Thursday, March 27, 2014

Nervous markets edge higher

Dow gained 14, advancers ahead of decliners 3-2 & NAZ slipped 2. The MLP index rose 1+ to 459 & the REIT index went up 1+ to the 281s.  Junk bond funds were mixed & Treasuries gained on political uncertainties around the world.  Oil was higher but gold slipped below 1300.

AMJ (Alerian MLP Index tracking fund)

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLF15.NYM....Crude Oil Jan 15...93.72 Up ...0.49 (0.5%)

GCH14.CMX...Gold Mar 14....1,311.80 Up ...8.40 (0.6%)

Economy in U.S. Expands More Than Previously Estimated
Photo:   Bloomberg

The US economy grew more rapidly in Q4 than previously estimated as consumer spending climbed by the most in 3 years, showing the expansion had momentum heading into this year’s harsh winter.  GDP grew at a 2.6% annualized rate, more than the 2.4% gain reported last month, according to the Commerce Dept.  The forecast called for a 2.7% increase.  Robust consumer spending on services, particularly health care, helped accelerate the expansion, a sign that this year’s slowdown is partly due to heavy snowfall & freezing temps.  Retailers are waiting for the weather to improve to get a clearer picture of the economy.  Consumer purchases, which account for almost 70% of the economy, advanced at a 3.3% pace in Q4, the most since the Q4-2010 & surpassing the 2.6% gain previously reported.  It added 2.2 percentage points to growth & followed a 2% advance in Q3.

Economy in U.S. Expands More Than Previously Estimated

Applications for unemployment benefits unexpectedly declined last week to an almost 4-month low, a sign companies are confident in the outlook for demand.  Jobless claims decreased 10K to 311K, according to the Labor Dept.  The forecast called for 323K claims.  The 4-week average  dropped to the lowest level since Sep.  A slower pace of firings helps give employers room to add staff when sales pick up after harsher winter weather weighed on Q1 growth.  Federal Reserve policy makers are counting on sustained improvement in the job market as they wind down their unprecedented bond-buying program & consider when to raise interest rates.  The 4-week average of claims fell to 312K, the lowest since Sep 28, from 327K in the prior week.  The number continuing to receive jobless benefits dropped 53K to 2.82M & the unemployment rate among people eligible for benefits held at 2.2% in the same period.  37 states & territories reported a decline in claims, while 16 reported an increase.  Initial jobless claims reflect weekly firings & typically wane before employment can accelerate.

Jobless Claims in U.S. Unexpectedly Decreased Last Week

Ukraine reached a preliminary deal with the IMF to unlock $27B of intl support to avert default & limit economic damage from a 4-month political crisis.  The gov reached a staff-level agreement with the IMF for a 2-year loan of $14-$18B from the IMF.  The IMF’s board must still sign off on the package, Ukraine’s 3rd since 2008, & the cabinet must complete “prior actions” to receive the first installment as early as Apr.  The gov, which came to power after an uprising ousted the pres last month, is grappling with an economy threatening to slide into a 3rd recession in 6 years, dwindling reserves & a weakening currency.  Lawmakers will vote today on measures proposed by the gov as part of the accord, acting President Turchynoy said.  “The country is on the edge of economic and financial bankruptcy,” Prime Minister Yatsenyuk said.  “This package of laws is very unpopular, very difficult, very tough. Reforms that should have been done in the past 20 years.”  Approval for the rescue package is “expected in April, following the authorities’ adoption of a strong & comprehensive package of prior actions aiming to stabilize the economy and create conditions for sustained growth,” IMF mission chief said.  Disbursement may start next month.  The IMF agreement will clear the way for a planned €1.6B ($2.2B) in emergency aid from the EU.

Ukraine Unlocks $27 Billion International Aid Deal

There is not a lot of movement in the stock market.  The revision to GDP in Q4 barely qualifies for a grade of C, not impressive when compared to the past.  While the Ukraine got a bailout (assuming all parties agree), political tensions remain high in eastern Europe, not to mention the rest of the world.  Dow remains down almost 300 YTD going into the final days of  Q1. The bulls have lost command of the market, making it likely Dow will remain in the red for Q1.

Dow Jones Industrials

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