Friday, January 23, 2015

Markets fluctuate on economic data

Dow dropped 59, decliners ahead of advancers 5-4 & NAZ was off 7.  The MLP index rose 2+ to the 452s & the REIT index was up fractionally to 354, very close to its record.  Junk  bond funds were strong & Treasuries advcanced.  Oil is in the low 46s & gold failed to crack thru 1300.

AMJ (Alerian MLP Index tracking fund)

CLH15.NYM...Crude Oil Mar 15...46.04 Down ...0.27  (0.6%)

GCF15.CMX...Gold Jan 15.......1,298.70 Down ...2.00  (0.2%)

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The index of US leading indicators increased in Dec, extending its rise to 4 straight months, as the economy expanded.  The Conference Board’s index, a gauge of the outlook for the next 3-6 months, increased 0.5% in Dece, after a revised 0.4% gain in Nov.  The forecast called for a 0.4% advance.  An improving job market & plunging gas prices continue to support consumer spending that makes up almost 70% of the economy.  A strong domestic market is buffering the US against global weakness as Federal Reserve policy makers prepare to meet next week to discuss if & when to raise interest rates.  “The short-term outlook is getting brighter and the economy continues to build momentum,” the Conference Board said.

Leading Indicators in U.S. Increase for Fourth Straight Month

Purchases of previously owned US homes rose less than forecast in Dec as higher prices limited sales to first-time buyers.  Contract closings increased 2.4% to a 5.04M annual rate from a 4.92M pace in the prior month, according to the National Association of Realtors.  The forecast called for a rise to 5.08M.  Prices picked up while inventories fell.  Employment gains & mortgage rates at historically low levels may encourage more Americans to take the plunge in the housing market provided properties remain affordable.  The improving outlook for sales & construction is supporting builder confidence.  Existing home sales, tabulated when a purchase contract closes, account for more than 90% of the residential market.  New-home purchases, which make up about 7% & are tabulated when contracts are signed, are considered a timelier barometer.  For all of 2014, sales of previously-owned houses fell 3.1% to 4.93M.  The median price for an existing home advanced 6% in Dec from the same period a year earlier, to $209K.  The number of previously owned homes on the market fell 11.1% to 1.85M, the fewest since Jan 2013.  At the current sales pace, it would take 4.4 months to sell those houses compared with 5.1 months at the end of the prior month.  Less than a 5 months’ supply is considered a tight market, the Realtors group said.  Sales of existing single-family homes increased 3.5% to an annual rate of 4.47M.  Purchases of multifamily properties fell 5% to a 570K pace.  First-time buyers accounted for 29% of all purchases, down from 31% a month earlier.  All-cash transactions made up about 26%.  Distressed sales, comprised of foreclosures & short sales, in which the lender agrees to a transaction for less than the balance of the mortgage, accounted for 11% of the total, up from 9% in Nov.  Even with the gains, the housing recovery still has a way to go.  A record 7.08M previously-owned houses were sold in 2005.  3 years later, existing-home sales plunged to a 13-year low of 4.11M.  Dow remains in the red in Jan.

Sales of Existing Homes in the U.S. Rise Less Than Forecast

China's Industrial Production
Photo:   Bloomberg

A Chinese manufacturing gauge recovered lost ground in Jan, suggesting stimulus measures have helped stabilize the economy.  The preliminary Purchasing Managers' Index from HSBC Holdings & Markit Economics was at 49.8, exceeding the estimate of 49.5 & up from 49.6 in Dec.  Numbers below 50 indicate contraction.  China's GDP increased 7.4% in 2014, the slowest full-year pace in 24 years, & provinces are lowering targets for this year’s expansion.  Along with data this week showing industrial output & retail sales improved in Dec, the first reading of the economy’s momentum in Jan may alleviate concerns of a deeper downturn.  Readings on output & new orders improved in Jan.  Today’s report, known as the Flash PMI, is based on 85-90% of responses to surveys sent to more than 420 manufacturers.

Chinese Manufacturing Picks Up, Lifted by Stimulus Measures

The news is indecisive today.  The king of Saudi Arabia died & Yemen is in turmoil, adding more uncertainty to the volatile oil market.  The housing market, an important part of the economy, continues to slog along with uneven reports.  Earnings remain inconsistent with few really good reports hard to find.

Dow Jones Industrials

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