Friday, November 1, 2013

Markets edge higher on strong October auto sales

Dow rose 69. but decliners over advancers 5-4 & NAZ inched up 4.  The MLP index was off a smidgeon in the 455s & the REIT index inched up fractionally in the 279s.  Junk bond funds were higher & Treasuries pulled back as money went into stocks.  Oil is headed for its longest run of weekly declines since Jun 2012 amid ample stockpiles & as the dollar gained versus the € on speculation the ECB will cut interest rates.  Gold dropped with money going into stocks.

AMJ (Alerian MLP Index tracking fund)

stock chart

Treasury yields:

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U.S. 2-year


U.S. 10-year


CLZ13.NYM....Crude Oil Dec 13...95.29 Down ....1.09  (1.1%)

GCX13.CMX...Gold Nov 13.....1,309.30 Down ...14.30  (1.1%)

Economists Cut Fourth-Quarter U.S. Growth Forecast on Shutdown

Photo:   Bloomberg

The US economy will probably expand at a 2% annualized rate in Q4, less than projected at the start of the budget impasse that resulted in a 16-day gov shutdown.  The median projection compares with a 2.4% forecast in an Oct 4-9 survey.  GDP may increase to a 2.6% growth rate in Q1-2014, unchanged from the previous survey.  Q4 GDP will reflect a decline in gov output, estimated by the number of hours put in by federal workers, as well as cutbacks at contractors.  Growth may pick up in Q1 as the economy recovers from any shutdown-induced pause in business & consumer purchases.  The first of 3 reports on Q3 growth, originally scheduled for release earlier this week, is now due on Thurs as the shutdown kept federal agencies from collecting data.  The median estimate in a preliminary survey calls for a 1.9% rate Q3 after the economy expanded at a 2.5% annualized pace in Q2.  Postponement of the gov data releases has made it difficult for economists to gauge the economy’s progress.

Fourth-Quarter U.S. GDP Forecasts Lowered on Shutdown

U.S. ISM Manufacturing Index Rose to 56.4 in October From 56.2

Photo:   Bloomberg

Manufacturing grew in Oct at a faster pace than forecast, showing US factories were a source of strength for the economy at the start of Q4.  The Institute for Supply Management Index climbed to 56.4, the highest since Apr 2011, from 56.2 a month earlier.  Readings above 50 indicate growth.  The forecast was for 55.  Resilient motor vehicle sales & recovery in housing are helping sustain production at the same time global markets begin to pick up.  Today’s figures show the brinksmanship over the budget that closed the federal gov for 16 days last month did little to spoil the rebound in manufacturing since the middle of the year.  Manufacturing accounts for about 12% of the economy.  Of the 18 industries covered, 14 reported expansion in Oct, led by textile mills.  From China to South Korea, manufacturing strengthened last month in a sign that growth risks are abating in Asia & expansion may pick.

U.S. ISM Manufacturing Index Rose to 56.4 in October From 56.2

  • The Chrysler logo is shown on a new Chrysler 200 on the showroom at the Massey-Yardley Chrysler, Dodge, Jeep and Ram automobile dealership in Plantation, Florida October 8, 2013. REUTERS/Joe Skipper
Photo:   Yahoo

Oct auto sales in the US rose by double-digits from a year earlier, but results at Ford (F) & Chrysler narrowly missed expectations.  Automakers reporting monthly sales were expected to show a gain of 12% to 1.22M vehicles, or 15.4M vehicles on a seasonally adjusted annualized basis.  General Motors (GM) said Oct sales climbed nearly 16% to 226K from 195K a year ago, beating expectations.  All 4 GM brands reported year-to-year increases, with Buick up 31%.  Analysts expected ales of 211K.  Ford Oct sales increased 14% to 192K from 168K a year earlier.  Ford & Lincoln brand sales both were up during the month.  Analysts expected 194K.  Chrysler reported Oct sales of 140K, up 11% from 126K a year ago & analysts expected 143K.  Sales of full-size pickups continued to show strength, although their torrid year-long pace slowed a bit.  Volkswagen's US subsidiary said VW brand sales fell 18% to 28K.  Hyundai sales climbed 7% to 53K vehicles. 

October Sales Miss Expectations at Chrysler, Ford Reuters

Traders are digesting intentions by the Federal Reserve (FED) on a next step in its easy money policy & waiting for GDP data next week.  Dow is within a whisper of its record high reached earlier this week.  I know  I'm repeating, but the high yield sectors have seen better days earlier this year & that bothers me a lot.  Big Ben won't be doing much in the next few weeks, but next year the FED should start trimming its bond buying purchase program & the stock market won't like that.

Dow Jones Industrials

stock chart

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