Dow dropped 82, but advancers slightly ahead of decliners & NAZ fell 24. The MLP index rose 3+ to the 447s & the REIT index went up 2+ to the 335s. Junk bond funds did little & Treasuries advanced, bringing the yield on the 10 year Treasury down to 2%. Oil bounced back into the 49s & gold crawled higher.
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](http://www.kitco.com/images/live/gold.gif?0.7055103624521912)
William C. Dudley, pres of the Federal Reserve Bank of New York, said he sees reason for caution on how soon or how quickly to raise interest rates. “Inflation is projected to stay for some time below the Fed’s objective of 2 percent,” he said & also cited “lingering headwinds” from the financial crisis. Dudley was discussing an academic paper arguing the Fed should delay its first rate increase & then tighten more sharply thereafter. The paper investigates whether there is a “new neutral” for long-term rates & finds it could range from a little over zero-2%, adjusted for inflation. Dudley also repeated his view that raising rates too soon poses greater risks to the economy than lifting them too late. While Dudley said he doesn’t accept the “secular stagnation” thesis of prolonged period of low growth & interest rates, the appropriate longer-run level of the federal funds rate will probably be lower than in the past because of slower growth in the labor force & worker productivity. “My point estimate is that the longer-run value of the federal funds rate is 3.5 percent, well below its long-run historical level of 4.25 percent,” he said. “At the same time, I also have little confidence about the accuracy of this specific estimate,” he added. He said a cautious approach to tightening only applies as long as inflation expectations are stable, & added that globalization & a migration of financial activities away from the banking system may have made the federal funds rate less effective in influencing the economy. Dudley also said investor expectations that the Fed will keep its benchmark rate low in the long run are helping to hold down bond yields & boosting growth. If long-term yields stay low after the Fed starts to raise its short-term rate, he said, “it would be appropriate to choose a more aggressive path of monetary policy normalization.”
The Institute for Supply Management-Chicago business barometer decreased to 45.8 in Jan from 59.4 in the prior month. Readings greater than 50 signal growth. The forecast was for 58. The estimates ranged from 55-59.6.
JC Penney misses Street estimate; stock drops 9%
Stocks finished the month low on less than thrilling economic news. Oil rigs declined for a 12 straight week. This is a major contributor to the economy & it's hurting. The GDP news was glum after the downward revision which will produce lower estimates for the Q1 growth rate. GDP grew at a mediocre 2.4% rate last year following 2.2% in 2013. Past recessions have had much strong growth rates. Despite the negative market today, Dow rose an outstanding 1K in Feb bringing it into the black YTD (down 90 from the record reached 2 days go).
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CLJ15.NYM | ...Crude Oil Apr 15 | ....49.57 |  ...1.40 | (2.9%) |
William C. Dudley, pres of the Federal Reserve Bank of New York, said he sees reason for caution on how soon or how quickly to raise interest rates. “Inflation is projected to stay for some time below the Fed’s objective of 2 percent,” he said & also cited “lingering headwinds” from the financial crisis. Dudley was discussing an academic paper arguing the Fed should delay its first rate increase & then tighten more sharply thereafter. The paper investigates whether there is a “new neutral” for long-term rates & finds it could range from a little over zero-2%, adjusted for inflation. Dudley also repeated his view that raising rates too soon poses greater risks to the economy than lifting them too late. While Dudley said he doesn’t accept the “secular stagnation” thesis of prolonged period of low growth & interest rates, the appropriate longer-run level of the federal funds rate will probably be lower than in the past because of slower growth in the labor force & worker productivity. “My point estimate is that the longer-run value of the federal funds rate is 3.5 percent, well below its long-run historical level of 4.25 percent,” he said. “At the same time, I also have little confidence about the accuracy of this specific estimate,” he added. He said a cautious approach to tightening only applies as long as inflation expectations are stable, & added that globalization & a migration of financial activities away from the banking system may have made the federal funds rate less effective in influencing the economy. Dudley also said investor expectations that the Fed will keep its benchmark rate low in the long run are helping to hold down bond yields & boosting growth. If long-term yields stay low after the Fed starts to raise its short-term rate, he said, “it would be appropriate to choose a more aggressive path of monetary policy normalization.”
Dudley: Uncertainty on Long-Run Rate Argues for Caution
The Institute for Supply Management-Chicago business barometer decreased to 45.8 in Jan from 59.4 in the prior month. Readings greater than 50 signal growth. The forecast was for 58. The estimates ranged from 55-59.6.
Chicago ISM Manufacturing Index Tumbles
JC Penney reported break-even results,
missing estimates for EPS of 11¢, while revenue &
comparable-store sales grew more than expected thanks to a "successful
holiday season." The retailer reported fiscal Q4 sales
of $3.89B, up from $3.78B a year earlier, & topping estimates for $3.87B. Same-store sales rose 4.4%, compared to forecasts for a gain of 3.8%. In addition, the company said online sales totaled
$428M, up 12.5%. "I am extremely proud of all that has been accomplished to restore this great company," CEO Mike Ullman said. "We are back in the eyes of our customers, back running the
business effectively and back on solid financial footing. We fully
intend to build on this momentum and continue to significantly improve
our business in 2015." JCP expects comp-store sales to increase 3-5% for fiscal 2015, while gross margin is expected
to improve between 50-100 basis points versus 2014. Free cash flow is
projected to come in flat. "I have been very impressed by what I have seen in
my first few months at J.C. Penney," pres & CEO-designee Marvin Ellison said. "I believe 2015 will be an important year
for J.C. Penney, and the team is focused on profitably executing our
business." Last month, JCP posted strong numbers for
the 9-week holiday period, reporting comparable-store-sales growth of
3.7% over the year-earlier period. The improvement renewed investor hope that the struggling retailer's turnaround is on the right track. The stock sank 64¢ (7%). If you would like to learn more about JCP, click on this link:
club.ino.com/trend/analysis/stock/JCP?a_aid=CD3289&a_bid=6ae5b6f7JC Penney misses Street estimate; stock drops 9%
J.C. Penney (JCP)
Stocks finished the month low on less than thrilling economic news. Oil rigs declined for a 12 straight week. This is a major contributor to the economy & it's hurting. The GDP news was glum after the downward revision which will produce lower estimates for the Q1 growth rate. GDP grew at a mediocre 2.4% rate last year following 2.2% in 2013. Past recessions have had much strong growth rates. Despite the negative market today, Dow rose an outstanding 1K in Feb bringing it into the black YTD (down 90 from the record reached 2 days go).
Dow Jones Industrials
