Tuesday, March 31, 2015

Markets close Q1 lower on economic data

Dow dropped 200 finishing near the lows, decliners over advancers 3-2 & NAZ pulled back 46.  The MLP index lost 1+ to 429 & the REIT index fell 3+ to the 337s.  Junk bond funds were lower & Treasuries rose in price.  Oil is back in the 47s & gold was lower.

AMJ (Alerian MLP Index tracking fund)

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CLK15.NYM....Crude Oil May 15....47.56 Up  ...0.99 (2.1%)

Live 24 hours gold chart [Kitco Inc.]

Home prices in 20 US cities appreciated at a faster pace in the year ended in Jan, indicating the residential real-estate market continues to firm.  The S&P/Case-Shiller index of property values increased 4.6% from Jan 2014, the biggest gain since Sep after rising 4.4% the prior month.  That matched the projection that prices rose 4.5% from January 2014.  A dearth of supply will continue to drive up home prices heading into the busy spring selling season as demand is spurred by rising rents.  Builders expect to post strong revenue in the warmer months ahead, based on early signs of strength, particularly among first-time buyers.  Seasonally adjusted home prices in the 20-city index increased 0.9% from the prior month, matching Dec's advance.  14 cities in the index showed year-over-year gains that were larger than in the prior month, with Chicago experiencing the largest acceleration.

Home Prices in 20 U.S. Cities Rose at Faster Pace in January

The US Midwest continues to indicate a slowdown in the economy.  The Chicago Business Barometer, also known as Chicago PMI, registered 46.3 in Mar, up from its 5½ year low of 45.8, but still below 50, which points to contraction.  The barometer came in at 50.5 for Q1, down from 61.3 in the previous period.  This is the index's lowest point for a qtr since Q3-2009.  The Mar number suggests economic weakness is continuing beyond the wintry weather & labor problems at West Coast ports, which plagued Feb.  Of the 5 subindices that make up the barometer, only employment ended up above 50.  Production, new orders, order backlog & supplier deliveries all remained in the realm of contraction.

Midwest Factory Activity Rises in March

Iran & world powers may push negotiations into early Wed, missing their Mar 31 deadline for an agreement to resolve the 12-year standoff over the Iran's nuclear program.  The possible extension comes with diplomats struggling to reach an outline agreement that would allow all sides to claim some success, while falling short of the full resolution of every issue dogging the dispute.  The sides would then have until Jun 30 to overcome remaining difficulties & draft a detailed technical agreement.  “We’re making progress but it’s difficult,” French Foreign Minister Laurent Fabius said. “I’m afraid we’ll spend the night on it.”  Negotiators have missed 2 previous deadlines since last Jul, a sign of how difficult it has been for the 2 sides to agree on issues that include restricting and monitoring Iran’s disputed nuclear activities and lifting penalties applied for the Iran's illicit atomic work.  Sanctions, research & development & issues related to uranium enrichment have not yet been resolved, he said, hinting that there may be rifts among the 6 powers negotiating with Iran over how to address the remaining gaps.  White House press secretary Josh Earnest said that the US is willing to keep the negotiations going “if the conversations continue to be productive.”  After more than a year of talks, Iran is running out of time & the US is running out of patience, he said.  But if there is serious engagement from Iran “we should keep going.”

Q1 closed on a down note.  With no significant financial news, fighting in Yemen, nuclear talks dragging on & Greece desperately seeking another bailout, dominated traders' thoughts.  Mar was another down month for the Dow & it fell 50 in Q1.  Tomorrow begins a new qtr, but it may not be much better.

Dow Jones Industrials

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Lower markets on mixed economic data.

Dow fell 16 (paring earlier losses), decliners slightly ahead of advancers & NAZ lost 6.  The MLP index rose 2+ to the 433s & the REIT index fell pennies below 341.  Junk bond funds were mixed & Treasuries climbed higher.  Oil slipped lower in the 48s & gold inched higher.

AMJ (Alerian MLP Index tracking fund)

CLK15.NYM...Crude Oil May 15...48.05 Down ...0.63  (1.3%)

GCJ15.CMX....Gold Apr 15......1,188.40 Up ...3.60 (0.3%)

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German Chancellor Angela Merkel & French President Francois Hollande pressed the Greek gov to come up with an economic plan that its creditors can approve, saying time is short.  “There’s no time to lose,” Merkel said.  While talks are “a start,” they “aren’t there yet,” she said.  “As I already said several days ago, we’ve lost too much time,” Hollande said.  “The sooner, the better.”  The leaders of the euro area’s 2 biggest economies used the occasion to signal unity on Greece, saying they want to keep the country in Europe & insisting that Greek Prime Minister Tsipras deliver on economic reform commitments.  While other euro-area governments gave Greece until the end of Jun to present a plan & “I’m not counting the days,” Merkel said “the quicker Greece makes proposals, the quicker an agreement can be reached.”  Asked about Tsipras’s plan to visit Moscow for talks next week, she said she & Hollande “have also been to Moscow & we’re still members of the European Union & stand united.”

German unemployment dropped to a record low as the labor market continued to underpin the country’s position as Europe’s economic powerhouse.  The jobless rate fell to 6.4% in Mar from 6.5% in Feb, the Federal Labor Agency said.  The prediction was for the level to remain unchanged.  The number out of work declined a seasonally adjusted 15K to 2.8M.  German business & investor confidence is mounting as plunging energy prices put more cash in consumers’ pockets & a weaker € bolsters exports.  Output in the country probably increased “sharply” in Q1, the Bundesbank said in its Mar monthly report.  Inflation data published yesterday showed German consumer prices rising again on an annual basis in Mar, after 2 months of decline.  A purchasing managers’ index showed manufacturing accelerated more than predicted in the month.  Italy’s unemployment rate unexpectedly rose to 12.7% in Feb, from 12.6% the prior month, statistics agency Istat said.  The jobless rate in the 19-nation euro area probably held at 11.2% in Feb, according to a recent survey.

German Unemployment Keeps Falling as Economy Strengthens

Consumer confidence increased in Mar to the 2nd-highest level since Aug 2007 as Americans grew more upbeat about the outlook for the labor market & incomes.  The Conference Board’s sentiment index climbed to 101.3 from 98.8 in the prior month that was stronger than initially reported.  The forecast called for the gauge to hold at Feb’s previously reported 96.4 reading.  The gain in Mar was paced by households who looked forward to more employment opportunities & rising incomes in the coming 6 months.  The pickup may help consumer spending rebound after a setback earlier this year.  The gauge averaged 96.9 during the last expansion & 53.7 during the recession that ended Jun 2009.  In Jan, the index rose to 103.8, the best reading since Aug 2007.  The Conference Board’s consumer expectations gauge for the next 6 months increased to 96, the 2nd-highest reading in 4 years, from 90 in Feb.  The measure of present conditions dropped to 109.1 in Mar from 112.1 & the share of Americans who said business conditions were good held at 26.7%.  The Conference Board’s data showed Americans’ assessments of current & future labor-market conditions improved.  The share of Americans who said jobs were plentiful rose to 20.6% in Mar from 20.3%.  The proportion of consumers expecting more jobs to become available in the next 6 months climbed to 15.5% from 13.8% in Feb.  The share of respondents that said they expected their incomes to grow in the next half year increased to 18.4% from 16.4% last month.

Americans’ Confidence Climbs to Second-Highest Since 2007

Stocks aren't doing much of anything.  Today's final prices may be largely a function of money managers adjusting their books one way or the other.  But there are plenty of problems out there.  The US economy does not have a robust recovery.  Intl relationsd are a mess, highlighted by the need to refinance Greek debt shortly & the growing fighting in Yemen (along with the rest of the MidEast).  Dow is up 100 in Q1, not bad all considered.

Dow Jones Industrials

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