Thursday, February 19, 2015

Markets waffle on mixed economic data

Dow fell 44, decliners slightly ahead of advancers & NAZ gained 18.  The MLP index was off 1+ to the 448s after a steep loss in the AM & the REIT index dropped 7 to the 336s.  Junk bond funds traded lower & Treasuries rose.  Oil saw more selling after US inventories dropped sharply & gold climbed higher.

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Germany, France, Russia & Ukraine said a truce signed last week must still be enforced after a rebel offensive pushed gov troops out of the strategic town Debaltseve & the leadership in Kiev called for peacekeepers.  Chancellor Merkel & presidents Putin, Hollande & Poroshenko agreed to stand by the deal, “despite the grave breach of the cease-fire in Debaltseve,”  Germany’s gov said.  Ukraine wants a European contingent to dominate any peacekeeping operation & sees Russian participation as unacceptable,  the Ukraine Minister said.  Fighting continued after the cease-fire agreement was meant to come into force on Sun, underscoring the tenuous nature of the deal brokered last week.  It also raises the prospect of the conflict hardening into a long-term standoff.  The 4 leaders “agreed that concrete steps need to be taken immediately to enable a comprehensive implementation of the cease-fire and the withdrawal of heavy weapons under observation” by the Organization for Security & Cooperation in Europe (OSCE), the German gov said.  Almost 3K Ukrainian soldiers have left Debaltseve, after Ukraine accused the pro-Russian separatists of violating the truce 253 times.  90 gov troops were captured & 82 are missing following the battle for Debaltseve, the Defense Ministry said.  It said the insurgents were parading the captured servicemen and that Ukrainian forces also took dozens of prisoners.  While the cease-fire is largely holding, there are still many violations, & heavy weaponry is not being withdrawn as per the truce accord, the OSCE monitoring team said.  The US gov also called on Russia to abide by the agreement.  The rebels continued shelling gov forces near the Sea of Azov port city of Mariupol.  Ukrainian troops also took fire near a village near Donetsk.

Leaders Say Ukraine Truce Vital as Donetsk Fighting Wanes

American Express, a Dow stock, fell after a judge ruled that the company violated antitrust law with its policy barring merchants from asking customers to use other forms of payment.  The lender failed to show that its so-called non-discrimination provisions, imposed on merchants who agree to accept its card, don’t harm competition, the jusdge said.  The Justice Dept victory in its lawsuit against the credit-card company might give merchants more leverage in their efforts to cut the costs, which are largely hidden from consumers.  It is the latest in a series of blows to AXP after its partnerships with Costco (COST) was called off.  “The court’s ruling will not provide any benefit to consumers and will, in fact, harm competition,” AXP said.  “We continue to believe the Department of Justice’s arguments are flawed and believe we should prevail on appeal.”  The US gov was joined by 17 states in its 2010 antitrust suit, alleging that AXP rules preventing merchants from steering customers to cards with lower processing costs violate federal law.  The lender has said it needs the policy to remain competitive & uses the swipe fees it collects to pay for customer rewards & provide services for merchants like fraud-prevention programs.  The stock fell 1.38.  If you would like to learn more about AXP, click on this link:

AmEx Declines After Losing U.S. Antitrust Lawsuit Over Steering

American Express (AXP)

In recent months, the stage seemed set for Americas to do what they've traditionally done best: Spend money, & drive the economy.  The lowest gas prices in 5 years had given people more spending money.  Employers added over 1M jobs from Nov-Jan, the best 3-month pace in 17 years.  Businesses even raised pay in Dec.  Economists had forecast that last week's retail sales report for Jan would show a healthy rise.  But to the surprise of analysts, consumers have held their wallets closely.  Even though Americans spent $6.7B less at gas stations in Jan than they had 2 months earlier, the extra cash didn't get spent anywhere else: Retail sales, excluding gas, fell slightly from Nov-Jan.  The unexpected pullback provided evidence that drivers had used their extra money to further rebuild their savings & reduce debts, a trend that began after the financial crisis & recession.  In the long run, deeper savings and shrunken debts benefit individual households & eventually, even the economy as a whole, because they supply fuel for a sustained flow of future spending.  For now, though, the slowdown in consumer spending likely means the economy will grow more slowly in Q1 than predicted.  The forecast now is for annualized growth of 2.5% in Q1, down from an earlier estimate of about 3%.  Why aren't Americans spending more?  One key reason: The deep damage to Americans' finances from the recession has continued to leave households more frugal than many economists had expected.  Americans have shrunk their debt loads but still aren't ready to spend as freely as they did before.  Americans saved 4.9% of their income in Dec, up from 4.3% in Nov, according to gov data.  Many Americans may not feel sure that the low gas prices will last.  It can take 3-6 for consumers to spend "found money," such as a tax rebate or savings from cheaper gas.  If that trend holds true, spending & economic growth could pick up in coming months.

For many Americans, money saved at the gas pump is being stashed in pockets, for now

Stocks are back to meandering on a lack of favorable economic news.  Business in China slows because of the new year, Europe is evaluating what to debt about the Greek debt crisis & the US has not been able to put together a string of good & encouraging news stories.  Yes, unemployment has come down but some of that is from people giving up looking for work & many new jobs are not high paying.  The inability of lower gas prices to bring significant gains for retailers is not encouraging   However the popular stock averages at or near record highs.  Maybe not for long.

Dow Jones Industrials

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