Thursday, June 11, 2015

Higher markets on consumer spending data

Dow rose 57 (although losing strength in the last hour), advancers over decliners 3-2 & NAZ added 9.  The MLP index edged up a fraction in the 418s & the REIT index climbed 1+ to the 312s.  Junk bond funds were mixed & Treasuries continued sliding lower.  Oil was hit with profit taking after its recent advance & gold also pulled back.

AMJ (Alerian MLP Index tracking fund)

CLN15.NYM....Crude Oil Jul 15...60.90 Down ....0.53  (0.9%)

GCM15.CMX...Gold Jun 15.....1,177.10 Down ...9.00  (0.8%)

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Retail sales increased 1.2% last month, matching the forecast & following a 0.2% advance in Apr, according to the Commerce Dept.  The gain was broad-based with 11 of 13 major categories gaining.  The data show American consumers are ready to spend on more than just automobiles, unlocking months of savings from cheap gasoline & higher incomes as the labor market improves.  A pickup in purchases, accompanied by faster wage gains, would burnish the outlook for growth this year.  Sales at auto dealers, clothing & building material stores were among the biggest gainers last month.  Sales climbed 2% at automobile dealers, after rising 0.7% in Apr.  Memorial Day promotions drew Americans to dealerships, while an improved job market also had consumers heading to showrooms & paying higher prices by taking out longer loans.  Retail sales excluding autos increased 1%, topping the projection of 0.8%.  It followed a 0.1% gain in Apr.  The figures used to calculate GDP, which exclude categories such as food services, auto dealers, home-improvement stores & service stations, increased 0.7% in May after rising 0.1% the month before.  The reading for Mar was revised up to show a 0.9% gain compared with a previously reported 0.5% advance, which should boost Q1 consumer spending when the figures are updated later this month.  Today’s figures also shore up growth prospects for Q2 after unusually harsh winter weather, delays at West Coast ports & a stronger dollar caused the economy to contract in Q1.  Prior data showed consumers were still hesitant to boost outlays, with purchases stalling in Apr as Americans used income gains to shore up savings.

Missing-in-Action U.S. Consumer Returns as Retail Sales Increase

Applications for US unemployment benefits remained below 300K for a 14th straight week, a sign of labor market strength that will help fuel US growth.  Jobless claims rose 2K to 279K, according to the Labor Dept.  The forecast called for 275K.  The 4-week average of initial applications also crept up.  The data indicate employers are retaining workers in anticipation of a pickup in demand in Q2 after a slow start to the year.  Combined with a spring spurt in payrolls, the employment picture bodes well for household spending, the biggest part of the economy.  Since the first week of Mar, applications for unemployment benefits have been below the 300K level that is consistent with an improving job market.  The 4-week moving average, a less volatile measure than the weekly numbers, climbed to 278K last week, from 275K.  The number continuing to receive jobless benefits rose 61K to 2.27M & the jobless rate among people eligible for benefits climbed to 1.7% from 1.6%.

Jobless Claims in U.S. Hold Below 300,000 for a 14th Week

Mortgage rates in the US jumped to an 8-month high, making home purchases costlier as investors prepare for the Federal Reserve to raise interest rates.  The average rate for a 30-year fixed mortgage jumped to 4.04%, up from 3.87% in the prior week & the highest since Oct, Freddie Mac.  The average 15-year rate climbed to 3.25% from 3.08%.  Yields on 10-year Treasuries, which guide mortgages, approached 2½% for the first time since Oct amid speculation the Federal Reserve is poised to end 7 years of lending to banks at near-zero rates.  Low mortgage rates have helped bolster the housing market.  Contracts to buy homes in the US jumped 3.4% in Apr to the highest level in 9 years & more than projected, according to the latest National Association of Realtors report.  New-home sales rose 6.8% in Apr, also a bigger gain than expected.

U.S. Mortgage Rates Jump to an Eight-Month High

The consumer data was encouraging to the bulls.  Rising consumer spending is key for GDP growth to show stronger & more consistent numbers.  But all is not well in the world.  The Greek debt debt mess is not going to be solved this week or next, at a minimum.  The MidEast remains a confusing mess with the bad guys gaining more ground & that can affect oil supplies.  Rising mortgages rates will pinch the recovery in the housing market.  But Dow is back above 18K, where it has been for months. 

Dow Jones Industrials

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