Monday, February 23, 2015

Markets fluctuate on mixed economic data

Dow slid back 23, decliners barely ahead of advancers & NAZ went up 5.  The MLP index dropped 5+ to the 448s (hurt by lower oil prices) & the REIT index climbed 2+ to the 442s.  Junk bond funds did little & Treasuries rose.  Oil is back in the 49s & gold drifted lower.

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CLJ15.NYM....Crude Oil Apr 15....49.25 Down ...1.56  (3.1%)

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German business confidence rose for a 4rth month as faster economic growth & optimism over ECB stimulus outweighed fears of a worsening Greek crisis.  The Ifo institute’s business climate index advanced to 106.8 in Feb from 106.7 in Jan.  The estimate was for an increase to 107.7.  Growth in Europe’s largest economy is accelerating amid lower oil prices & a weaker €, & Germany’s Bundesbank plans to increase its forecasts for 2015.  With the ECB set to start buying €60B ($68B) a month of debt to bolster the euro-area economy, the risk of a Greek default & exit from the union hasn’t weighed much on business sentiment.  A measure of current conditions dropped to 111.3 from 111.7 the previous month & a gauge of expectations climbed to 102.5 from 102.  Greece’s wrangling over its bailout package still clouds the outlook for Europe.  In Germany, manufacturing grew & services picked up pace in Feb, according to a Purchasing Managers Index by Markit Economics.  The Bundesbank has said that 2015 growth will probably exceed its Dec forecast of 1% while the European Commission this month forecast 1.5%.

German Business Confidence Rises as QE Outweighs Greece

US home resales fell sharply to their lowest level in 9 months in Jan amid a shortage of properties on the market, a setback that could temper expectations for an acceleration in housing activity this year.  The National Association of Realtors said existing home sales declined 4.9% to an annual rate of 4.82M units, the lowest level since Apr 2014.  Sales fell in all 4 regions.  Sales slumped last month despite a decline in mortgage rates, which saw the 30-year rate hitting a 20-month low.  Tight inventories are hurting sales by limiting the selection of houses available to potential buyers.  The lack of supply is also keeping house prices elevated, helping to sideline first-time buyers from the market.  There is hope that a tightening labor market would spur sturdy wage growth and pull first-time buyers into the market.  But unless there is a significant pickup in the number of homes available for sale, the housing recovery could remain sluggish.  The forecast for existing home called for sales falling only to a 4.97M unit pace last month.  Sales were up only 3.2%  from a year ago.

Existing Home Sales Hit Nine-Month Low on Weak Supply

Greece is presenting its economic reform plans to seal a euro zone financial lifeline, but the gov drew criticism from a veteran leftist & ruling party member that the deal let voters down.  Germany, the biggest contributor to Greece's 2 bailouts, said any extra spending on the list of reforms had to be offset by savings or higher taxes.  To win the conditional 4-month agreement, the gov of PM Tsipras declared the reform list would at least be decided by Greeks, in contrast to the austerity policies dictated by foreign creditors since they were bailed out in 2010.  "The list will include a series of reforms that the Greek government will propose - and I underline that," a gov spokesman said.  "Above all, they will be socially just reforms that aim to fight tax evasion, to fight corruption," was added.  The gov made clear Greece was anxious to avoid any last-minute hitches in securing the funding needed to keep it afloat & avoid an exit from the euro zone.  "We aim for this list to be accepted by the partners. This is why there are consultations and discussions with the partners so that there is a mutually beneficial solution," the spokesman said.  Tsipras declared victory in the Fri deal, which is conditional on Greece's European & IMF creditors accepting the reform list, even though he had to accept an extension of the bailout program he had promised to scrap.  But he drew criticism from a leftist in gov who attacked the failure to fulfil Syriza's campaign promises & said simply avoiding inflammatory wording would not soothe the public.

This was a quiet day in the stock market.  The bailout for Greece remains fairly certain, but is still in the clouds.  Fighting in eastern Ukraine continues & the MidEast remains unsettled.  The US economic recovery continues on a rocky road while the popular stock averages are essentially at record highs.  Keep in mind that higher interest rates are only a few months away.

Dow Jones Industrials


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