Thursday, May 28, 2015

Lower markets on growing Greek debt concerns

Dow dropped 53, decliners ove advancers 2-1 & NAZ fell 10.  The MLP index lost 5+ to the 434s & the REIT index was off 1+ to 321.  Junk bond funds slipped lower & Treasuries were sold.  Oil prices saw more weakness, falling to the lowest in 6 weeks, while gold did little.

AMJ (Alerian MLP Index tracking fund)

CL.NYM...........Crude Oil Jul 15...56.78 Down ...0.73  (1.3%)

GCM15.CMX...Gold Jun 15.....1,186.70 Up ...1.10 (0.1%)

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More Americans than forecast signed contracts to purchase previously owned US homes in Apr, indicating a pickup in the housing market during the busy spring selling period.  The index of pending home resales climbed 3.4% to the highest level in 9 years after a revised 1.2% gain the prior month, according to the National Association of Realtors.  The forecast called for an increase of 0.9%.  Steady hiring, easier credit availability & borrowing costs still close to historically low levels are providing a boost to the market.  “Realtors are saying foot traffic remains elevated this spring despite limited -- and in some cases severe -- inventory shortages in many metro areas,” NAR chief economist Lawrence Yun said.  “Homeowners looking to sell this spring appear to be in the driver’s seat.”  All 4 regions saw an increase, the report showed.  Compared with a year earlier, the index increased 13.4% on an unadjusted basis, after a 13.5% gain in the prior 12-month period.  They were projected to climb 10.9%.  The pending sales gauge was 112.4 on a seasonally adjusted basis, the highest since May 2006.  A reading of 100 corresponds to the average level of contract activity in 2001, or “historically healthy” home-buying traffic.  Pending sales are considered a leading indicator because they track contract signings.  Purchases of existing homes are tabulated when a deal closes, typically a month or 2 later.  Those resales, which make up more than 90% of the housing market, dropped 3.3% to a 5.04M annualized rate in Apr after a 5.21M pace that was the strongest in almost 2 years.  The median price from a year earlier posted the biggest 12-month gain since Jan 2014 as the number of houses for sales fell from the same time last year.

Pending Sales of Existing Homes in U.S. Increased 3.4% in April

Applications for US jobless benefits remained below 300K for the 12th straight week, signaling the labor market remains firm even as the economy has been slow to rebound from a Q1 slump.  Jobless claims increased 7K to 282K in the latest week, according to  the Labor Dept.  The forecast was for 270K.  Readings this low typically coincide with healthy levels of hiring.  Persistently low layoffs signal managers are planning for at least steady business demand.  As joblessness approaches the Federal Reserve’s definition of full employment, employers might be pressured to boost paychecks in order to retain & attract workers.  The 4-week average of claims climbed to 271K from a 15-year low of 266K in the prior week.  The number continuing to receive jobless benefits increased 11K to 2.22M & the unemployment rate among people eligible for benefits rose to 1.7% from 1.6%.

Jobless Claims in U.S. Hold Below 300,000 for 12th Week

Greece once again expressed optimism that the country will reach a deal with creditors in the coming days, only to have that confidence knocked down by intl officials.  The most recent vow came today from the gov chief spokesman who said an agreement could be hammered out by Sun even as intl creditors lined up to insist the 2 sides are still far apart & a lot of work remains.  “This optimism is not just words, it is based on the experience of the previous weeks and the progress achieved,” the spokesman said.  “In cooperation with creditor institutions and our partners, we are making sure that there won’t be a chance of default.”  Prime Minister Tsipras’s gov has promised on a number of occasions in past months that it was close to sealing a deal, most recently at the end of Apr when Greek officials argued an agreement could be reached by May 3, only to have no accord come to pass.  As the deadlines come & go, Greece has managed to scrape together enough funds to pay the bills & limp along.  German Chancellor Merkel & French pres Hollande, in an effort to jump-start the stalled negotiations, said last week that they were aiming for a deal by the end of May, only to say after talks with Tsipras that more work was needed.  While the Greeks say that is still possible, European officials said yesterday that goal is no longer reachable.  The new timeframe being discussed for a deal is before Jun 5, when Greece is set to make the first of about €1.6B ($1.75B) in IMF payments coming due in the next 3 weeks.  Whether that really is a hard deadline is impossible to say because no one outsides Athens knows exactly how much money Greece still has.  One option being tossed around is bundling the Jun payments to the IMF into one transfer & making it when the final one is due, essentially buying a couple of weeks time.  The ECB warned today that a failure to reach an agreement on Greece’s aid program soon may drive yields on bonds issued by other euro-area countries higher, “In the absence of a quick agreement on structural implementation needs, the risk of an upward adjustment of the risk premia demanded on vulnerable euro-area sovereigns could materialize,” the ECB wrote.

Greece Remains More Optimistic Than Its Creditors

Greece is running out of time to arrange an extension of its bailout & all indications are that the euro powers are ready to throw in the towel.  Meanwhile economic data for the US is inconsistent.  The housing data today looks good, but it has had its ups & downs as consumer spending continues to vary form one month to the next.  Dow keeps clinging to 18K, now going on 6 months, as NAZ was able to barley eke out a new record.  Dow is up 300 YTD.  All considered, not so bad.

Dow Jones Industrials

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