Monday, December 23, 2013

Higher markets after IMF raised outlook for US economy

Dow soared another 73 to a new record, advancers over decliners 7-2 & NAZ shot up 46.  The MLP index was up a very big 6+ to the 451s & the REIT index added a fraction to the 265s.  Junk bond funds were up 1% & treasuries pulled back.  Oil fell in what has been a very good month & gold hovered near 1200.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLG14.NYM...Crude Oil Feb 14....98.79 Down ...0.53  (0.53%)

Live 24 hours gold chart [Kitco Inc.]

Personal Spending
Photo:   Bloomberg

In Nov, consumer spending rose by the most in 5 months as discounts lured early holiday shoppers, giving the US economy a boost at the end of 2013.  Purchases increased 0.5% after a 0.4% gain in Oct (larger than previously estimated by the Commerce Dept).   Record stock prices & a rebound in home values are boosting wealth among upper-income Americans, benefiting retailers.  At the same time, the job market is strengthening, which means spending advances will become more broad-based, enabling the world’s largest economy to pick up in 2014.  The report follows data last week that showed stronger momentum in economic growth as households stepped up spending.  Q3 GDP expanded at a 4.1% pace, the most in almost 2 years.  Consumer purchases, which account for almost 70% of the economy, increased 2%, more than the previously reported 1.4%.  One soft spot was incomes, which climbed 0.2% in Dec, short of the 0.5% increase projected.  The shortfall reflected a slump in earnings by farmers as commodity prices dropped last month rather than flagging worker pay.

IMF Managing Director Christine Lagarde
Photo:   Bloomberg

The IMF raised its outlook for the US economy, as a budget deal in DC & the Federal Reserve's plan to taper its bond buying ease doubts about the future, Managing Director Christine Lagarde  said. “We see a lot more certainty for 2014,” she said today.  With the unemployment rate falling, the FED’s action last week & the gov budget agreement, “all of that gives us a much stronger outlook for 2014, which brings us to raising our forecast,” she said.  The jobless rate, at 7%, will keep falling as confidence increases that the economy is on a sustainable growth path, Lagarde said.  She urged the congress to be “responsible” & “not threaten the recovery with yet another debate about whether or not the U.S.” will honor its obligations or default on debt as the Treasury Dept nears the limits of its borrowing authority in Feb.  She praised the FED’s “very well communicated” plan.  “What has been announced in terms of tapering is an indication that the central bank in the U.S. has more trust, more confidence in the real economy picking up now,” she said.  The IMF chief also indicated support for the bipartisan budget passed last week that eases $63B in automatic spending.

Stocks had a good day in light trading during this holiday period.  There's not much to say.  Bulls are having their way in the markets & the bears are hibernating.  Tomorrow is a half day of trading & after the holiday, stocks should continuing climbing.  Dow is up 135 in Dec.

Dow Jones Industrials

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