Wednesday, November 26, 2014

Markets crawl higher amid economic data

Dow pulled back 12, advancers ahead of decliners 5-4 & NAZ gained 9.  The MLP index dropped 1+ to the 507s & the REIT index was up 1+ to the 522s, a new multi year high.  Junk bond funds were mixed & Treasuries gained ground.  Oil sank to the 73s, another new multi year low & gold inched higher but still under 1200.

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CLF15.NYM...Crude Oil Jan 15...73.43 Down ....0.66  (0.9%)

GCZ14.CMX...Gold Dec 14....1,197.50 Up ...0.40 (0.0%)

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More Americans than forecast filed for unemployment benefits last week, a possible sign the pace of improvement in the labor market has cooled.  Jobless claims increased 21K to 313K, the highest since early Sep, from 292K in the prior week, according to the Labor Dept.  It would take several weeks of sustained elevated readings to confirm the labor market has taken a step back.  The forecast called for a decline to 288K, with estimates ranging from 280K- 300K.  The prior week’s claims were revised from an initial reading of 291K.  The 4 week average of claims, a less-volatile measure than the weekly figure, climbed to 294K from 287K the week before.  The number continuing to receive jobless benefits dropped 17K to 2.32M, the fewest since Dec 2000.  In that same period, the unemployment rate among people eligible for benefits fell to 1.7%, the lowest since Nov 2000, from 1.8% the prior week.  Initial jobless claims reflect weekly layoff & typically decrease before job growth can accelerate.

Jobless Claims in U.S. Increase to Almost Three-Month High

Consumers in U.S. Stay Within Means
Photo:   Bloomberg

Consumer spending in the US climbed in Oct at the same pace as incomes, showing households are staying within their means as the holiday shopping season begins.  Expenditures increased 0.2% last month after being little changed in Sep, according to the Commerce Dept.  The forecast called for a 0.3% gain.  Incomes also rose 0.2%, less than projected.  Bigger wage gains & concern about taking on too much debt could potentially put a lid on how fast consumer spending can accelerate in Q4.  Continued progress in the labor market & relief at the gas pump may help some households find the means to spend as retailers.  Today’s consumption data showed that after adjusting for inflation, which generates the figures used to calculate GDP, purchases rose 0.2% in Oct after being little changed the month before.  Spending on durable goods, including automobiles, decreased 0.1% after adjusting for inflation following a 1% drop in Sep.  Purchases of non-durable goods, which include gasoline & clothing, increased 0.5%.  Household outlays on services rose 0.1% last month after adjusting for inflation.  In addition to health care, the category also includes categories such as utilities, tourism, legal help & personal care items, making it difficult for the gov to estimate accurately in the preliminary report.  The data also showed that prices tied to consumer spending rose 1.4% in the year ended Oct, the same as in the prior month.  Federal Reserve policy makers aim for yearly price increases of 2%.  The core price measure, which excludes fuel & food, rose 0.2% in Oct from the prior month & was up 1.6% from a year ago, the biggest 12-month gain since Dec 2012.  Disposable income, or the money left over after taxes, rose 0.1% last month after adjusting for inflation, the same as in Sep.  It was up 2.5% from Oct 2013 in real terms.  Wages & salaries increased 0.3% after rising 0.2%.  The saving rate held at 5% last month.

Consumers Stay Within Means as U.S. Spending Matches Income

Orders for US business equipment such as machinery & electrical gear unexpectedly declined in Oct, a sign that recent increases in corp investment may not persist.  Bookings for non-military capital goods excluding aircraft fell 1.3% for a 2nd straight month, the Commerce Dept said.  The projection was for a 1% gain.  Orders for all durable goods, items meant to last at least 3 years, rose 0.4% on a jump in demand for military aircraft.  An inconsistent pattern of investment in equipment shows companies are waiting to see if demand is sustained as global markets struggle to improve.  At the same time, spending by American households will probably hold up & underpin manufacturing as the job market strengthens & gasoline prices continue to fall.  Bookings declined last month for metals, machines, computers & electrical equipment but demand for motor vehicles rebounded.  The last time orders declined in consecutive months for non-military capital goods excluding aircraft, which are considered a proxy for future business investment, was Apr & May.  Excluding transportation equipment, which is often volatile from month to month, total bookings dropped 0.9%, the most this year.  Demand for non-defense goods decreased 0.6% after a 1.2% slump.  Orders for military aircraft surged 45.3% in Oct.  The median forecast called for a 0.6% drop in total durable goods orders.  Sep was revised to a 0.9% decrease, previously reported down 1.1%.  The durable goods data also reflected a 0.1% decrease in bookings for civilian aircraft.  Shipments of non-military capital goods excluding aircraft, used in calculating GDP, decreased 0.4% in Oct after rising 0.4% the prior month.

Orders for U.S. Business Equipment Unexpectedly Decline

Once again, stocks are meandering with a slight upward emphasis.  US economic data continues to come in mixed, signalling an economic recovery that is less robust than record Dow levels suggest.  The OPEC meeting tomorrow will be a major market driver.  Current indications are that OPEC will will not call for production cuts to boost prices.  MLP price movements appear to be highly related to what OPEC has to say.  For the rest of the week, NYSE trading will be limited to this PM & Fri AM.

Dow Jones Industrials

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