Tuesday, July 29, 2014

Markets edge higher after consumer confidence data

Dow rose 42, advancers over decliners 3-2 & NAZ gained 18.  The MLP index sank 3 to the 519s & the REIT index was fractionally lower in the 308s.  Junk bond funds were mixed & Treasuries rose, prompted by growing intl conflicts.  Oil is weak & gold currently fell under 1300.

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CLU14.NYM...Crude Oil Sep 14...100.70 Down ...0.97  (1.0%)

GCN14.CMX...Gold Jul 14...1,310.00 Up ...6.70 (0.5%)

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Confidence among US consumers soared in Jul to the highest level in almost 7 years on the heels of a strengthening labor market.  The Conference Board index rose to 90.9, the highest since Oct 2007, from a revised 86.4 in Jun.  The projection was for a reading of 85.4.  More employment opportunities, fewer layoffs & resilient equity markets are buoying spirits against a backdrop of geopolitical tension in Ukraine & the MidEast.  Faster wage growth would help to further spur sentiment & provide the wherewithal for bigger gains in consumer spending.  “Stronger job growth helped boost consumers’ assessment of current conditions, while brighter short-term outlooks for the economy and jobs, and to a lesser extent personal income, drove the gain in expectations,” the Conference Board said.  The figures “suggest the recent strengthening in growth is likely to continue into the second half of this year.”  The gauge of present conditions rose to 88.3 from 86.3 & the barometer of consumer expectations for the next 6 months increased to 92.7, the highest since Feb 2011, up from 86.4 a month earlier.  The share of Americans who said jobs were currently plentiful advanced to 15.9%, the highest since May 2008, from 14.6% & consumers said they expected greater employment opportunities in the 6 months ahead.

Consumer Confidence in U.S. Rises to Highest Since October 2007

Home Prices in 20 U.S. Cities Rose at Slower Pace in Year to May
Photo:   Bloomberg

Residential real-estate prices rose in the 12 months ended May at the slowest pace in more than a year as a lull in the housing market limits appreciation.  The S&P/Case-Shiller index of property values in 20 cities increased 9.3% from May 2013, the smallest year-to-year advance in more than a year, after rising 10.8% in the year ended in Apr.  The projection called for a 9.9% year-over-year advance.  Compared with the prior month, prices dropped for the first time in 2 years.  Higher mortgage rates & strict lending requirements are bridling sales, which will probably prompt sellers to lower their expectations of how much they can get for their properties.  Continued job growth & greater balance between supply & demand will be needed to bring some potential homebuyers back into the market.  Home prices adjusted for seasonal variations decreased 0.3% in May from the prior month, the first drop since Jan 2012, after inching up 0.1% in Apr.  Unadjusted prices increased 1.1% in May for a 2nd month.  Property prices fell in 14 of 20 metropolitan areas in May from a month earlier after adjusting for seasonal variations.  Unadjusted prices rose in all 20.  “Housing has been turning in mixed economic numbers in the last few months,” the S&P index committee said.  “At the same time, the broader economy and especially employment are showing larger improvements and substantial gains.”  All 20 cities in the index showed a year-over-year increase, led by Las Vegas & San Francisco.  Cleveland showed the smallest increase.

Home Prices in 20 U.S. Cities Rose at Slower Pace in May

U.S., EU Ready New Sanctions as Russia Prepares Its Response
Photo:   Bloomberg

The US & EU are nearing tougher sanctions against Russia for its role in the fighting that continues to rage in eastern Ukraine.  The sanctions target “key” Russian industries, energy, defense & finance, & are being imposed in the face of Putin "doubling down” in support of rebels battling Ukrainian troops, US Deputy National Security Adviser Tony Blinken said.  The EU is preparing to announce a list of the Russian president’s “cronies” subject to asset freezes & travel bans after reaching an agreement yesterday.  At least 10 soldiers & 22 civilians died in violence yesterday.  “Putin continues to isolate himself in the court of world opinion,” retired US Navy Admiral James Stavridis, ex-supreme allied commander of NATO, said.  The sanctions “look stronger than they did three-four weeks ago. They’re moving in the right direction.”  The US & allies are seeking to squeeze Putin amid months of pro-Russian unrest in the Ukraine & this month’s Malaysian jet disaster.  Up to now, EU govs that depend on Russia for trade & about 1/2 of their energy supplies haven’t gone as far as the US in hitting Russia’s $2T economy.  Russia hasn’t pressured the separatists to negotiate & hasn’t taken concrete steps to control Ukraine’s border.  The IMF cut its forecast for Russia’s 2014 economic growth last week to 0.2% from 1.3%, citing capital flight fueled by the Ukraine conflict.

Stocks are trying to findx their footing & climb higher, but there was selling in the last few minutes.  The consumer confidence data was encouraging, although there was also a reminder that housing, an important part of the economy, is still sputtering.  Demand is shaky, good but far short of great.  That takes us back to the recurring theme of slow growth in earnings in recent years.  Intl conflicts make matters worse.  On top of that, Janet speak tomorrow.  There is a lot to be nervous about which will limit any advance by stocks.
Dow Jones Industrials

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