Markets close the year higher with Dow near its record highs

Dow rose 37, advancers over decliners almost 3-2 & NAZ added 18.  The MLP index slid pennies in the 463s (up 1 for the year) & the REIT index went up fractionally to 334 (essentially a multi year high).  Junk bond funds were mixed to lower & Treasuries had a slight advance.  Oil sold off again, to the 52s, & gold also lost ground, staying below 1200.

AMJ (Alerian MLP Index tracking fund)

CLG15.NYM

...Crude Oil Feb 15

...52.86

...1.26

(2.3%)

GCF15.CMX

...Gold Jan 15

......1,195.90

...4.30

(0.4%)

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More Americans filed applications for unemployment benefits for the first time in 5 weeks, displaying the typical year-end holiday swings that make the data difficult to interpret.  Jobless claims rose 17K to 298K in the latest week, from a revised 281K in the prior period, according to the Labor Dept.  The forecast called for 290K.  The number of applications can fluctuate during this time of year as the holidays make it tough to adjust the data for seasonal variations.  Employers are dismissing fewer workers & adding staff as household purchases pick up, driven by a drop in gasoline costs that will keep boosting the economic expansion.  Last week reflected claims during the Christmas holiday, which may contribute to volatility.  The 4-week moving average, a less volatile measure than the weekly figures, was essentially flat at 291K last week.  The number continuing to receive jobless benefits dropped 53K to 2.35M.  The unemployment rate among people eligible for benefits held at 1.8%.

Jobless Claims in U.S. Climbed More Than Forecast Last Week


Contracts to purchase previously owned homes rose in Nov as employment gains & low borrowing costs helped bring potential buyers into the market.  The pending home sales index advanced 0.8% after a revised 1.2% decrease in Oct, the National Association of Realtors said.  The projection called for the index to rise 0.5%.  “The consistent economic growth and steady hiring we’ve seen in the second half of this year is giving buyers enough assurance to consider purchasing a home before year’s end,” NAR chief economist Lawrence Yun said.  “With rents now rising at a seven-year high, historically low rates and moderating price growth are likely to entice more buyers.”  Purchase contracts climbed 1.7% in the 12 months ending in Nov after a 2.1% annual increase in Oct on an unadjusted basis.  The 3 months of year-over-year advances follow a series of 11 straight declines.  The pending sales index was 104.8 on a seasonally adjusted basis.  A reading of 100 corresponds to the average level of contract activity in 2001, or “historically healthy” home-buying traffic.  Pending sales increased in 3 of 4 regions from the previous month, led by a 1.4% in the Northeast.

Pending Sales of U.S. Existing Homes Increase 0.8% in November

Photo:   Bloomberg

A Chinese factory gauge sank to a 7-month low in Dec, holding near a preliminary reading & putting pressure on policy makers to provide more support for the economy.  The final reading of the Purchasing Managers' Index from HSBC Holdings & Markit Economics was 49.6 this month from 50 in Nov & compares with the Dec 16 reading of 49.5.  Numbers below 50 indicate contraction.  The median was for 49.5.  Mired in industrial overcapacity, factory-gate deflation & a housing slump, China is headed for its slowest full-year economic expansion since 1990.  The central bank, which cut its benchmark interest rate in Nov, has expanded its toolkit to support growth, freeing up more funds for lenders in 2015 by broadening the definition of a deposit & adding liquidity by stealth at least 4 times in the past 4 months.

China December Factory Gauge Falls in Sign Growth Support Needed


After all is said & done, markets had a good year.  Dow gained more than 1.4K (almost 9%) to reach new record levels on mixed economic news.  The MLP index was essentially flat but the REIT index had another good year as it nears its record highs made 8 years ago.  Currently low prices for oil are bringing changes to the business world, some can not be seen today.  Hope everybody had a good year in the stock market  & best wishes for the new year.

Dow Jones Industrials

Markets drift lower in slow holiday trading

Dow dropped 55, decliners over advancers 5-4 & NAZ was off 29.  The MLP index rose fractionally to 464 & the REIT index slipped back pocket change to the 332s.  Junk bond funds were lower & Treasuries rallied.  Oil finally went higher & gold had a good day, although it finished below the important 1200 level.

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CLG15.NYM

....Crude Oil Feb 15

....53.85

...0.24

(0.5%)

ECB Chief Economist Peter Praet warned that lower oil prices increasingly risk de-anchoring inflation expectations, indicating that quantitative easing is becoming more likely.  Euro-area inflation will drop below zero “for a longer period” in 2015 amid a slide in the cost of crude, & the Governing Council “cannot simply look through” that, Praet said.  Inflation expectations are currently “extremely fragile” & the danger of 2nd-round effects is “today higher than usual,” he said.  ECB policy makers are preparing to consider a proposal for large-scale asset purchases, including sovereign bonds, when they meet in 3 weeks.  While Executive Board member Benoit Coeure has said that there’s broad consensus for new stimulus, officials including Germany's Jens Weidmann have railed against the risks quantitative easing would entail.  The impact of oil prices, which have fallen by about half this year, was underscored by Spanish inflation data today.  Consumer prices slid 1.1% in Dec from a year ago, worse than forecast & the biggest drop since Jul 2009.  Praet said the ECB must “not be paralyzed” by the problems a QE program might create.  Sovereign bonds are “the only kind of asset for which there is a significant market volume,” he added.  One sticking point in the debate is how to treat the risk of buying bonds of stressed nations.  The prospect of renewed political turmoil in greece, the country that triggered the debt crisis in 2009, has risen as snap elections in a few weeks could put anti-austerity party Syriza in power.  The rise of political parties opposed to structural adjustments is a “warning signal,” Praet said.  “Populists in some countries promise fast and simple solutions but their proposals would be a complete disaster.”

Praet Warning of Second-Round Effects Raises QE Chances for ECB


Libyan oil production has fallen below 300K barrels a day after Islamist militants shifted attacks to energy facilities including the country’s largest oil export terminal.  Output is the lowest since May & down a good 65% from a recent high of 850K barrels a day in Oct following the assault on the Es Sider terminal.  Libya holds Africa's largest oil reserves.  The fighting last week marked a turning point in the unrest that followed Muammar Qaddafi’s 42-year rule.  All the factions, including the Islamist militia coalition known as Libya Dawn, had committed to spare the energy industry that provides 80% of public spending.  Extended fighting helped bring a temporary halt to the slump in prices.  The main combatants in the last round of fighting are the internationally recognized gov of Abdullah al-Thinni & the self-proclaimed regime of Omar al-Hassi, who has the backing of the Islamist militias that took control of the capital Tripoli in Jul, forcing his rival to move to eastern Libya.  Libya’s crude output had been increasing despite the clashes of opposing forces in & near the capital Tripoli, reaching a year-high of 850K barrels a day in Oct, more than half the average before the overthrow of Qaddafi.  The trend reversed in Nov, when the conflict spread to the nation’s largest producing oilfield, cutting output to 580K barrels a day.  Production declined further when Hassi ordered Islamist militias to wrest the terminals in eastern Libya from the control of the Petroleum Facilities Guard that remained loyal to his rival, after Thinni announced plans to take control of oil payments by foreign companies that buy Libyan crude.  The country is producing about 350K barrels a day, having stopped loading from Es Sider & the neighboring oil port of Ras Lanuf, Libya’s 3rd-largest, according to the spokesman for National Oil.  Even this level makes Libya the smallest producer of the 12-member OPEC.

Libya Crude Output Seen Falling to Lowest Since May After Oil Port Attack


Just when everybody thought the US economy was roaring back to health, former Federal Reserve Chairman Alan Greenspan is here to say otherwise.  “The United States is doing better than anybody else, but we’re still not doing all that well,” Greenspan said.  “We still have a very sluggish economy.”  Greenspan said the economy won’t fully recover until American companies invest more in productive assets & the housing market bounces back.  “Almost all of the weakness in the last four, five, six years has been in long-lived investments” in capital goods & real estate, Greenspan said.  “Until these pick up, we’re not going to get the kind of vibrant growth that everyone is hoping for.”  Greenspan, who retired from the Fed’s helm in 2006, said he expects growth to dip below a 3% annual rate in Q4-2014.  His forecast is in line with the estimate from a recent survey of 2.5%.

Greenspan Throws a Wet Blanket on Hopes for Growth Breakout


Dow took a rest after reaching record highs.  It's entitled.  This year, the Dow is up more than 1.4K YTD (about 9%).  Volume was low today & could be even lower tomorrow, although last minute trades by money managers to make portfolios look better may create a little excitement.  Hope everybody had a good year.

Dow Jones Industrials