Friday, March 13, 2015

Markets fall on consumer confidence data

Dow plunged 182, decliners over advancers 3-1 & NAZ sold off 30.  The MPL index fell 5+ to the 515s, near its recent lows, & the REIT index was off 1 to 330.  Junk bond funds were lower & Treasuries saw selling.  Oil sank to the 45s on a negative industry report (see below) & gold inched higher.

AMJ (Alerian MLP Index tracking fund)

CLJ15.NYM....Crude Oil Apr 15...46.07 Down ...0.98  (2.1%)

GCH15.CMX...Gold Mar 15....1,155.00 Up ...2.90 (0.3%)

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Consumer confidence declined in Mar to a 4-month low as optimism about the US economy was tempered by weaker income expectations & a rebound in gasoline prices.  The University of Michigan said its preliminary consumer sentiment index decreased to 91.2 this month from 95.4 in Feb.  The projection called for a reading of 95.5.  Consumers were less upbeat this month as cold weather boosted utility bills, the cost of gas advanced from the almost 6-year low in Jan & wage growth was limited among middle & lower income households.  At the same time, a better job market is among reasons Americans may feel comfortable spending.  The gauge averaged 75.8 thru Feb from the start of this expansion in Jun 2009.  It averaged 88.8 in the 5 years leading to the last recession that started in Dec 2007.  The Michigan sentiment survey’s index of expectations 6 months from now decreased to 83.7, the lowest since Nov, from 88 last month.  The gauge of current conditions, which measures Americans’ views of their personal finances, fell to 103 in Mar, also a 4-month low, from 106.9 a month earlier.  “Positive personal financial gains lessened in early March among lower- and middle-income households due to fewer reports of income gains and more frequent reports of drains on their budgets due to higher utility costs,” the Michigan Survey of Consumers reported.  At the same time, “the data provide no indication that consumers think that robust job growth has ended.”  Americans expected an inflation rate of 3% in the next year, the highest since Sep, after 2.8% in Feb.  Over the next 5-10 years, they expect a 2.8% rate of inflation, compared with 2.7% in Feb.

Consumer Sentiment in U.S. Fell in March to Four-Month Low

Wholesale prices in the US unexpectedly declined in Feb for a 4th consecutive month, reflecting cheaper food & a slump in profit margins among wholesalers & retailers.  The 0.5% decrease in the producer price index followed a 0.8% drop the prior month, according to the Labor Dept.  The estimate called for a gain of 0.3%.  The core measure, which strips out volatile food & fuel, also decreased 0.5%.  Inflation in the US has decelerated as a rising dollar cheapened the cost of imports & crude oil slumped. Federal Reserve policymakers are awaiting signs that inflation will move back up toward their target as they consider raising interest rates for the first time since 2006.  Compared with a year before, producer prices fell 0.6%, the first 12-month decrease since records began in 2009. The core index increased 1 percent in the 12 months ended Feb, after a 1.6% gain.  Eliminating food, energy & trade services costs were unchanged last month after falling 0.3% in Jan.  A 1.5% drop in trade services reflected a plunge in profit margins among a broad swath of wholesalers and retailers, including service stations, clothing stores & trucking companies.  It was the biggest decrease in trade services since record-keeping began in 2009.  The cost of services decreased 0.5% last month, while prices for goods dropped 0.4%.  Energy costs were little changed last month after a 10.3% drop in Jan.  Food prices declined 1.6%, the most since Apr 2013.  Lower gasoline prices have been leaving a little more money in consumers’ pockets, allowing them to spend or save extra income.

Wholesale Prices in U.S. Fall for Fourth Month

Oil fell after a monthly report from the International Energy Agency (IEA) raised concerns that the glut of crude supplies & tightening storage capacity in the US may cause prices to weaken further.  In its report, the IEA said any appearance of stability in oil is tenuous.  “On the face of it, the oil price appears to be stabilizing. What a precarious balance it is, however,” the report said.  “Behind the facade of stability, the rebalancing triggered by the price collapse has yet to run its course, and it might be overly optimistic to expect it to proceed smoothly,” the report said.  The report indicated that oil production in the US increased 115K barrels a day in Feb & said ballooning inventories combined with the nation’s shrinking oil storage could drag prices lower.  The comments from IEA come as oil has been trading in a relatively narrow band over the course of the past few weeks, on the heels of steep declines in weekly US rig counts.

Oil drops as IEA raises U.S. supply, storage concerns

Stocks fell because of the glum report on the state of the oil industry combined with weak consumer confidence data.  Dow is down more than 400 in Mar & this is shaping up as another gloomy month.

Dow Jones Industrials

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