Wednesday, July 29, 2015

Higher markets after Fed keeps rates unchanged

Dow went up 121 (closing near the highs), advancers over decliners 5-2 & NAZ added 22.  The MLP index continued its recent rise, up 6+ to the 391s, & the REIT index rose 1+ to the 317s.  Junk bond funds rallied & Treasuries saw selling.  Oil climbed well into the 48s & gold drifted lower again.

AMJ (Alerian MLP Index tracking fund)

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CLU15.NYM....Crude Oil Sep 15....48.86  ...0.88 (1.8%)

Live 24 hours gold chart [Kitco Inc.]

The Federal Reserve (FED) said the labor market & housing have improved, moving closer to ending an unprecedented period of near-zero interest rates without providing a clear signal on the timing of liftoff.  “The labor market continued to improve, with solid job gains and declining unemployment,” the FOMC said.  It added that “underutilization of labor resources has diminished,” dropping the modifier “somewhat” to describe the change.  Chair Janet Yellen is guiding the FED toward its first rate increase in almost a decade as the nation approaches full employment.  She has said the FED is likely to tighten this year if the economy continues to improve as she expects, with market speculation focused on a move as soon as Sep.  “The housing sector has shown additional improvement,” the FED said.  “Business fixed investment and net exports stayed soft.”  It dropped language saying energy prices appeared to have stabilized.  It added that it will tighten policy when it sees “some further improvement in the labor market,” adding the modifier “some,” & is “reasonably confident” inflation will move back to its 2% goal over the medium term.  The committee kept its description of the risks to the outlook for the economy & labor market as “nearly balanced.”  The decision was unanimous.

Fed Says Labor Market Improves as It Moves Toward Rate Rise

Contracts to buy previously owned homes the US unexpectedly fell in Jun after 5 straight months of increase, suggesting some cooling in sales activity after recent hefty gains.  The National Assn of Realtors said its Pending Home Sales Index, based on contracts signed last month, declined 1.8% to 110.3.  Still, the index was the 3rd highest reading for this year.  Pending home contracts become sales after a month or 2, & last month's drop pointed to a pause in home resales after they reached a near 9-year high in May.  Economists had forecast pending home sales rising 1.0% last month.  The decline in contracts comes on the heels of a drop in new home sales.  Still, that will probably not change views the housing market recovery was back on track given a tightening labor market.  Other housing market indicators such as groundbreaking on new projects, building permits & builder confidence have painted a bullish picture for housing.  Pending home sales rose 8.2% from a year ago.  Contracts edged up 0.4% in the Northeast & gained 0.5% in the West.  They declined 3.0% in both the South & the Midwest.

Pending Home Sales Post Surprise Decline in June

The Windows 10 operating system from Microsoft, a Dow stock, debuts Wed, as the longtime leader in PC software struggles to carve out a new role in a world where people increasingly rely on smartphones, tablets & information stored online.  The company is counting on tens or even hundreds of millions of people to download its latest release for free in the coming months.  The launch will be accompanied by a global marketing campaign for an event the company hopes will be pivotal, both for its own future & for a vast audience of computer users around the world.  Windows 10 is coming to PCs & tablets first, but it's also designed to run phones, game consoles & even holographic headsets.  It has new features, a streamlined Web browser called Edge & a desktop version of Cortana, the online assistant that is Microsoft's answer to competition from its rivals.  Still, the company insists Windows 10 will seem familiar to users of Windows 7, the 6-year-old operating system still running on most PCs.  MSFT & PC makers want to erase the memory of the last big update, Windows 8, which alienated many with its jarring, unwieldy design.  It's unclear whether Windows 10 will spur the industry back to growth.  The stock rose 95¢.  If you would like to learn more about MSFT, click on this link:

Microsoft debuts Windows 10: Why it's being given away free

Microsoft (MSFT)

No great surprise, the FOMC did not increase interest rates.  But the Sep meeting as been advertised at the time for a rise as much as decency permits.  Again, increases are believed to come in 25 bp increments maybe every other meeting.  That could bring as much as a 75 basis points rise over a 12 month period.  As long as economic data continues to come in uneven, that could prove to be a high forecast.  The forecast should not disturb stocks too much, but bonds, & other yield securities may see additional selling.  Tomorrow is the first GDP report for Q2 & it should not be expected to show much growth (if any).  Dow remains down YTD as it it extends its sideways trading pattern since Nov.

Dow Jones Industrials

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