Monday, November 25, 2013

Markets inch higher after Iranian nuclear deal

Dow rose 31 to another record, decliners just ahead of advancers & NAZ inched up 1 taking it closer to 4K.  The MLP index was up 1+ to the 457s (but still flat from late Mar) & the REIT index fell 1 to the 266s.  Junk bond funds & Treasuries fluctuated.  Oil dropped as a deal between Iran & 6 world powers on the country's nuclear program made it more likely that sanctions choking Iranian oil exports will be lifted while gold was flat, assessing the Iran deal.

AMJ (Alerian MLP Index tracking fund)

stock chart

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLF14.NYM...Crude Oil Jan 14...............93.63 Down ...1.21  (1.3%)

ZGZ13.CBT.....Gold 100 oz. Dec 13...1,244.70 Up ...0.60 (0.1%)

Existing Home Sales

Photo:   Bloomberg

The number of contracts signed to buy previously-owned homes unexpectedly fell in Oct for a 5th consecutive month amid higher borrowing costs that are denting the real-estate recovery.  The gauge of pending home sales decreased 0.6% after a 4.6% drop in Sep, according to the National Association of Realtors (NAR).  The forecast called for a 1% gain.  Higher mortgage rates & price increases driven by a tighter supply of homes for sale may be keeping some prospective buyers out of the real-estate arena.  Further gains in hiring & confidence would help boost the housing-market recovery as well as the US economic expansion.  The NAR’s report showed purchases decreased 2.2% from the year prior on an unadjusted basis.  The pending sales index was 102.1, the lowest this year.  A reading of 100 corresponds to the average level of contract activity in 2001, or “historically healthy” home-buying traffic.  “We could rebound a bit from this level, but still face the headwinds of limited inventory and falling affordability conditions,” the group’s chief economist Lawrence Yun said.  “Job creation and a slight dialing down from current stringent mortgage underwriting standards going into 2014 can help offset the headwind factors.”  2 of 4 regions showed a decrease from the Sep figures, led by a 4.1% slump in the West.  Pending sales also declined in the South & rose in the Northeast & Midwest.  Existing-home sales are expected to reach about 5.1M this year & be little changed in 2014, the group said.  Purchases weakened in Oct to a 5.12M annual rate, the fewest since Jun.  About 4.7M previously-owned homes were sold in 2012.

Pending Sales of U.S. Existing Homes Drop for Fifth Month

ECB Headquarters

Photo:   Bloomberg

ECB Governing Council member Ardo Hansson said the ECB stands ready to cut borrowing costs further & is technically prepared to make its deposit rate negative.  “The options on rate cuts are still not fully exhausted and there are all kinds of other measures that are still on the table,” Hansson said on Fri.  “Of course, every time you use one option, you have one less to use. But I don’t see us, by any means, running out of our toolkit of things we can draw on.”  The ECB, fighting a slowdown in inflation that threatens to undermine the area’s recovery, cut its main refinancing rate by a quarter percentage point to a record low of 0.25% this month & policy makers are considering a smaller-than-normal cut in the deposit rate, currently at zero, to minus 0.1% if more stimulus is needed.  “We are technically ready” to reduce the deposit rate, said Hansson.  “We’ve had a tradition of using those 25 basis points so I’d have to look at some analysis of different options. Theoretically, a smaller cut wouldn’t be off the table. Certainly, the bigger the move, the more impact you have.”  While a negative deposit rate could help the recovery, it would also come with risks, Hansson said.  Banks’ profits may be hit as as loan rates fall while the institutions may be unable to pass negative rates onto depositors.  “It has positive effects in terms of broadening the room for maneuver,” he said.  “On the other hand, it may certainly compress banks’ net interest margins,” he said, referring to the difference between a bank’s lending and deposit rates.

ECB’s Hansson Says Rate Cut Options Not Fully Exhausted

Cyber Monday, billed as one of the busiest online-commerce days of the year, is spilling into the rest of the holiday season as more consumers use mobile devices to shop whenever they please.  Consumers armed with tablets & smartphones are ordering online over a longer stretch, according to ComScore.  That’s spurring e-commerce heavyweights to grapple with retailers including in using online promotions & mobile applications to lure tech-savvy gift buyers long before & after Cyber Monday.  As more purchasing happens over the Web, e-commerce will keep outstripping shopping in brick-and-mortar stores.  Online holiday sales will increase as much as 15% to $82B, more than 3 times faster than the gain of 3.9% to $602B, according to the National Retail Federation.  Evidence of an extended online buying period emerged last year, especially on Thanksgiving Day & Christmas Day, as consumers browsed online offers between post-turkey naps.  Growth in spending on those days rose, up 32% on Thanksgiving versus 18% in 2011, while the pace of Cyber Monday sales growth slowed to 17% last year, compared with 22% the year prior, according to ComCcore.  The trend is set to accelerate this year as mobile offers take off.  Commerce on tablets & smartphones grew twice as fast in Q3 as desktop online spending, & Web users in Aug spent more time engaging with retailers on mobile devices than on desktops for the first time, according to ComScore.  Today, 1/3 of average monthly traffic for leading retailers is from smartphones & tablets, according to ComScore.  As a result, stores are offering more holiday deals that can reach consumers whenever they’re plugged into those devices.

Cyber Monday Every Day as IPhone Users Shun Retail Stores

Even with the Iranian deal, markets are not doing very much as a holiday shortened week begins.  Like with Obamacare, the pres likes this deal & has to explain that to much of the rest of the world.  If it goes thru, that means 1M barrels of oil will come to market, causing the price decline (which has been under pressure for months).  The news on home sales signals that this booming business is losing a lot of steam because of limited supply, rising mortgage rates & worries by consumers about where the economy is going.  As has been the case all year, Dow is unconcerned with problems with a "What can go wrong?" attitude.  There are plenty of problems, starting with the budget mess in DC.

Dow Jones Industrials

stock chart

No comments: