Thursday, June 19, 2014

Markets waver, assessing Fed moves

Dow lost 14, advancers ahead of decliners 4-3 & NAZ fell 6.  The MLP index rose 3+ to the 504s & the REIT index was up fractionally above 300.  Junk bond funds did little & Treasuries slid lower.  Oil was flattish & gold shot up the most in 14 weeks on the rising conflict in Iraq & greater uncertainty in the MidEast.

CLN14.NYM...Crude Oil Jul 14...105.77 Down ...0.20  (0.2%)

GCM14.CMX...Gold Jun 14...1,294.70 Up ...22.30 (1.8%)

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Jobless Claims
Photo:   Bloomberg

Fewer filed applications for unemployment benefits last week, a sign of progress in the labor market.  Jobless claims fell 6K to 312K, according to the Labor Dept, just under the forecast of 313K.  The total number of people collecting benefits decreased to the lowest level in almost 7 years.  Layoffs have been skirting pre-recession lows & companies are hiring as they look for a sustained pickup in household purchases.  Payroll growth that is on pace for its best year since 1999 will need to spur bigger gains in wages for spending to accelerate & contribute more to the economic expansion.  The 4 week averag declined to 311K from 315K the week before.  The number continuing to receive jobless benefits dropped by 54K to 2.56M, the fewest since Oct 2007.  The unemployment rate among people eligible for benefits declined to 1.9% from 2%.  Fewer layoffs typically signal an acceleration in job growth.  Employers added 217K workers to payrolls in May, lifting the average monthly advance so far this year to 213K.

Jobless Claims in U.S. Fell Last Week as Labor Market Heals

Caterpillar, a Dow stock, reported a steepening decline in retail machine sales in Asia as miners continue to reduce spending.  Sales in the Asia-Pacific region fell 30% in the 3 months thru May compared with the same period a year earlier after sales slid 25% in the 3 months thru Apr.  Global sales fell 12% in 3 months thru May, after falling 13% in the period thru Apr.  There was also bad news for construction machinery in the latest sales report.  Asia-Pacific sales were down 8%, compared with the 2% increase in the 3 months thru Apr.  Construction sales slowed in Latin America & were flat in North America.  In Africa, Europe & the Middle East, they fell at a slower pace.  Mining companies have slashed spending in the face of lower commodity prices.  CAT said in Apr that large mining-truck sales in Q1 were down about 80% from their 2012 peak.  The company has laid off workers & shut mines after sales & earnings dropped last year, the first time they’ve declined since 2009.  For the resource industries segment, the company said that sales fell 69% in the Asia-Pacific region & 47% in Africa, Europe & the Middle East in the most recent period.  Sales dropped 62% in Latin America & were up 7% in North America.  The stock fell 34¢.  If you would like to learn more about CAT,
Click here for a FREE analysis of CAT and be sure to notice the intermediate time frame

Caterpillar Sales Drop Accelerates Amid Mining Cuts

The index of US leading indicators rose in May for the 4th straight month, indicating the economy will gain momentum following a slowdown at the start of 2014.  The Conference Board’s gauge, a measure of the outlook for the next 3-6 months, increased 0.5% after a 0.3% gain in Apr.  The forecast called for a 0.6% advance.  The Federal Reserve's pledge to keep its benchmark interest rate low for a “considerable time” after the bond-buying program ends has put a lid on borrowing costs & propelled a rally in stocks that will support the expansion.  Nonetheless, industries such as housing that have stalled in recent months will need to rebound to see more marked improvement in growth.  The index of coincident indicators, a gauge of current economic activity, climbed 0.3% in May after a 0.2% increase the prior month.  The coincident index tracks payrolls, incomes, sales & production, measures used by the National Bureau of Economic Research to determine the beginning & end of recessions.  “The economy is finally moving up from a 2 percent growth trend to a more robust expansion,”  Ken Goldstein, economist at the Conference Board, said.  “Going forward, the biggest challenge is to sustain the rise in income growth which will drive consumption.”  A measure of lagging indicators rose 0.4% after a 0.3% advance in Apr.

Leading Economic Indicators in U.S. Rise for Fourth Month

Stocks aren't doing much as traders are trying to figure out what the real message is from the Fed.  Nobody knows other than it will continue to be gentle when it gets around to raising interest rates which looks to be down the road.  Meanwhile the mess in & around Iraq grows as the only leaders are the bad guys.  It's growing likely that Baghdad will fall to these forces.  Bent crude rose to a 9-month high, widening its premium over WTI, as major oil companies evacuate workers.  Sorry, but there are problems with the graphs today.

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