Monday, May 5, 2014

Markets fluctuate as services data offsets increased tension in Ukraine

Dow went up 17, decliners just ahead of advancers & NAZ rose 14.  The MLP index soared 5+ to the 491s, for another new record, & the REIT index went up 1+ to the 296s.  Junk bond funds were mixed while Treasuries retreated.  Oil fell after Chinese manufacturing contracted for a 4th month in Apr, bolstering concern that the economy’s slowdown is deepening.  Gold rose to the highest in almost 3 weeks as escalating tensions between Ukraine & pro-Russian separatists boosted safe haven demand.

AMJ (Alerian MLP Index tracking fund)

Treasury yields:

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CLM14.NYM....Crude Oil Jun 14....99.41 Down ...0.35  (0.4%)

Live 24 hours gold chart [Kitco Inc.]

Services, the biggest chunk of the US economy, picked up in Apr as gains in orders & sales signaled even faster growth ahead.  The Institute for Supply Management’s (ISM) non-manufacturing index rose to 55.2, the highest level since Aug, from 53.1 in Mar.  Readings above 50 indicate expansion.  Bookings jumped by the most in 4 years.  Retailers, restaurants & construction companies were among the 14 industries reporting growth last month as the economy rebounds from a weak Q1.  Increased hiring sets the stage for stronger consumer spending that will benefit companies.  The ISM gauge of orders jumped to 58.2 from 53.4 in Mar, the biggest gain in 4 years.  Demand, measured by the business activity index, registered the strongest one-month increase in more than 6 years.  “Confidence is building,” Anthony Nieves, chairman of the survey, said.  “Employment has to increase in this sector if business keeps growing.”  The forecast called for 54 in the overall gauge.  The non-manufacturing survey covers an array of industries including utilities, retailing & health care.  It also encompasses construction & agriculture.

Orders Propel U.S. Service Industries as Sales Improve

Pro-Russian separatists killed 4 Ukrainian troops, wounded 30 & shot down a military helicopter in the eastern city of Slovyansk as unrest gripped the nation.  The pilots survived after the chopper was hit with machine-gun fire & crashed near the city in the Donetsk region, the Defense Ministry said.  Several civilians also died in the fighting in Slovyansk, the Interior Ministry said.  78 people remain hospitalized in Odessa after violence engulfed the city Fri, RIA Novosti reported.  The campaign to drive out insurgents from the easternmost regions is in danger of stalling as a growing death toll threatens gov efforts to retake positions from Russian sympathizers in the run-up to May 25 presidential elections.  With violence spiraling in Ukraine after dozens died in Odessa 3 days ago, the authorities moved to erect roadblocks around the capital Kiev to prevent provocations.  “The slow pace of the anti-terrorist operation is due to the fact that we are trying to ensure the safety of citizens & prevent civilian casualties,” acting President Turchynov told German Chancellor Merkel during a phone conversation today.  The insurgents have shot down 3 helicopters since Fri, with another damaged in an attack.  7 military servicemen, excluding members of the National Guard, have died since the start of gov offensive on Apr 13, the Defense Ministry said.  Turchynov said yesterday that the authorities are setting up checkpoints around Kiev to guard against “provocations” on Fri, when Ukraine celebrates the victory over Nazi Germany.  10 such roadblocks were installed on the main roadway leading into the capital as of today.  Ukraine sent special forces from Kiev to Odessa after dismissing the local police following a deadly fire, acting Interior Minister Arsen Avakov said.

Ukraine Troops Killed in Slovyansk as Rebels Down Chopper

US banks during Q1 eased policies for loans to businesses including real estate companies amid stronger demand for credit, according to a Federal Reserve (FED) survey.  For households, banks reported easier standards on consumer credit card & auto loans, the FED said in its quarterly survey of senior loan officers.  Every domestic bank that reported easing standards or terms on commercial & industrial loans “cited more-aggressive competition from other banks or non-bank lenders as an important reason for having done so,” the FED said.  “Smaller numbers of banks also attributed their easing to a more favorable or less uncertain economic outlook and increased tolerance for risk.”  Record lending by US banks is helping the economy rebound from a lull brought on by unusually harsh winter weather.  The FMOC last week said the expansion is gaining strength as it continued to taper the monthly pace of bond purchases.  More domestic banks said they eased standards on all 3 types of commercial real estate loans included in the survey: construction & land development loans, loans backed by nonresidential buildings & loans secured by multifamily residential structures.  For all 3 categories, “reports of stronger demand also outnumbered reports of weaker demand at domestic banks,” the FED said.  For residential real estate, banks said standards on prime mortgages saw “mixed changes,” with both easier & tighter conditions.  Reports on home equity lines of credit also were mixed.  In consumer lending, “several” domestic banks were more willing to make consumer loans compared with the previous qtr & several large banks increased credit card limits.  Stepped-up lending by small banks signals the economy is improving, FED Chair Janet Yellen said last Thurs.  “After several years of reduced lending following the recession, we are starting to see slow but steady loan growth at community banks,” Yellen said.  “While this expansion in lending must be prudent, on balance I consider this growth an encouraging sign of an improving economy.”

Banks in U.S. Eased Commercial Loan Policies, Fed Says

Traders had a lot to think about & little was accomplished in the stock market.  While Dow & the S&P 500 are inches from new records, breadth has been narrow.  Today decliners were ahead of advancers by 36, not a good sign after the 2 popular stock averages have run up 150% from recession lows & are near record levels.  The mini war in Ukraine is going from from bad to worse.  Russia is a major player in the global economy if for no other reason than it's the #1 source for oil.

Dow Jones Industrials

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