Thursday, April 30, 2015

Lower markets on sluggish consumer spending in March

Dow dropped 112, decliners over advancers almost 4-1 & NAZ fell 49.  The MLP index was of pennies & the REIT index fell 4+ to 320.  Junk bond funds were mixed & Treasuries sold off again, taking the yiled on the 10 year Treasury up to 2.1%.  Oil climbed higher, pushing towards 59, & gold plunged.

AMJ (Alerian MLP Index tracking fund)

CLM15.NYM...Crude Oil Jun 15...58.62 Up ....0.04 (0.1%)

GCK15.CMX...Gold May 15...1,179.30 Down ...30.50  (2.5%)

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Consumer spending climbed in Mar, capping a lackluster Q1 performance that was enough to keep the US economy from shrinking.  Purchases rose 0.4%, the biggest increase since Nov, after a 0.2% Feb gain that was larger than previously estimated, according to the Commerce Dept.  The forecast called for a 0.5% increase.  Incomes were little changed reflecting a drop in div payments.  Economists are counting on household spending to do the heavy lifting in reviving growth after slumps in business investment & exports caused the economy to stagger at the start of 2015.  An improving job market & nascent acceleration in wage increases are among reasons such a rebound is probably in the works.  A survey called for incomes to rise 0.2%.  The report represents the monthly breakdown of data that showed consumption climbed at a better-than-expected 1.9% in Q1.  Still, that was less than ½ the pace of the prior 3 months, when spending climbed at the fastest rate since 2006.  The price index tied to consumer spending increased 0.2%, the same as in the prior month.  From a year earlier, the gauge was up 0.3%.  This inflation measure is preferred by Fed policy makers & last met their target in Apr 2012.  Stripping out the volatile food & energy components, the price measure climbed 0.1% from the month before & 1.3% in the 12 months ended Mar.  After adjusting for inflation, which generates the figures used to calculate GDP, purchases increased 0.3% last month after being little change in Feb.  The gain last month was propelled by a 2% inflation-adjusted increase in durable goods that reflected a rebound in demand for automobiles.  Cheaper gasoline prices have kept some extra money in consumers’ pockets over the past few months.  Disposable income, or money left over after taxes, fell 0.2% in Mar from the prior month after adjusting for inflation, the weakest performance since Dec 2013.  It was up 3.3% over the past year.  The saving rate decreased to 5.3% from 5.7% in Feb.

Consumer Spending Ends Sluggish U.S. Quarter on Better Note

Applications for US jobless benefits declined last week to the lowest level in 15 years, showing employers view a Q1 slowdown in the economy is temporary.  First-time layoffs for unemployment insurance fell by 34K to 262K, the lowest since 2000, according to the Labor Dept.  The figure was smaller than the lowest projection.  With job openings at a 14-year high & prospects for stronger growth after the Q1 setback, companies are intent on maintaining headcounts.  The level of layoffs is consistent the Federal Reserve view of sustained progress in the job market.  The 4-week average of claims, a less-volatile measure than the weekly figure, declined to 283K from 285K in the prior week.  The number continuing to receive jobless benefits dropped 74K to 2.25M, again the lowest level since 2000.  The unemployment rate among people eligible for benefits held at 1.7%.  Claims since the beginning of Mar have held below the 300K level that is consistent with an improving labor market.

Job market strengthens

Exxon Mobil,  Dow stock & Dividend Aristocrat, posted a 46% drop in Q1 profit, hurt by the sharp slump in oil prices, though results still topped expectations.  XOM has moved to conserve cash in a sign that it doesn't expect a quick rebound in crude prices.  The company has announced it would slash its capital spending by 12% this year to $34B & reduce its stock buybacks in the near term, though it raised its quarterly div to 73¢ from 69¢ yesterday.  Earnings in the exploration & production business dropped to $2.9B.  Meanwhile, refining & marketing earnings rose to $1.7B.  Results have been buoyed by strength in its oil refining business, which benefits from cheaper crude.  Earnings in the chemical segment dropped to $982M.  The slumping production in part reflects a willingness to give up some less-profitable barrels, such as at a concession in Abu Dhabi that has expired.  CEO Rex Tillerson has made improving profitability one of the company's highest priorities.  EPS fell to $1.17 from $2.10 a year earlier.  Revenue dropped to $67.6B from $106.3B.  Analysts expected EPS of 83¢ on revenue of $56.4B.  The stock inched up pennies.  If you would like to learn more about XOM, click on this link:

Exxon 1Q Profit Drops, Results Beat the Street

Exxon Mobil (XOM)

Consumer spending keeps disappointing with inconsistent data.  There has been a long recovery from the recession lows, but much of that has not reached many consumers. Even with stronger growth in Q2, consumer spending can not be counted on to contribute a lot.  Gas prices at the pumps ticking higher will be a negative for consumer spending.  Dow is back to where it was 5 months ago, because the economy is growing, but at meager rates.  With higher interest rates coming in the next few months, it's hard to be overly optimistic about the stock market.

Dow Jones Industrials

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