Thursday, June 26, 2014

Lower markets on disappointing comsumer spending data

Dow dropped 91, decliners over advancers 2-1 & NAZ fell 22.  The ML:P index was up pennies in the 518s, good enough for a new record, & the REIT index was off 1 to 301.  Junk bond funds were mixed & Treasuries continued in their rally mode.  Oil & gold pulled back.

AMJ (Alerian MLP Index tracking fund)

CLQ14.NYM....Crude Oil Aug 14...105.91 Down ...0.59  (0.6%)

GCM14.CMX...Gold Jun 14.........1,312.40 Down ....9.80  (0.7%)

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Consumer Spending in U.S. Increased Less Than Forecast in May

Photo:   Bloomberg

US consumer spending grew less than forecast in May as Americans used gains in income to shore up household finances.  Purchases, which account for about 70% of the economy, climbed 0.2% after being little changed in Apr, Commerce Dept figures showed.  The forecast called for a 0.4% rise.  Incomes advanced 0.4% & the saving rate increased to an 8-month high.  Today’s report dims the outlook for a pickup in growth after figures yesterday showed consumer spending in Q1 grew at the weakest pace in 5 years, restrained by a drop in health-care outlays.  Sustained progress in the job market & even bigger income gains are needed to give households the means to cope with rising fuel & food costs.  Today’s report showed that adjusting spending for inflation, used to calculate GDP, purchases dropped 0.1% last month after falling 0.2% in Apr.  Purchases of durable goods, including automobiles, increased 1% adjusted for inflation, following a 0.9% drop & auto sales accounted for more than half of the gain.

Fewer Americans filed applications for unemployment benefits last week, a sign of steady progress in the labor market.  Jobless claims fell 2K to a one-month low of 312K, according to the Labor Dept.  The forecast called for 310K.  Dismissals are hovering just above their pre-recession lows & hiring has picked up as companies grow confident the economy will snap back from the worst contraction in 5 years.  Employment that’s on pace for its best year since 1999 will need to spark faster wage growth for consumer spending to accelerate.  The 4 week average of claims, a less-volatile measure than the weekly figure, rose to 314K from 312K the week before.  The number of people continuing to receive jobless benefits climbed 12K to 2.57M in the latest week.  The unemployment rate among those eligible for benefits rose to 2% during that period from 1.9%.  Fewer layoff typically foreshadow an acceleration in job growth.

Jobless Claims in U.S. Decreased 2,000 Last Week to 312,000

Ukraine isn’t “too optimistic” it will soon clinch a peace deal with separatist rebels in the east, a minister said, as the US & the EU raised pressure on Russia to ease violence that’s left hundreds dead.  With Ukraine’s gov saying the pro-Russian militants have repeatedly flouted a cease-fire due to expire tomorrow, the Economy Minister said the conflict may drag on even as peace talks continue.  “We are not too optimistic,” he said.  “Developments are moving in the right direction, but the situation is quite volatile.”   With momentum behind peace efforts flagging, the US is preparing sanctions against Russia on technology aimed at exploiting & producing oil & gas products, a major part of that country’s economy & EU countries have been preparing possible deeper penalties since Mar.  A day after Russian lawmakers voted to rescind the authorization they gave Putin in Mar to use force in its neighbor, Russia agreed to new talks on Jul 11 with the EU & Ukraine, its Foreign Ministry said.  Poroshenko held talks yesterday with Putin & the leaders of Germany & France to discuss ways to end the months of fighting.  Putin spoke “in favor of extending the cease-fire & organizing a sustained negotiation process.”  Poroshenko will present a draft constitution today, to extend powers to the largely Russian-speaking regions in the east to ease tensions.  Another mess that's far from over.

Ukraine Optimism Wavers on Peace as Cease-Fire Winds Down

The Ukraine & Iraq are ugly situations going nowhere fast.  But the consumer spending data is closer to home & that was not encouraging.  The year started with a terrible Q1 for US GDP growth & that is affecting consumer spending.  While Dow is up 200 YTD, it's also almost 200 below its recent record high.  Failing to crack thru 17K may prove significant.

Dow Jones Industrials

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