Tuesday, March 17, 2015

Markets retreat as oil sinks to another 6 year low

Dow fell 161, decliners over advancers 2-1 & NAZ pulled back 16.  The MLP index dropped 2+ to the 213s (essentially at its lows after the recent sell-off) & the REIT index was fractionally higher to the 334s.  Junk bond funds slid lower & Treasuries advanced.  Oil is at 43 & gold is about even.

AMJ (Alerian MLP Index tracking fund)

CLJ15.NYM....Crude Oil Apr 15...43.57 Down ...0.31  (0.7%)

GCH15.CMX...Gold Mar 15.....1,156.00Up ...2.70 (0.2%)

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Greece will begin debating measures to boost liquidity as the cash-starved country braces for more than €2B ($2.1B) in debt payments Fri.  Unable to access bailout funding & locked out of capital markets, the gov will outline emergency plans that includes incentives for tax delinquents to pay up before Mar 27, when Greece needs money for monthly salaries & pensions.  Prime Minister Tsipras’s gov is burning through cash while trying to get creditors, euro area member states, the ECB & the IMF, to release more money from a €240B bailout program.  Euro-area finance ministry officials will hold a call Tues to discuss Greece’s deteriorating finances.  The gov's revenue-boosting plan also requires pension funds & public entities to invest reserves held at the Bank of Greece in gov securities & repurchase agreements, & transfers €556M from the country’s bank recapitalization fund to the state.  A vote on the measures is scheduled for Wed.  Tsipras has asked to meet with ECB pres Mario Draghi, German Chancellor Merkel, French pres Hollande & other leaders at an EU summit starting Thurs to discuss Greece’s finances.  European govs have said they won’t disburse any more emergency loans unless the Greek gov implements a set of economic overhauls agreed last month, including pension & sales tax reform.  Tsipras has pledged to meet the country’s obligations while also ending austerity measures.  “None of my colleagues, or anyone in the international institutions, can tell me how this is supposed to work,” German Finance Minister Schaeuble said.  Greek leaders are “lying to the population,” he added.  The interest payment adds to the country’s funding woes as the gov misses budget targets & the ECB refuses to allow Greek banks to keep the country afloat with additional short-term debt.  Greece’s 2014 primary budget surplus was just 0.3% of GDP, missing a 1.5% goal, according to data released Mon.

Greece Scrambles to Find Cash Ahead of $2 Billion Payment Deadline

Housing starts slumped in Feb by the most in 4 years as bad winter weather in parts of the US prevented builders from initiating new projects.  Work began on 897K (annualized rate), down 17% from Jan & the fewest in a year, according to the Commerce Dept.  The estimate called for a 1.04M rate.  An increase in building permits was driven by applications for multifamily units, indicating single-family construction, the biggest part of the market, will keep struggling.  While stronger hiring & low borrowing costs have helped the industry advance, sales remain challenged by limited supply of cheaper homes & sluggish wage growth.  Building permits climbed 3% to a 1.09M annualized pace, the fastest since Oct, after a 1.06M rate a month earlier.  They were projected at 1.07M.  Permits for single-family dwellings were the lowest since May.  Starts of single-family properties dropped 14.9% to a 593K rate.  Construction of multifamily projects such as condominiums & apartment buildings decreased 20.8% to an annual rate of 304K.  New construction slumped a record 56.5% in the Northeast & fell 37%, the most since Jan 2014.  Cheap borrowing costs are keeping homes affordable for some Americans.  The average 30-year, fixed-rate mortgage was 3.86% in the latest week, according to data from Freddie Mac.  That’s below the average 4.26% rate since the expansion began in Jun 2009.

Housing Starts Plunge by the Most in Four Years

German investor confidence rose less than predicted in Mar as uncertainty over Greece’s future in the euro area countered optimism over an improving economic outlook.  The ZEW Center for European Economic Research index of investor & analyst expectations, which aims to predict economic developments 6 months in advance, climbed to 54.8 from 53 in Feb.  While that’s the highest in a year & the 5th month of increases, it fell short of the 59.4 forecast.  Concerns about the outcome of Greece’s negotiations with its European Union creditors is weighing on sentiment.  However, German economic growth remains supported by lower oil prices & a weaker €, just as the ECB quantitative-easing program pushes down bond yields & boosts stocks.  “Economic sentiment in Germany remains at a high level,” the ZEW said.  “In particular, the continuing positive development of the domestic economy confirms the expectations of experts. At the same time, limited progress is being made with regard to solving the Ukraine conflict & the sovereign debt crisis in Greece.  This has a dampening effect on sentiment.”  A gauge of the current situation climbed to 55.1 from 45.5 the previous month, ZEW said.  A measure of expectations for the euro area rose to 62.4 from 52.7.

German Investor Confidence Rises as Economic Outlook Improves

Yesterday's rally was not meant to last.  There are too many negative influences out there.  This time, the ECB & other money guys may get tough with Greece as critical deadlines are only days away.  Lower priced oil disrupts a lot of investment thinking.  Weak data on housing was no great surprise, adding to market woes.  Dow is down more than 300 in Mar & back into the red YTD.

Dow Jones Industrials

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