Friday, January 31, 2014

Lower markets after declines in emerging countries markets

Dow fell 149 to the lowest level in the new year, decliners over advancers 3-2 & NAZ lost 19.  The MLP index rose 3+ to the 462s (close to the record reached 8 months ago) & the REIT index went up 1 to the 273s.  Junk bond funds eased back & Treasuries gained ground.  Oil fell from the highest level of 2014 on concern that developing economies may contract & speculation that prices have climbed more than justified.  Gold hardly budged.

AMJ (Alerian MLP Index tracking fund)

stock chart







Treasury yields:

U.S. 3-month

0.02%

U.S. 2-year

0.34%

U.S. 10-year

2.67%

CLH14.NYM....Crude Oil Mar 14....97.68 Down ...0.55  (0.6%)

Live 24 hours gold chart [Kitco Inc.]




The Senate’s 3rd-ranking Rep predicted his party may provide enough votes to raise the debt limit in Feb without conditions, such as defunding Obamacare.  “I suspect that with Democrats, there are probably enough Republicans in the Senate that would vote for a clean debt limit increase,” said South Dakota Senator John Thune.  However he said he hadn’t conducted a formal vote count.  Separately, House Reps ended a policy retreat in Maryland without deciding on their strategy for the debt limit debate.  Party members, chastened from prior debt-limit fights, realize that default isn’t an option.  Treasury Secretary Jacob Lew said Congress should raise the debt ceiling as soon as possible, & that the Treasury will reach its borrowing limit by late Feb.  The debt limit issue has been suspended thru Feb 7 with no conditions, thru bipartisan votes in the Rep-led House & Dem-controlled Senate.  27 Senate Reps joined Dems in passing the “clean” debt ceiling increase 3 months ago.  A number of Senate Reps this week said they want to avoid another fight over Obamacare as part of the debt-limit debate.   Instead, they said Reps should focus on cuts in federal spending or long-term debt reduction.

Republican Leader Sees Senate Raising Debt Limit Without Strings


The IMF said some developing countries need to take action to “improve fundamentals” as emerging-market stocks extended their worst start to a year since 2008.  “The turbulence also underscores the need for vigilance among central banks over liquidity conditions in international capital markets,” the IMF said.  Emerging-market stocks declined today as signs of a Chinese slowdown & worse-than-estimated Russian economic data bolstered concern the global recovery will falter.  About $1.8T has been erased from the value of equities worldwide this month after China’s manufacturing contracted, the Federal Reserve tapered monetary stimulus & political unrest in Ukraine escalated.  Russia’s economy grew at less than half the previous year’s pace in 2013, missing forecasts as investment declined.  Jacob Lew said today the US is following the situation “very closely.”  “We’re seeing very significant differentiation between the experience in different countries based on the policies that they’ve had in effect.”  “We’re watching it, and in each of these countries they are managing to get through the situations that they are in.”  The volatility in emerging markets “highlights the need for coherent macroeconomic and financial policies, good communication, and, in some cases, the need for urgent policy action to improve fundamentals and policy credibility,” he said.  “Several emerging countries have responded forcefully in recent days,” & many countries have “solid fundamentals with high reserves, fiscal space and inflation under control.”

IMF Calls on Emerging Markets to Bolster Economic Fundamentals


Consumer Spending


The Dow chart below tells the sad story of 2014 very well.  Stocks have been slipping & sliding lower all month, bringing the total fall to almost 900 for the Dow.  While not the largest, it is still one of the greatest declines in history.  Stocks remain overbought & now global tensions are making investors nervous.  The US recovery over the last 5 years has been the most sluggish in decades.  Improvement in the unemployment rates masks the reality that many new jobs are part time at low wages & other workers have given up looking for work.  A decline for the Dow in Jan is another indication for falling stock prices this year.    

Dow Jones Industrials

stock chart







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Markets tumble on guidance from Wal-Mart and Chevron

Dow sank 164, declines over advancers 2-1 & NAZ went down 30.  The ML:P index climbed 1+ to the 461s & the REIT index was up fractionally to the 273s.  Junk bond funds slipped back & Treasuries rose.  Oil was hit with profit taking & gold advanced.

AMJ (Alerian MLP Index tracking fund)

stock chart

Treasury yields:

U.S. 3-month

0.02%

U.S. 2-year

0.33%

U.S. 10-year

2.66%

CLH14.NYM...Crude Oil Mar 14...97.49 Down ....0.74  (0.8%)

GCG14.CMX...Gold Feb 14......1,250.20 Up ...8.00 (0.6%)









Consumer confidence in the US declined in Jan from a month earlier, indicating spending may cool following the biggest gain in 3 years at the end of 2013.  The Thomson Reuters/University of Michigan final index of sentiment dropped to 81.2 this month from 82.5 in Dec.  The estimate called for a decline to 81 after a preliminary Jan reading of 80.4.  Less optimism, partly a reflection of declining stock prices this month, may signal households will temper their spending, which climbed in Q4 at the fastest pace since 2010.  The survey’s  current conditions index, which measures Americans’ view of their personal finances, decreased to 96.8 in Jan from 98.6 a month earlier.  The preliminary reading was 95.2.  The index of expectations 6 months from now fell to 71.2 from 72.1 last month & the preliminary gauge of the outlook showed a decline to 70.9.

Michigan Consumer Sentiment Index Decreased in January


Customers Check Out at a Wal-Mart Store in Los Angeles

Chevron (CVX)

stock chart


The popular stock averages lost yesterday's gains & then some.  Dow has fallen nearly 1K in Jan, not a good way to begin the new year.  Emerging markets, starting with China, all of a sudden have a bunch of problems.  While the predictions for GDP growth in the US are good, not all is well as seen in today's reports.  Additionally, dysfunctional DC is snapping back inaction & it could create more headaches for the economic recovery.  Overbought stocks need a retreat to get rid of those who are not serous investors..

Dow Jones Industrials

stock chart