Thursday, March 19, 2015

Markets slide lower as oil pirces decline

Dow dropped 117, decliners over advancers almost 2-1 & NAZ added 9.  The MLP index fell 3+ to the 422s & the REIT index was off pocket change to the 339s.  Junk bond funds declined & Treasuries sold off, but the yield on the 10 year Treasury is still under 2%.  Oil lost over $1 while gold climbed higher.

AMJ (Alerian MLP Index tracking fund)

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CLJ15.NYM....Crude Oil Apr 15....43.60 Down ...1.06  (2.4%)

Live 24 hours gold chart [Kitco Inc.]

The Federal Reserve (FED) was in a tough spot: The Feb US unemployment rate of 5.5% is right where the FED had been saying inflation would likely start to accelerate.  Yet inflation remains even lower than the FED wants it to be.  So yesterday, it moved the goalposts.  It now says unemployment could fall as low as 5-5.2% before inflation pressures would probably start to build.  That's down from its previous range of 5.2-5.5%.  That shift is a big reason many think the FED has in effect postponed the date when it will start raising the short-term interest rate it controls.  They expect it to start raising rates in Sep or even later after having previously predicted Jun.  As the unemployment rate falls, it typically reaches a level at which employers must raise pay to find qualified workers to hire.  Those employers then raise prices to offset the higher wages they're paying, which usually accelerates inflation.  The unemployment rate that triggers higher prices is generally considered "full employment."  Chair Janet Yellen said thenew lower range for acceptable unemployment "suggests that (FED officials) are seeing more slack in the economy now than they previously did."  That, in turn, implies that rates will rise more slowly than many had assumed.  The FED had little choice but to make the change to acknowledge economic reality.  Paychecks for most Americans have barely kept up with inflation since the recession officially ended 5½ years ago.

Fed redefines the unemployment range it considers acceptable

Growth in factory activity in the US mid-Atlantic region fell for a 4th straight month in Mar to its lowest level in more than a year, a regional Federal Reserve survey showed.  The Philadelphia Federal Reserve Bank said its business activity index slipped to 5.0 this month, the lowest since Feb 2014, from Feb's 5.2.  The forecast was for an increase to 7.1.  Any reading above zero indicates expansion in the region's manufacturing.  The survey covers factories in eastern Pennsylvania, southern NJ & Delaware.  It is seen as one of the first monthly indicators of the health of US manufacturing leading up to the national report by the Institute for Supply Management.  Just 4 months ago, in Nov, the Philadelphia Fed gauge had notched its highest reading since Dec 1993, but has fallen each month since then.

Mid-Atlantic Manufacturing Activity Unexpectedly Falls

Apple starting its first day in the Dow Jones Industrial Average as one of the 5 components gaining ground in the AM.  However it finished, down 97¢.  If you would like to learn more about AAPL, click on this link:

Apple Starts Its First Day In The Dow As One Of a Handful Of Gainers

Apple (AAPL)

stock chart

Lennar reported Q1 earnings & sales that topped estimates, but gross margins diminished as expected.  EPS rose 43% to 50¢ which compares with the estimate for 45¢.  Revenue climbed 21% to $1.64B, ahead of projections for $1.5B.  The stock was rocked in mid-Jan after LEN warned that rising costs would squeeze margins, but shares quickly rebounded.  Gross margins fell 2 percentage points to 23.1% in the qtr, which the company says is "consistent with our previously stated guidance."  LEN attributed this decrease to increased costs of materials, labor & land.  On Jan 20, LEN projected that its 2015 gross margins would shrink to 24% from 25.4%.  New home deliveries increased 19% to 4302 homes, while new orders increased 18% to 6287.  The dollar value of the new orders jumped 25% to $1.8B.  The stock lost pennies.  If you would like to learn more about LEN, click on this link:

Lennar Q1 Earnings And Sales Top But Margins Shrinkat Investor's Business Daily

Lennar (LEN)

Reality caused modest selling after yesterday's big rally.  Low priced oil has been responsible of much of the selling in stocks this year & sellers returned today.  An uneven economic recovery in the US continues with an inconsistent record of growth & what growth there has been is coming in a little over 2% annual rates.  After trying & failing for more than a month, breaking thru the 18K ceiling in a meaningful way may prove difficult for the Dow.

Dow Jones Industrials

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