Wednesday, April 15, 2015

Higher markets on earnings hopes

Dow went up 84, advancers over decliners better than 2-1 & NAZ added 20.  The MLP index climbed 2 to the 442s, extending its recent run, & the REIT index was about even.  Junk bond funds did little & Treasuries also rose.  Oil is up to 54 & gold inched higher, still under 1200.

AMJ (Alerian MLP Index tracking fund)

CLK15.NYM...Crude Oil May 15...54.37 Up ...1.08 (2.0%)

GCJ15.CMX....Gold Apr 15......1,197.00 Up ...4.20 (0.4%)

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Factory output barely climbed in Mar, buoyed by a rebound in auto making as other industries retreated, indicating a strong dollar & cheap oil are hurting American manufacturing.  The 0.1% gain in manufacturing was the first advance in 4 months & followed a 0.2% Feb decrease, a Federal Reserve report showed, matching the forecast.  Total industrial production declined more than projected as utility use dropped by the most in 9 years.  Manufacturers are taking a hit as a stronger dollar & soft global markets depress exports & oil companies pare operations amid a plunge in fuel prices.  Auto sales remain a bright spot as consumers benefit from an improving job market and low interest rates, a sign assembly lines will keep running.  Total industrial production declined 0.6%, the biggest drop since Aug 2012.  It was projected to fall 0.3%.  Output in Feb rose 0.1%.  Manufacturing production, which makes up about 75% of the total, slumped at a 1.2% annual rate in Q1, the biggest drop since Q2-2009, just as the recession was ending.  Utility output fell 5.9%, the biggest decrease since Jan 2006, after jumping 5.7% the previous month.  More seasonable weather in Mar followed plummeting temperatures, limiting demand for utilities.  Mining production, which includes oil drilling, decreased 0.7% in Mar, the 3rd consecutive decline.  Oil & gas well drilling plunged at almost a 70% annualized rate last qtr.  The Fed report also showed capacity utilization, which measures the amount of a plant that is in use, dropped to 78.4% from 79% in Feb.

Factory Production in U.S. Barely Rises on Rebound in Autos

Talks on resolving Greece’s financial deadlock resumed amid growing creditor concern that Prime Minister Tsipras’s gov won’t come up with the reforms necessary to unfreeze aid by its self-imposed deadline of Apr 24.  The 2 sides are not moving closer to a deal, said an intl official involved with the negotiations.  The Greek gov's refusal to proceed with any privatizations, & its pledges to reverse labor-market reform, pension reform & budget savings can’t be accepted by the country’s creditors, the official said.  Greece’s gov can use cash reserves of state enterprises, pension funds & local govs to stay afloat until May even if today's meeting is inconclusive.  Such a depletion of cash buffers would only make sense if the gov's final goal is to strike a compromise with creditors.  The ECB increased the ceiling of emergency liquidity assistance available to Greek lenders to €74B ($79B) from €73.2B.  Greek banks have used about €70B euros of ELA so far.  With a monthly bill of about €1.5B ($1.6B) for pensions & salaries, Greek officials last week said they are targeting the finance ministers’ meeting as a deadline for approving new money.  In the first 2 weeks of May alone, Greece must make payments to the IMF of nearly €1B.

Greek Talks Resume Amid Concern Reform Deadline Won’t Be Met

China’s economy expanded at the weakest pace since 2009 in Q1l, with output, investment & retail data pointing to a deepening slowdown.  GDP rose 7% from a year earlier, the statistics bureau said, matching the estimate & the leadership’s full-year expansion target.  Data for the month of Mar showed industrial production was weaker than all estimates.  While China’s leaders have signaled tolerance for a slower expansion as they seek to rein in debt risks, corruption & pollution, today’s reports speak to the case for policy makers to deploy greater stimulus.  Premier Li Keqiang’s gov has already relaxed home-purchasing rules, cut interest rates twice & reduced the reserves banks must set aside in recent months.  Industrial production rose 5.6% in Mar from a year earlier, the weakest since Nov 2008 & less than the 7% estimate.  Retail sales climbed 10.2%, compared with the 10.9% projection.  Fixed-asset investment excluding rural areas expanded 13.5% in Q1, compared with the 13.9% projected.  Li is seeking to engineer a transition away from debt-fueled investment growth toward an economy where consumers & services make up a bigger share.  Reflecting the shift, services accounted for 51.6% of GDP in Q1, 8.7 percentage points more than manufacturing.  The premier last month said policy makers will step in to support the economy if jobs & wages are hurt by the slowdown.

China’s Economy Slows to Weakest Since 2009 as Output Wanes

While the intl scene is glum, hopes run high for earnings reports.  But the factory report was especially disturbing.  The strong dollar is being felt in the US at the same time it weakens other economies.  Bank earnings are also difficult to understand with so many numbers giving varied messages.  But manufacturing companies will feel the strong dollar.  Meanwhile, Dow is flirting with setting a new record high & NAZ wants to go above 5K.

Dow Jones Industrials

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