Monday, March 16, 2015

Higher markets despite weak economic data

Dow jumped 164, advancers over decliners a mild 3-2 & NAZ added 36.  The MLP index plunged 6+ to the 411s (pretty much matching lows in recent months & down 130 from the peak last year) & the REIT index rose 4+ to the 335s.  Junk bond funds were higher & Treasuries gained.  Oil dropped to the 43s (a new multi year low) & gold was flattish.

AMJ (Alerian MLP Index tracking fund)

CLJ15.NYM.....Crude Oil Apr 15...44.33 Down ...0.51  (1.1%)

GCH15.CMX...Gold Mar 15......1,154.00 Up ...1.40 (0.1%)

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US factory production declined in Feb for a 3rd consecutive month, signaling cutbacks in manufacturing will hold back economic growth this qtr.  The 0.2% decrease at manufacturers followed a 0.3% drop in Jan that was initially estimated as a gain, according to the Federal Reserve.  Total industrial production, which also includes mines & power plants, climbed 0.1%, propelled by a record surge in utility use as temperatures plummeted.  Delays at West Coast ports have probably disrupted supplies, while sluggish growth in foreign markets & a rising dollar that makes American products more expensive may be crimping demand.  US consumer spending, supported by job & wage gains, will be needed to underpin activity at factories, which are often considered economic bellwethers.  Manufacturing, which makes up about 75% of total production, was forecast to be little changed.  January had previously been reported as a 0.2% increase.  Total industrial production was projected to rise 0.2%.  Output in Jan fell 0.3% compared with a previously reported 0.2% increase.  Capacity utilization, which measures the amount of a plant that is in use, declined to 78.9% in Feb from 79.1%.  Utility output soared 7.3%, the most since records began in 1972 as the eastern US saw below-normal temperatures & record snowfalls in New England.  Mining production, including oil drilling, fell 2.5%, the biggest decline in 4 years, after a 1.3% drop the prior month.  The plunge in fuel prices that started last year has led oil producers to curb investment plans.  The decline in manufacturing output reflected a 3% drop in production of motor vehicles & parts.  Automakers had said the work stoppage at West Coast ports, which has now been resolved, led to a shortage of some supplies.

Factory Production in U.S. Drops for Third Consecutive Month

A poll published Fri found 52% of Germans no longer want Greece to remain in Europe’s common currency, up from 41% last month.  The shift is due to a view held by 80% of Germans that Greece’s gov “isn’t behaving seriously toward its European partners.”  The hardening of German opinion is significant because the country is the biggest contributor to Greece’s €240B ($253B) twin bailouts & the chief proponent of budget cuts & reforms in return for aid.  Tensions have been escalating between the 2 govs since Prime Minister Tsipras took office in Jan, promising to end an austerity drive that he blames on Chancellor Angela Merkel.  Tsipras has also stepped up calls for war reparations from Germany for the Nazi occupation during WW II & Greek Finance Minister Varoufakis has been locked in a war of words with his German counterpart Wolfgang Schaeuble.  Last week, the Greek gove officially complained about Schaeuble’s conduct, to which Schaeuble replied that the whole matter was “absurd.”  The shift in German sentiment comes as Greece, at risk of running out of cash this month, battles with European officials over the release of more bailout funds.  Tsipras will join European leaders Thurs for more talks.  German voters’ growing umbrage may make it harder for Merkel to sell any possible deal down the road to the German public & Bundestag, which would have to vote on it.   While Merkel’s gov says Greece doesn’t have a blank check to do as it pleases, Germany’s official aim is to keep the euro area together.  Just 40% of Germans now say they want Greece to remain in the euro.

Germans Tired of Greek Demands Want Country to Exit Euro

Confidence among US homebuilders unexpectedly fell in Mar to an 8-month low as prospective buyers were in little rush to shop for properties ahead of the busier spring selling season.  The National Association of Home Builders/Wells Fargo sentiment gauge dropped to 53 from 55 in Feb.  The forecast called for a gain to 56.  Sales of single-family homes declined to a 5-month low & builder optimism about the outlook failed to improve.  Low mortgage rates & job creation may help spur homebuyer interest in coming months.  “Even with this slight slip, the HMI remains in positive territory and we expect the market to improve as we enter the spring buying season,” the NAHB said.  The group’s gauge of prospective buyer traffic declined to a 9-month low of 37 from 39 a month earlier.  The index of current single-family home sales dropped to 58, the weakest since Oct, from 61.  The measure of the 6-month sales outlook held at 59, the lowest since Jun.  Builder confidence declined in 3 of 4 regions, led by an 11-point slump in the West.  Potential buyers were slow to return to the market after colder weather in parts of the country helped limit sales & buyer traffic in the previous month.

Confidence Among U.S. Homebuilders Declines to Eight-Month Low

The bulls have taken command today even though there is little economic news to back up stock buying.  There are a few deals & hopes are still high for another Greek bailout as the month end deadline approaches.  Oil is at a 6 year low & the MLP index is back to where it was at the start of 2013.  All is not well in the energy markets & that spells trouble for the overall stock market.

Dow Jones Industrials

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