Thursday, May 29, 2014

Markets rise cautiously as fighting spreads in Ukraine

Dow climbed 11, advancers over decliners 3-2 & NAZ rose 11.  The MLP index was up fractionally in the 491s & the REIT index slipped a fraction to the 298s.  Junk bond funds rose & Treasuries advanced again with the yield on the 10 year Treasury at an 11 month low.  Oil gained & gold slid lower.

AMJ (Alerian MLP Index tracking fund)

CLN14.NYM....Crude Oil Jul 14...103.13 Up ...0.41 (0.4%)

GCM14.CMX...Gold Jun 14.......1,254.20 Down ...5.10  (0.4%)

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Pro-Russian rebels downed a military helicopter in eastern Ukraine, killing 13 troops & a general, as an adviser to pres Putin accused the US of pushing the world toward war through proxies in Kiev.  Insurgents shot down an Mi-8 transport chopper with a shoulder-fired missile amid heavy fighting in Slovyansk, 100 miles from the Russian border, Speaker Oleksandr Turchynov told parliament.  Russia demanded Ukraine halt its “fratricidal war” & withdraw troops from the mainly Russian-speaking regions of the east after separatists suffered the heaviest casualties of their campaign.  Western countries should use their influence to stop Ukraine from “sliding into a national catastrophe,” the Foreign Ministry in Moscow said on its website.  Ukraine stepped up air patrols over Donetsk yesterday as a convoy of pro-Russian rebels moved thru the eastern city with an anti-aircraft gun in tow, regrouping after dozens were killed in a gov operation to retake the main airport.  President-elect Petro Poroshenko has vowed to wipe out the insurgents & re-establish order after winning office on May 25 with 54.7% of the vote.  He’s faced with trying to stabilize an economy that the European Bank expects to shrink 7% this year while reclaiming swaths of territory captured by pro-Russian militias.  An economic adviser to Putin said the US controls the new Ukrainian gov & is seeking to use the conflict to start a “third world war.”  “This can’t be called anything but madness -- the bombing of cities, airports, escalation of unmotivated violence against their own people,” he told reporters.

Rebels Kill 14 Downing Ukraine Chopper as Russia Sees War

The US economy contracted for the first time in 3 years in Q1 as companies added to inventories at a slower pace & curtailed investment.  GDP fell at a 1% annualized rate, a bigger decline than projected, after a previously reported 0.1% gain, according to the Commerce Dept.  The last time the economy shrank was in Q1-2011.  The forecast called for a 0.5% drop.  A pickup in receipts at retailers, stronger manufacturing & faster job growth indicate the setback will prove temporary as pent-up demand is unleashed.  Federal Reserve policy makers said at their Apr meeting that the economy has strengthened after adverse weather took its toll.  Companies boosted stockpiles by $49B, less than the $111.7B in the prior qtr.  Inventories subtracted 1.62 percentage points from GDP, the most since Q4-2012.  Slower inventory accumulation may encourage factories to step up production should demand accelerate.  The economy in Q2 will expand at a 3.5 % rate, according to a recent projection.  For all of 2013, the economy expanded 1.9% after a 2.8% gain in the prior year.  Non-residential investment dropped at a 1.6% annualized rate.  Companies reduced their spending on structures at a 7.5% pace, the biggest decrease in a year.  Spending for equipment fell 3.1%, the most since Q3-2012.  Consumer purchases, which account for about 70% of the economy, increased at a 3.1% annualized rate in Q1.  The gain, which added 2.1 percentage points to GDP, was more than the previous estimate of 3%.

U.S. Economy Shrinks for First Time Since 2011; Pent Demand Suggests Temporary Setback

Fewer Americans than forecast filed applications for unemployment benefits last week, a sign the labor market continues to strengthen.  Jobless claims fell 27K to 300K in the latest week, according to the Labor Dept.  The forecast called for 318K.  The 4-week average declined to the lowest level since Aug 2007 (before the last recession began), decreasing to 311K from 322K in the prior week.  The number continuing to receive jobless benefits fell 17K to 2.63M in the latest week & the unemployment rate among people eligible for benefits held at 2%.

Jobless Claims in U.S. Decreased 27,000 Last Week to 300,000

Shrinkage in the US economy was taken well although it was expected & the outlook for the rest of the year suggest growth will resume.  But it was still a downer getting that news.  Fighting in Ukraine is getting worse & that has the potential to clobber the markets.  Nobody knows wait will happen next, but the markets are not worried.  The strength in the stock market this year has come form bidding up yield stocks & that should continue in the low interest rate environment.  Meanwhile tech related stocks have been floundering, hurt because most don't pay dividends.

Dow Jones Industrials

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