Tuesday, November 26, 2013

Markets rise on housing data

Dow inched up a fraction (good enough for a new record, but there was selling into the close), advancers over decliners 4-3 & NAZ gained 31 - helped by a good day for Apple (AAPL) & Amazon (AMZN).  The MLP index lost 2 to 455 & the REIT index was fractionally lower in the 265s.  Junk bond funds rose fractionally & the 10 year Treasury bonds were higher.  In the PM, oil & gold continued little changed.

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....93.85 Down ...0.24  (0.3%)

Live 24 hours gold chart [Kitco Inc.]

One regional Federal Reserve (FED) bank continued to seek a quarter point cut in the discount rate last month while 3 other branches pushed for a matching hike, but the FOMC decided to leave rates unchanged at 0.75%.  Minneapolis FED directors sought a cut to 0.50% in the discount rate, the level at which banks may borrow from the FED if they are unable to raise funds in the private market.   Dallas, Philadelphia & Kansas City requested a hike to 1.0%, according to documents released today.  "Those directors requesting an increase, which would widen the spread between the primary credit rate and the upper end ofthe target range for the federal funds rate to 75 basis points,were interested in moving toward the 100-basis-point spread in the pre-crisis discount rate structure," the FED said.  "Those directors favoring a reduction in the primary credit rate believed that a lower setting would help to foster the Committee's macroeconomic objectives of maximum employment and price stability," it added. The FOMC subsequently decided at a meeting last month to hold the overnight fedfunds rate near zero, & to keep buying bonds at an $85B pace in an effort to hold down the long-term cost of borrowing.  There's a lot of discussion on what to do next with interest rates.

Regional Fed banks still split on discount rate cut/hike need

Farm income in the US will hit a 40-year high in 2013, driven by gains in livestock income, according to a new forecast from the US Department of Agriculture.  Its Economic Research Service estimated net farm income of $131B for 2013, up significantly from an earlier forecast of $120.6B & up 15% from $113.8B in 2012.  After adjusting for inflation, net farm income for 2013 is expected to be the highest since 1973.  Net farm income has been on an almost unbroken upward trend since 2002.  Cash crop receipts will fall 3% in 2013 as some of the year's larger crops, especially corn & soybeans, will not be sold by year-end.  That decline, as well as rising expenses, will be partially offset by an almost 6% increase in livestock receipts.  Net cash income is forecast to decline 3.4% on the year, to $129.7B, although that estimate has been hiked by almost $9B since Aug.  Production expenses continue to climb, up 3% to $352B, but rising at a slower pace than in 2012 & 2011.  USDA said increases in farm asset values are expected to continue to exceed increases in farm debt, leading to another record high for farm equity.  Farm asset values, chiefly farmland, are expected to rise 7% in 2013 & farm sector debt by 3.3%, pushing farm equity up by a strong 7.4%.  "Farmland values are expected to continue rising, given the relative strength of commodity prices, accommodating interest rates, and expectations of continued favorable net returns both from the market and from government programs, including crop insurance," USDA said.  This part of the economy is doing well.

U.S. sees 2013 farm income highest since 1973; farm values rise

Home Prices in 20 U.S. Cities Rise By Most Since February 2006

Photo:    Bloomberg

Home prices in 20 US cities rose by the most since Feb 2006 in the 12 months thru Sep, showing the housing market sustained progress even as borrowing costs climbed.  The S&P/Case-Shiller index of property values advanced 13.3% after increasing 12.8% a month earlier, the group said.  The forecast called for a 13% advance.  Sellers are standing firm on asking prices as buyers compete for a limited number of available properties.  Higher home values are helping propel gains in Americans’ net worth, boosting confidence among homeowners & creating momentum for consumer spending.  Home prices adjusted for seasonal variations increased 1% in Sep from the previous month, compared with a 0.9% gain in Aug.  Unadjusted prices climbed 0.7% in Sep after a 1.3% gain as 19 of the 20 cities showed advances.  The year-over-year gauge, which includes records going back to 2001, provides a better indication of price trends, the group said.  All of the 20 cities showed an increase in year-over-year prices, led by gains of 29.1% in Las Vegas & 25.7% in San Francisco.  The smallest gain was in New York with a 4.3% advance.

Home Prices in 20 U.S. Cities Rise Most Since February 2006

The bulls are having their way again with light volume.  Some of the buying could be from portfolio managers adding to positions to make year end numbers look better.  Dow is up a staggering 3K YTD & up 5.7K since its lows in early Oct 2011.  No matter how you tally the numbers, those are among the very best rises of all time.  All the while, the economic recovery has been so-so.  But Big Ben keeps throwing money at the markets without making a significant impact on improving growth.  It's hard to figure what will happen in 2014 for an encore.

Dow Jones Industrials

stock chart

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