortgage rates have risen more than a full percentage point since early May & higher rates may be starting to slow the recovery's momentum.  In Jul, new-home sales plummeted to the lowest level in 9 months.

Work Began on Fewer U.S. Homes Than Projected in August

Handlers scan and affix a courier route label onto packages moving down the belt at the Marina Del Rey, California FedEx station December 12, 2011. REUTERS/Fred Prouser

Photo:   Yahoo

FedEx posted a better-than-expected profit on cost cuts & said it would raise rates next year for express shipping, a business that has suffered as customers shift to slower but cheaper delivery options.  The company, an economic bellwether, said EPS was $1.53 in fiscal Q1.  FDX also backed its profit view for the year.  It will raise express shipping rates an average 3.9% for US domestic & intl services, effective Jan 6 & the rate increases for its ground courier facilities will be announced later this year.  EPS beat the estimate by 3¢ on cost cuts & other price increases it implemented earlier.  FDX also retired older, less efficient airplanes.  The company said modernization of its fleet reduced maintenance costs in the qtr.  Revenue at its express unit fell, but operating margins rose to 3.6 % from 3.1% the previous year.  Revenue at its lower-margin ground segment rose 11%, but operating margins were at 17.1%, down from 18.1% last year.  The stock shot up 3.38.

FedEx Profit Beats Estimates Amid Shift to Cheaper Shipments

FedEx (FDX)

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The pres's budget office is urging federal depts & agencies to get ready for a possible gov shutdown in less than 2 weeks.  Sylvia M. Burwell, director of the OMB, issued a 16-page memo (why isn't a 1 page memo good enough?) directing agency executives to begin preparing for a “lapse in appropriations” for the new fiscal year that begins Oct 1.  The administration wants to avoid a shutdown &  is prepared to work with Congress to fashion a temporary extension of funding that would give lawmakers time to work out long-term budget legislation to fund the gov for fiscal 2014, Burwell said.  “The administration does not want a lapse in appropriations to occur,” she said.  “However, prudent management requires that agencies be prepared for the possibility of a lapse.”  If there is no agreement on a stopgap funding measure, most, though not all, gov operations would come to a halt.  House Reps are planning to include a proposal to defund Obamacare in a stopgap measure to finance the gov thru Dec 15.  In the House, Rep leaders’ scenario involves a stopgap measure that defunds or delays Obamacare while financing the gov agencies.  Such a measure would be stronger than the proposal last week to compel the Senate to vote on defunding the health-care law without endangering money needed to keep the gov running when fiscal 2014 starts.

Obama Budget Office Urges Agencies to Plan for Shutdown

Traders are twiddling their thumbs.  Not much to do until Big Ben speaks.  The bond buying program is expected to be cut back & hardly anybody thinks the near zero interest interest rate will be touched.  In the meantime, yield sensitive securities remain weak.  Buyers are already hiking up those interest rates.  As long as Big Ben's announcement roughly matches expectations, markets should not move very much in the PM.

Dow Jones Industrials

stock chart

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