Tuesday, March 24, 2015

Markets slide lower on Greek debt concerns

Dow dropped 104, decliners 5-4 ahead of advancers & NAZ lost 16 to under 5K.  The MLP index was off 6 to the 426s & the REIT index pulled back 2+ to the 344s.  Junk bond funds edged higher & Treasuries rallied, taking the yield on the 10 year Treasury below 1.9%.  Oil & gold each crawled higher, oil shooting for 48 & gold heading for 1200.

AMJ (Alerian MLP Index tracking fund)

Investors risk suffering a Federal Reserve interest-rate rise surprise unless market expectations for future tightening line up with the outlook of policy makers, said St. Louis Fed pres James Bullard.  He said active discussion by the Fed about the timing of the first rates increase since 2006 ought to ensure that it doesn’t come as a shock when policy eventually moves.  “But there is this issue about the market expectation of the rate path being different from the committee’s expectation,” he told reporters.  “So if we get all the way to the day we actually make the decision, and end up surprising the markets on that day, there is going to be a reconciliation on that day and that could be violent.”  The Fed last week opened the door to a rate rise from Jun onward by dropping an assurance to be “patient” on the timing of liftoff in the policy statement that it released following a meeting of the FOMC.  Rates have been held near zero since Dec 2008.  “Given the extent of discussion about it, I’d be surprised if we get all the way to that juncture,” said Bullard, who next votes on the FOMC in 2016.  Officials last week marked down their quarterly forecasts for the economy & interest rates, almost halving the median projection for the federal funds rate to 0.625% by end-2015 from 1.125% in the Dec estimate.  Even so, bets laid in financial markets indicate investors see rates rising at a slower pace than the Fed, with interest rate futures markets currently priced for the benchmark rate around 0.55% by end-2015.  A surprise would recall the so-called taper tantrum of May 2013, when then-Fed Chairman Ben Bernanke rattled investors by signaling that the central bank could soon begin scaling back bond buying, sending yields sharply higher.  The taper tantrum “came from a misalignment between what the markets were thinking the committee was going to do with its QE program and what the committee thought it was going to do,” Bullard said.  Fed bond buying was also called quantitative easing.

Fed's Bullard Says Markets Risk Rate-Rise Surprise If They Ignore Fed

The ECB banned Greek banks from increasing holdings of short-term govt debt, according to leakers.  The decision, approved by the Governing Council, comes 5 days after the same body stalled a previous proposal by the institution’s supervisory arm, pending legal review.  In the intervening days, Greek Prime Minister Tsipras met high-level euro-area officials, including ECB pres Mario Draghi & German Chancellor Merkel.  Tsipras agreed to submit a comprehensive list of policy measures aimed at securing more financial aid from euro partners.  Euro-area finance officials will hold a call tomorrow to discuss progress on Greece, amid concerns that the country will run out of money by early Apr.  The Governing Council decision makes previous supervisory recommendations legally binding, & reflects increasing concern at the ECB’s bank oversight body, the SSM, about Greek lenders’ exposure to the state & the accompanying default risk.  The ban echoes decisions already made on the monetary policy side, such as a €3.5B ($3.8B) limit on accepting Greek treasury bills as collateral.

ECB Said to Limit Greek Lenders’ Treasury-Bill Holdings

US home prices in Jan increased less than the estimated (0,6%) as traditional buyers took the place of investors, leading to smaller gains.  Prices climbed 0.3% on a seasonally adjusted basis from Dec, according to the Federal Housing Finance Agency (FHFA).  After the residential real estate crash, prices began rising as investors bid up values for foreclosures.  Now, fewer distressed properties are available & the market is increasingly dependent on traditional buyers.  Investors purchased 14% of homes in Feb, down from 21% a year earlier, according to the National Association of Realtors.  The FHFA’s index showed home prices increased 5.1% in Jan from a year earlier.  The US gauge is 3.5% below its Mar 2007 peak & about the same as the Dec 2005 level.  Prices in Jan climbed 8.2% from a year earlier in the Pacific region, which includes California, Oregon & Washington; & 7.2% in the West South Central area, with states such as Texas, Oklahoma & Louisiana.  The Middle Atlantic region -- New York, New Jersey & Pennsylvania -- had the smallest increase, at 1.7%.  The FHFA index measures transactions for single-family properties financed with mortgages owned or securitized by Fannie Mae & Freddie Mac.

U.S. Home Prices Rose Less Than Expected in January

Stock traders have a lot to think about & stocks were not bought today.  Deadlines for refinancing Greek debt draw near, by one estimate less than a month, & there is some nervousness.  US economic data keeps coming in mixed.  Feb & Mar numbers should be drab with harsh winter weather limiting gains.  Housing, in particular, has had a tough time putting 2 or 3 good months together in a row.  GDP growth for 2015 is getting revised downward to the 2+% area, where it has been in during the "long" recovery.  Getting little attention, the Treasury is paying bills carefully after reaching its debt ceiling.  Despite these troubles, Dow is within 250 of its record high.  Hard to believe!

Dow Jones Industrials

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1 comment:

ben herbert said...

Hi Avi Do you have anyone you follow for MLP's and BDC 's , I enjoy your blog and read it daily , thanks