Tuesday, June 17, 2014

Markets fluctuate, awaiting developments in Iraq

Dow was off 9, advancers & decliners were about even & NAZ added 9.  The MLP index slipped a fraction in the 506s from its record close & the REIT index lost a fraction in the 297s.  Junk bond funds inched higher & Treasuries saw more selling.  Oil & gold had minor profit taking after recent gains.

AMJ (Alerian MLP Index tracking fund)

CLN14.NYM...Crude Oil Jul 14...106.62 Down ....0.28  (0.3%)

GCN14.CMX...Gold Jul 14.......1,268.30 Down ...6.70  (0.5%)

3 Stocks You Should Own Right Now - Click Here!

The cost of living in the US rose more than forecast in May, reflecting broad-based gains that signal inflation will move closer to the Federal Reserve’s goal.  The consumer price index increased 0.4%, the biggest advance in more than a year, after climbing 0.3% the prior month, according to the Labor Dept.  The forecast called for a 0.2% increase.  Excluding volatile food & energy prices, the gain was the largest in almost 3 years.  A pickup in inflation lessens the threat of a prolonged drop in prices that hurts economic growth, giving Fed officials reason to continue to scale back their bond-buying program.  Continued hiring & faster wage gains will be needed to boost demand & enable consumers to cope with higher prices.  Costs rose 2.1% over the past 12 months, the most since Oct 2012, after a 2% year-over-year gain in Apr.  The inflation report showed that stripping out volatile food & fuel, the measure increased 0.3%, the most since Aug 2011, & following a 0.2% gain the prior month.  Economists had forecast a 0.2% advance.  The core index increased 2% from the same month in 2013 after a 1.8% gain in Apr.

Consumer Prices in U.S. Increase by Most in More Than a Year

Photo:   Bloomberg

Builders broke ground on 1M US homes in May, indicating the industry is picking up after a weather-induced slump to start the year.  The number of housing starts last month was in line with the forecast & followed an 1.07M annualized rate in Apr (the most since Nov), according to the Commerce Dept.  Permits, a proxy for future construction, decreased, reflecting a decline in the multi family category.  A strengthening job market & a retreat in mortgage costs in recent weeks is helping support residential real-estate following a lull in building in early 2014.  Faster sales will prompt developers to step up construction, given supplies of homes on the market remain lean & property values are rising.  Permits decreased 6.4% to a 991K annualized rate & were projected to ease to a 1.05M pace.  Applications for multi family work dropped 19.5%, while those for single-family projects that make up the biggest share of the market rose 3.7% to the highest level since Nov.  Construction of single family houses declined 5.9% to a 625K rate from 664K the prior month.  Work on multi-family homes, such as condominiums & apartment buildings, decreased 7.6% to an annual rate of 376K.

Housing Starts in U.S. Beat 1 Million Pace for Second Month

Pres Obama told congressional leaders he will deploy as many as 275 US troops to Iraq to protect the American embassy & staff in Baghdad as he ponders airstrikes against Islamic militants.  The troops, which are ready for combat, are being sent to Iraq with the consent of the gov there & will stay until security improves.  The US Embassy in Baghdad will remain open.  Troops are being sent as Obama considers airstrikes against Islamic militants in Iraq that could prove as inconclusive & chaotic as the war the US thought had ended there in 2011.  Unlike the strikes that preceded the Iraq & Afghanistan ground wars, any air offensive this time would come with the encouragement & support of the Iraqi gov, giving the US virtually complete control of the skies to curb the Sunni militants’ offensive.  For all the available firepower, airstrikes risk civilian casualties & may not be enough to defeat an irregular enemy moving thru densely populated areas.  Obama has ruled out sending ground troops back to Iraq, even as he announced the increase in military force to secure the Embassy.  He has also opened the door to air attacks & increased military aid to help the Iraqi gov defeat the militant Islamic State of Iraq & the Levant (ISIL).  .

Obama Sends Troops to Assist Iraq Embassy, Weighs Strikes

Traders are twiddling their thumbs.  There is not a lot to do with all the uncertainty in Iraq & Afghanistan.  The situation looks good for the bad guys, professional killers, who seem to have the upper hand.  Somewhat forgotten, the FOMC has a meeting, but no excitement is expected tomorrow when their results are reported.  It is widely expected that tapering will continue & raising interest rates will remain a long term objective.

Dow Jones Industrials

No comments: