Wednesday, December 31, 2014

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 Down ...1.26  (2.3%)

GCF15.CMX...Gold Jan 15......1,195.90 Down ...4.30  (0.4%)

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Photo:   Bloomberg

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

China's Economy
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

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