Friday, November 14, 2014

Markets edge higher on US retail sales

Dow went down all of 2, advancers over decliners 4-3 & NAZ rose 4.  The MLP index rose 4 to 499 in a volatile week & the REIT index lost 1+ to 317.  Junk bond funds were flat to higher & Treasuries slid back.  Oil advanced on speculation that the drop in prices below $80 a barrel for the first time in 4 years increases the likelihood that OPEC will curb output & gold had a mild rebound (if you could call it that)..

AMJ (Alerian MLP Index tracking fund)

CLZ14.NYM....Crude Oil Dec 14...75.08 Up ......0.87 (1.2%)

GCX14.CMX...Gold Nov 14.....1,150.00 Down ...11.10  (1.0%)

3 Stocks You Should Own Right Now - Click Here!

Consumer confidence rose more than forecast in Nov, reaching a 7-year high & indicating Americans should be in the mood to step up holiday spending.  The Thomson Reuters/University of Michigan preliminary sentiment index increased to 89.4, exceeding the highest estimate & the strongest since Jul 2007, from a final reading of 86.9 in Oct.  The projection called for a gain to 87.5.  A stronger labor market, cheaper fuel costs, & near-record stock prices are brightening consumers’ spirits as the busiest time of the year for retailers gets under way.  Bigger wage gains would probably drive sentiment & boost household spending.  The index averaged 89 in the 5 years before Dec 2007, when the last recession began, & 64.2 in the 18-month contraction that followed.  The increase in confidence this month follows a rebound in retail sales in Oct.  Purchases rose 0.3% as 11 of 13 major categories showed gains.  The gauge of expectations about the economy 6 months from now climbed to 80.6, also the highest since Jul 2007, from 79.6 last month.  The gauge of current conditions, which measures Americans’ views of their personal finances, jumped to 103, the highest in more than 7 years, from 98.3.

Consumer Sentiment in U.S. Rose More Than Forecast in November

Retail Sales in U.S. Showed Broad-Based Increase in October
Photo:    Bloomberg

American consumers ate out & shopped for clothes in Oct, enjoying a windfall from cheaper gasoline & prompting a rebound in retail sales heading into the holiday-shopping season.  Purchases increased 0.3% after a 0.3% drop in Sep, according to the Commerce Dept.  The forecast projected a 0.2% advance.  11 of 13 major categories showed gains, indicating broad-based growth.  The lowest gasoline since 2010 & rising stock & home values are boosting consumer confidence & disposable income, raising the odds that spending will continue to improve thru year-end.  Falling unemployment also means more Americans have extra cash, brightening the outlook for holiday sales even as bigger wage gains have been slow to materialize.  The Commerce Dept retail sales figures used to calculate GDP, which exclude categories such as food services, auto dealers, home-improvement stores, & service stations, climbed 0.5% after being little changed the prior month.  The Sep reading was revised up from a previously reported 0.2% decrease.  The 1.9% increase in demand at non-store retailers, which include online merchants, was the biggest since Mar.  Restaurants, sporting goods, clothing & pharmacies were among the other categories showing pickups in demand & sales at auto dealers climbed 0.5% last month.  While cheaper fuel may be boosting household sentiment, lower prices result in smaller receipts at service stations because the data aren’t adjusted for inflation.  Purchases dropped 1.5% in Oct after declining 0.8% a month earlier.  The only other retail group to suffer a decrease in sales last month was electronics stores, which showed a 1.6% drop.

Retail Sales in U.S. Showed Broad-Based Gain in October

The People’s Bank of China’s (PBOC) targeted liquidity injections haven’t been enough to spur a pickup in lending, adding pressure for broader stimulus steps.  Aggregate financing in Oct was 662B yuan ($108B), the central bank said, down from 1.05T yuan in Sep & lower than the 887B yuan estimate.  New local-currency loans were 548B yuan, & M2 money supply grew 12.6% from a year earlier.  The central bank has added liquidity & sought to lower the cost of funds while refraining from broad-based interest rate or reserve requirement ratio cuts.  Data yesterday showing the 2nd-weakest growth in industrial output since 2009 & the slowest investment in fixed assets since 2001 suggest bolder steps will be needed to spur a pickup in growth.  New yuan loans, which measure new lending minus loans repaid, compared with an estimate of 626B yuan & 857B yuan in Sep.  Aggregate financing, a measure of credit that includes bank lending, corp bond issuance & shadow-banking products like entrusted loans, compared with 864B a year earlier.  Historically, lending wanes through the year as companies’ need for capital slows & banks brush up against lending quotas.  Data yesterday showed the economy’s slowdown deepened in October.  The PBOC last week confirmed it pumped 769B yuan into select banks in the last 2 months & twice lowered the rate it pays lenders on 14-day repurchase agreements. 

China Slowdown Deepens as Targeted Stimulus Fails to Spur Loans

Dow is up all of 80 this week, good enough to set new record highs.  But this was not a convincing advance.  Market breadth has been weak.  Consumer data continues uneven, good for one period & the next one is off.  The underlying current is that household income is not climbing higher like it has during previous recoveries.  While tiny advances by the Dow are good enough to set new record highs, it's hard to get excited by them.

Dow Jones Industrials

No comments: