Thursday, June 18, 2015

Markets move higher on hopes the Fed will extend low interest rates

Dow jumped up 173, advancers over decliners 5-2 & NAZ rose 58.  The MLP index was about even near 421 & the REIT index added 4+ to the 319s.  Junk bond funds were weak & Treasuries were sold.  Oil crawled back over 60 & gold is above 1200 again.

AMJ (Alerian MLP Index tracking fund)

CLN15.NYM...Crude Oil Jul 15...60.22 Up .....0.30 (0.5%)

GCN15.CMX...Gold Jul 15.....1,200.30 Up ...23.90 (2.0%)

The cost of living in the US excluding food & fuel rose less than forecast in May, a sign inflation may take time to meet the Federal Reserve goal.  The core measure increased 0.1%, the smallest gain this year, after climbing 0.3% in Apr, according to the Labor Dept.  The forecast called for a 0.2% rise.  The overall consumer-price index advanced 0.4%, as fuel costs rebounded.  Declining costs for used cars & trucks, clothing & hotel stays combined with a deceleration in health care expenses held back the core index, swamping advances in rents.  Fed policy makers yesterday reiterated they see price gains gradually progressing toward their target.  Overall consumer prices were little changed in the 12 months ended in May, after a 0.2% year-over-year decline the prior month.  The core CPI measure increased 1.7% from May 2014, after a 1.8% rise in the prior 12-month period.  The projection called for the core gauge to rise 0.2% from Apr, & to climb 1.8% from the prior year.  Energy costs increased 4.3% from a month earlier while food prices were little changed for a 2nd month.  The cost of clothing, used cars & trucks showed the biggest drop this year, & hotel rates declined by the most since Oct 2013.  Expenses for medical care increased 0.2% after a 0.7% increase in Apr.  The Fed’s preferred gauge of inflation, linked to consumer spending, hasn’t been above the central bank’s 2% goal since Mar 2012.  It climbed by 0.1% in Apr from a year earlier, the smallest 12-month gain since 2009.  The recent stabilization in energy costs is helping underpin inflation.

Core Consumer Prices in U.S. Increase Less Than Forecast

The number of Americans filing new claims for unemployment benefits fell more than expected last week, pointing to a tightening labor market when initial claims for state unemployment benefits dropped 12K to a seasonally adjusted 267K, according to the Labor Dept.  It was the 15th straight week that claims held below 300K, a threshold usually associated with a firming labor market.  The 4-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 2K to 277K.  The claims data covered the period during which the gov surveyed employers for the payrolls portion of the employment report for Jun.  Jobless claims fell 8K between the May & Jun survey periods, suggesting another month of solid job gains.  Nonfarm payrolls increased 280K in May after a rise of 221K in Apr.  The number of people still  receiving benefits after an initial week of aid declined 50K to 2.22M.

Weekly Jobless Claims Fall More than Views

Greece will be in default with the IMF at the start of Jul if it fails to make a repayment on Jun 30 because there is no grace period or possibility to delay, IMF Managing Director Christine Lagarde said.  "It will be in default, it will be in arrears vis-a-vis the IMF on July 1, but I hope it is not the case, I really do," Lagarde told reporters.  "There is no grace period or two-month delay, as I have seen here and there," she added.  Lagarde said a reform of the Greek pension system was critical to sealing a deal with Greece, although small pensioners should be protected.  "Everybody knows that. The Greek authorities know that as well. They have to address all sorts of issues," she said.  "It is not a question of cutting the small pensions, but the program of financing the pensions has to hold," she said, adding that more than 16% of Greece's economic output went to pay pension benefits, which was "way more than the average, pretty much everywhere."  She also defended the IMF program with Greece as "credible and flexible" & was supported by the many countries that make up the lender.

Lagarde: Greece Faces Default July 1 Without Deal

There is no shortage of optimism in the stock market.  Hopes are high low interest rates will for months, at a minimum.  But that thought may not be realistic with many warnings that interest rate hikes are coming this year.  The Greek debt mess continues to be stuck in the mud with no indication anything new will be decided for a week at a minimum.  Stock buyers are not concerned about problems, hoping for the best.

Dow Jones Industrials

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