Wednesday, March 25, 2015

Maixed markets after durable goods orders

Dow dropped 58, advancers over decliners 4-3 & NAZ fell 30.  The MLP index rose 2 to the 428s & the REIT index was fractionally lower in the 344s.  Junk bond funds were mixed & Treasuries slid lower but the yield on the 10 year Treasuries is still below 1.9%.  Oil climbed to 48 & gold is nearing the important ceiling of 1200.

AMJ (Alerian MLP Index tracking fund)

CLK15.NYM...Crude Oil May 15...48.01 Up ...0.50 (1.1%)

GCH15.CMX...Gold Mar 15......1,198.80 Up ...7.10 (0.6%)

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Greece has until Mon to show how it will follow thru on reform commitments after the euro area ruled out speedy access to aid funds, 3 officials said following a conference call of finance ministry deputies.  The currency bloc left the door open for Greece to access €1.2B ($1.3B) that has been allocated to aid the banking system, if the cash-strapped nation can show how it will move ahead with the changes that its creditors are seeking.  At the same time, the euro zone’s other 18 members were adamant that Greece needs to deliver specific plans to see any more bailout cash.  Greece can’t get faster access to the bank-aid money, the European Financial Stability Facility (EFSF) said after today's call.  The deputies concluded that, legally, Greece didn’t overpay when it returned the money in Feb, the EFSF said.  As a result, Mon will be a serious test of whether Greece can convince its peers that it will meet their demands for an economic overhaul.  Once Greece submits its next documents, they’ll need to be reviewed by the country’s official creditors & then the finance ministry deputies in the first few days of next week, ahead of Easter holidays.

Euro Area Gives Greece Five Days to Deliver plan

Orders for durable goods unexpectedly dropped in Feb, a sign the slowdown in global growth may be weighing on American manufacturers.  Bookings for goods meant to last at least 3 years declined 1.4% after a 2% gain in Jan that was smaller than previously estimated, according to the Commerce Dept.  The forecast estimated durable goods orders would rise 0.2%.  Demand for American-made products may be softening as economies abroad struggle to accelerate & a stronger dollar makes it more attractive for foreign customers to buy from elsewhere.  Increased business spending will be needed to provide a boost to the economy following what some economists are projecting as lackluster growth in Q1.  Orders for non-military capital goods excluding aircraft, considered a proxy for future business investment, also dropped 1.4%, its 6th consecutive decline.  That marked the longest stretch of decreases since mid-2012.  They were projected to rise 0.3%.  Shipments of non-military capital goods excluding aircraft, which is used to calculate GDP, increased 0.2% after falling a revised 0.4% the month before.  Jan had previously been reported as a 0.1% gain.

Durable Goods Orders in U.S. Unexpectedly Fell in February

Federal Reserve policymakers should be "quite confident" that inflation is headed back to a healthy 2% before raising interest rates, the head of the Chicago Fed said, urging a delay in rate hikes until H1-2016.  "I see no compelling reason for us to be in a hurry to tighten financial conditions until then," Chicago Fed pres Charles Evans said.  To Evans, the costs of raising rates too soon far outweigh those of raising them too late, especially given weak inflation & an unemployment rate that, at 5.5%, is still higher than the 5% level he sees as sustainable.  While many of his colleagues are looking past the recent sharp rise in the value of the dollar, Evans worries that the strong dollar's "clear disinflationary pressure" could get embedded in expectations & make it even harder for the Fed to reach its 2% inflation target.  To feel comfortable about raising rates, he said, he would need to see a rise in core inflation above the current level of 1.3%, an increase in wage growth to a range of 3-4% annually, & a rise in inflation expectations.  Still, Evans has not used his vote on the policy-setting committee to dissent against colleagues who for the most part expect the Fed to start raising rates this year & to continue raising them about a qtr of a percentage point every other meeting.  Most market participants expect the Fed to move even more slowly, Evans said.  His remarks included a graph of market expectations that suggest traders agree with the rate hike views of the Fed's 2 most dovish policymakers, of which he is one.  "I think we should be cautious in raising interest rates," Evans said.

Fed's Evans: 'No Compelling Reason' to Rush Rate Hikes

Refinancing Greek debt remains a touchy issue & that will probably go down to the last minute before a decision is made.  The new gov wants to keep spending on social programs but will have to get serious about austerity for another bailout.  Kraft (KRFT) will merge with ketchup maker HJ Heinz, owned by 3G Capital & Warren Buffett's Berkshire Hathaway (BRK.A), to form one of America's largest food & beverage companies.  KRFT jumped almost 20 (32%).  In a stronger market, that news would bring rising stock prices.  Not today because there are too many macro economic worries.

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