Friday, May 15, 2015

Markets fluctuate after weak consumer and manufacturing data

Dow fell 10, advancers slightly ahead of decliners & NAZ fell 2.  The MLP index lost 1+ to 445 & the REIT index added 2+ to the 324s.  Junk bond funds were a tad lower & Treasuries saw strong buying.  Oil dropped below 59 & gold drifted south.

AMJ (Alerian MLP Index tracking fund)

CL.NYM..........Crude Oil Jun 15...58.70 Down ...1.18  (2.0%)

GCK15.CMX...Gold May 15...1,217.30 Down ...8.10  (0.7%)

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Consumer confidence unexpectedly fell in May by the most in more than 2 years as Americans’ views on the economy dimmed.  The University of Michigan preliminary index of sentiment dropped to 88.6, the lowest since Oct, from 95.9 in Apr.  The 7.3% decrease was the largest since Dec 2012 & lower than the lowest estimate.  News that the economy stalled last qtr shook Americans’ outlook, while the tick up in fuel costs since early Mar also contributed to the gloomier perceptions.  While slightly lower than in the prior month, households still held relatively upbeat views on incomes, a sign spending will be sustained.  “The decline was widespread among all age and income subgroups as well as across all regions of the country,” the Michigan Survey of Consumers said.  “To be sure, the recent decline in consumer confidence does not indicate an incipient downturn in consumption and residential investment. Rather the data indicate a reluctant acceptance on the part of consumers that economic growth will remain near the same lackluster pace recorded during the past several years.”  The projection called for an unchanged reading at 95.9.  The average for 2014 was 84.1.  The index has shown bigger declines than in May in only 20 months since the monthly surveys began in 1978.  The sentiment survey’s current conditions index, which takes stock of Americans’ view of their personal finances, fell to 99.8 from in the prior month 107.  The measure of expectations 6 months from now decreased to 81.5 from 88.8.  Americans expect the inflation rate in the next year will be 2.9%, compared with 2.6% in the Apr survey.  Over the next 5-10 years, they expect a 2.8% rate of inflation, compared with 2.6% in the previous month.  The report shows a bigger retreat in confidence this month than other measures.

Consumer Sentiment in U.S. Plunged in May by Most in Two Years

Factory production stalled in Apr, as American manufacturers were dealt blows by a strong dollar & cheap oil.  The unchanged reading in manufacturing followed a 0.3% March gain that was larger than previously estimated, according to the Federal Reserve.  The forecast called for a 0.2% increase.  Total industrial production declined for a 5th consecutive month amid mining & utilities cutbacks.  Soft export demand, caused by a stronger dollar and weaker global markets, continued to diminish US manufacturing activity in Apr, while oil companies curtailed operations to cope with low fuel prices.  The effects of temporary setbacks in Q1, including bad weather & a West Coast port shutdown, will probably fade, signaling the industry could make some progress in coming months.  Total industrial production declined 0.3% for a 2nd month.  It was projected to be unchanged.  Output in Mar was revised from a previously reported 0.6% drop.  Mining production, which includes oil drilling, decreased 0.8% in Apr, the 4th consecutive decline.  Oil & gas well drilling dropped 14.5%.  Utility output declined 1.3% after plunging 5.4% the previous month.  Automaking remained a bright spot.  Output of motor vehicles & parts increased 1.3% after rising 4.3% a month earlier.  Excluding autos & parts, factory production declined 0.1% in Apr after climbing 0.1% a month before.  Capacity utilization, which measures the amount of a plant that is in use, fell to 78.2% last month from 78.6% in Mar.

Factory Production in U.S. Stalled on Machinery Cutbacks

New York business conditions returned to expansion mode this month, although not as strongly as economists expected, according to data from the Federal Reserve Bank of New York.  The Empire State's business conditions index edged up to 3.09 in May after falling to -1.19 in Apr from 6.90 in Mar.  Economists expected the index to increase to 5.0.  A reading above zero indicates expansion.  The miss in the factory report, while covering only a small geographic area, adds to worries about the firmness of the expansion in Q2.  The monthly data so far in the spring do not point to a big rebound in activity.  In the New York Fed report, the subindices were mixed this month.  The new orders index rebounded to 3.85 in May from -6.00 in Apr.  The shipments index was little changed at 14.94 from 15.23.  New York state manufacturers are hiring fewer workers.  The employment index slowed to 5.21 from 9.57 in Apr.  The workweek index rebounded only to -2.08 after it plunged to -4.26 last month.  Fewer New York state manufacturers are raising selling prices this month but the increase in input prices fell sharply.  The prices-received index fell to 1.04 from 4.26.  The prices-paid index dropped to 9.38 from 19.15.  The outlook for the next & months was "less favorable" than in Apr.  The general business conditions expectations index for the next 6 months slowed to 29.81 from 37.06 in Apr.  Expectations hit a 3-year high reading of 48.35 in Jan.  New orders expectations were little changed, at 33.94 from 33.57 while employee expectations fell to 16.67 from 22.34.

NY Fed Manufacturing Index Rises Less than Expected

Stocks are taking dreary economic news very well.  Consumer attitudes keep coming in inconsistent & disappointing.  This trend has been going on throughout the 6 year recovery from the recession.  That kind of data is not supposed to bring on one of the stock market's greatest rallies in history.  Manufacturing data also continues weak.  But the bulls have not given up & popular stock averages are essentially at record highs.  More earnings from retailers are coming next week & will probably be unsatisfactory.

Dow Jones Industrials

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