Thursday, March 12, 2015

Markets surge on hopes for a delay in interest rate hikes

Dow shot up 259, advancers over decliners 5-2 & NAZ gained 43.  The MLP index lost 2+ to 420 (nearing its multi month lows) & the REIT index jumped 5+ to the 331s.  Junk bond funds were mixed to lower & Treasuries pulled back.  Oil dropped to the low 47s & gold crawled higher.

AMJ (Alerian MLP Index tracking fund)

CLJ15.NYM....Crude Oil Apr 15....47.07 Down ...1.10  (2.3%)

Live 24 hours gold chart [Kitco Inc.]

The budget deficit in the US narrowed in Feb from a year earlier as a stronger economy helps improve the nation’s fiscal position, Treasury Dept figures showed.  Spending exceeded revenue by $192.3B last month, compared with a $193.5B deficit in the same month for the prior year.  The estimate was for a $191B deficit.  The US deficit has been shrinking in recent years as the economy strengthens, hiring picks up & company profits improve.  The Congressional Budget Office earlier this week predicted the deficit as a share of GDP this year will be the lowest since 2007.  “Our deficit, which has fallen by almost three-quarters, is forecast to decline even further in the next fiscal year,” Treasury Secretary Jacob Lew said, counting that among achievements that “underscore America’s enduring economic strength.”  For the first 5 months of the fiscal year that began Oct 1, the country ran a $386B deficit, compared with $376B in the prior fiscal year.  Revenue in Feb was $139B, down 3.4 % from a year earlier, while outlays fell 1.8% to $331B.  In the first 5 months of the fiscal year that began Oct 1, revenue is up 7.1% from the same period a year earlier.  The federal budget deficit is projected to total $486B in fiscal year 2015 & the CBO estimated 2.7% of GDP (which compares with 2.8% last year & 9.8% in 2009).

Budget Deficit in U.S. Narrows in February as Hiring Strengthens

Household wealth in the US increased in Q4-2014 by the most in a year as stock prices advanced to an all-time high at the end of 2014.  Net worth for households & non-profit groups rose $1.5T in Q4, or 1.9% from the previous qtr, to $82.9T, the Federal Reserve said.  Record stock prices & steadily increasing home values have made US households wealthier as the economic expansion lumbered on.  While faster job growth & low fuel prices also have helped lower-income households, bigger wage gains will strengthen balance sheets further.  The value of financial assets, including stocks & pension fund holdings, held by American households increased $1.2T in Q4, according to the Fed report.  Though the housing market has made fitful progress over the past year, the improving jobs picture may boost prospects for growth in the industry, which would in turn bolster household wealth.  Household real-estate assets climbed by $265B.  Owners’ equity as a share of total household real-estate holdings rose to 54.5% last qtr from 54% in Q3.  Wages have been slow to accelerate, with average hourly earnings climbing just 0.1% in Feb from the month before.  They rose 2% in the past year, matching the average for the recovery.   Household debt increased at a 2.7% in Q4.   Mortgage borrowing rose at a 0.7% pace for a 2nd straight qtr.  Other forms of consumer credit, including auto & student loans, slowed to a 6% pace, the weakest in a year.  Total non-financial debt increased at a 4.7% annual pace last qtr, the most in 2 years.  Federal gov obligations rose 5.4%, while business borrowing climbed 7.2%.  State & local gov debt advanced at a 1.1% pace.

Household Worth in U.S. Rose by $1.5 Trillion in Fourth Quarter

Intel, a Dow stock, slashed its revenue forecast for Q1 by nearly $1B, citing lower-than-expected demand for business PCs & lower inventory levels across the PC supply chain.  INTC expects Q1 revenue of $12.8B, plus or minus $300M.  It had earlier forecast $13.7B, plus or minus $500M.  Analysts were expecting revenue of $13.7B.  The company cut its forecast as small & medium business owners did not upgrade their Windows XP operating systems as often as had been expected.  INTC also cited "challenging" macroeconomic & currency conditions, particularly in Europe.  It said the mid-point of its gross margin range will remain at 60%, plus or minus a couple of percentage points, as lower PC unit volume is offset by higher platform average selling prices.  Global PC shipments fell 2.4% in Q4-2014, according to research firm IDC.  The stock sank 1.53 (5%).  If you would like to learn more about INTC, click on this link:

Intel Slashes First-Quarter Revenue Forecast

Intel (INTC)

Even though stocks had their best day on a month, there was little news of substance for all the buying.  Weaker retail sales data for Feb, which should be no great surprise to anybody who watched weather stories (or lives in the east), suggests to bulls that higher interest rates will be pushed back.  I don't know.  Spring is just a week away & temps are generally warming.  More disturbing for investors is VERY slow growth in wages & household income, a continuing theme during this long recovery.  Many are only seeing modest gains in their stand of living, if any.  That's a major disconnect with the Dow which is still close to its record highs reached early in Mar.

Dow Jones Industrials

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