Friday, December 19, 2014

Higher markets on continued US economy growth

Dow climbed 26, advancers over decliners 2-1 & NAZ added 16.  The MLP index slid fractionally lower in the 453s & the REIT index rose 1 to the 528s for a new multi year high.  Junk bond funds continued recovering from recent selling & Treasuries rose.  Oil had a huge rebound, up more than 6% to the 58s, & gold was only able to crawl higher.

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CLK15.NYM....Crude Oil May 15....57.84 Up ...2.42 (4.4%)

Live 24 hours gold chart [Kitco Inc.]

China revised the size of the economy by $309B, adding almost the entire output of Malaysia.  The GDP was 59T in 2013, according to the results of a nationwide economic census announced today.  That’s 3.4% larger than the previously reported figure.  Malaysia’s 2013 GDP was $312B.  The size of the revision was smaller than the last time China made a similar change in 2008, reflecting more accurate counting of a rapidly expanding services industry.  The larger GDP makes China’s debt look smaller by comparison, which may give policy makers more room to maneuver as they seek ways to bolster growth set to be the lowest since 1990 this year.  The revision will barely affect the 2014 GDP growth rate, the National Bureau of Statistics said.  Tertiary industry’s share of GDP is revised to 46.9% from 46.1%, it said, reflecting a more active services sector.  The economic census is conducted about every 5 years to gather information on the manufacturing & services industries.  Over 10M businesses & about 60M enterprises were visited early this year, according to the official Xinhua News Agency.  The past 2 censuses led to a 16.8% boost to 2004 GDP & a 4.4% increase in 2008.  The head of the National Bureau of Statistics said that China would revise 2013 GDP upward by “a bit more than 3 percent.”

China’s GDP Revision Adds Output Equal to Malaysian Economy

Cisco, a Dow stock, filed 2 patent-infringement complaints against Arista Networks (ANET), seeking a quick order to block its rival’s networking devices from the US.  The complaints cover the same 12 patents that were asserted in civil suits filed earlier against ANET.  CSCO claims the competing company, founded by a former CSCO exec, was built by copying CSCO technology.  The ITC, a quasi-judicial agency, typically completes investigations in 15-18 months, & it’s that speed that prompted the new filings, CSCO said.  “Our ITC actions are consistent with our commitment to do everything possible to expedite review of Arista’s illicit copying” CSCO said.  The stock went up pennies.  If you would like to learn more about CSCO, click on this link:

Cisco Seeks to Block Arista Network Devices From the U.S.

Cisco (CSCO)

Federal Reserve (FED) Bank of San Francisco pres John Williams said next Jun will be the right time to consider when to start raising interest rates, even as inflation is likely to stay below the central bank’s goal.  “June 2015 seems like a reasonable starting point for thinking about when liftoff could happen,” Williams  (who will vote on policy next year) said.  “It would depend on where the U.S. economy is relative to our goals.”  Chair Janet Yellen said Wed that the FED will be “patient” in considering when to raise interest rates for the first time since 2006 & is unlikely to move before the end of Apr.  Her remarks helped propel the best 2-day rally in US stock in 3 years.  “The introduction of the ‘patient’ word was a natural progression” toward a period when interest rates begin to rise, said Williams.  His views align closely with those of Yellen, his predecessor at the helm of the San Francisco Fed.  Williams never dissented from an FOMC policy statement during 8 meetings in 2012, the last time the San Francisco FED pres held a voting seat.  He was among the early supporters of open ended-bond purchases by the FED to boost the economy.  Williams expects consumer spending & wage growth to improve, & he views the drop in oil prices as “a huge windfall for American consumers.”  He projects unemployment at about 5.25% by the end of 2015.  The faster-than-expected drop in unemployment has bolstered the views of officials who favor raising rates sooner.  At the same time, policy makers urging caution have pointed to an inflation rate that has languished below the FED goal for 30 straight months.  Its preferred inflation gauge, the personal consumption expenditures price index, rose 1.4% in the year through Oct.  Officials don’t expect to meet their inflation goal until 2016, according to projections released this week.

Williams Sees June as Time to Start Weighing Higher Fed Rate

Stocks have had a memorable 3 day rally when the Dow advanced 740.  This kind of correction was to be expected in an oversold market, especially after an announcement by the FOMC.  Next week (with 3½ trading days) will demonstrate whether the rally has legs.  After high volatility this month, anything is possible. 

Dow Jones Industrials

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