Wednesday, April 22, 2015

Mixed markets on mixed earnings

Dow rose 53, advancers barely over decliners  & NAZ went up 2.  The MLP index slipped a fraction in the 442s & the REIT index inched up a fraction to 330,  Junk bond funds were mixed & Treasuries sold off.   Oil & gold were off slightly.

AMJ (Alerian MLP Index tracking fund)

CLM15.NYM...Crude Oil Jun 15...56.49 Down .....0.12  (0.2%)

GCJ15.CMX....Gold Apr 15.....1,188.30 Down ...14.60  (1.2%)

Sales of previously owned homes climbed in Mar to the highest level since Sep 2013 as job growth & cheap borrowing costs helped sustain the progress in residential real estate.  Closings increased 6.1% to a 5.19M annualized rate, according to the National Association of Realtors.  The forecast projected sales would increase to a 5.03M rate.  Prices rose by the most since Feb 2014.  Employment gains, low mortgage rates & better weather have the potential of unleashing pent-up demand as the spring selling season gets under way.  Bigger wage gains & more housing inventory to make properties more attainable would help provide another leg up for residential real estate.  Compared with a year earlier, purchases increased 13.5% in Mar on an unadjusted basis.  The median price of an existing home surged 7.8% to $212K from $197K in Mar 2014.  The number of existing properties on the market rose 5.3% to 2M from a month earlier.  At the current pace, it would take 4.6 months to sell those houses compared with 4.7 months at the end of Feb.  The inventory of unsold homes was up from 1.96M a year earlier.  “Housing is recovering but home prices are rising too fast,”  the NAR said.  “The only way to relieve housing cost pressure is to have more supply coming onto the market.”  Sales of single-family homes increased 5.5% to an annual rate of 4.59M.  The sales pace of multifamily properties including condominiums advanced 11.1% to 600K.  Cash transactions accounted for about 24% of all purchases.  Sales of distressed property, including foreclosures, accounted for 10% of the total, down from 11% a month earlier.

China has a $28T problem.  That's the country’s total gov, corp & household debt load as of mid-2014, according to McKinsey, equal to 282% of the country’s total annual economic output.  Pres Xi Jinping’s gov aims to wind down that burden to more manageable levels by recapitalizing banks, overhauling local finances & removing implicit guarantees for corp borrowing that once helped struggling companies.  China’s also trying to prop up a $10.4T economy that’s decelerating & probably will continue to do so through 2016, or so says the IMF.  The economy expanded 7%, the leadership’s growth target for this year, in Q1, the weakest since 2009 & a far cry from the 10% average China managed from 1980-2012.  Against this backdrop, a barrage of recent policy moves out of China in recent days comes into sharper focus.  It also helps explain why various parts of the gov don’t always seem to be working from the same playbook.  Last week, securities regulators clamped down on margin lending that has helped fuel epic stock market rallies over the last year.  Then officials unleashed about 1.2T yuan ($194B) into the economy & stock markets, by cutting the level of deposits that banks need to hold in reserve with the central bank.  For large lenders, the reserve requirement was lowered a full percentage point, to 18.5%, the PBOC’s most aggressive such step since 2008.  In a separate move, the PBOC injected a combined $62B worth of capital into 2 state-owned lenders that are referred to as policy banks, as they carry out gov objectives.  Also in recent weeks, China’s Premier Li Keqiang has urged banks to support economic growth & roll over loans when needed to key borrowers.  The question is whether the calm remains as a weakening economy makes it harder for borrowers to service interest payments & the gov gets more tolerant of some companies going under in crowded sectors such as real estate, steel & cement production.

Will report this PM on earnings, but they are not encouraging.  Estimates from the analysts have been revised lower reflecting problems in Q1 & many are not matching those lowered estimates.  Generally the best of the earnings  are reported first, so the next ones can not be counted on to help the stock market.  But Dow is just over 18K.

Dow Jones Industrials

No comments: