Dow fell 70, decliners over advancers more than 2-1 & NAZ rose 29 to a new record (although the breadth was negative). The MLP index dropped 4+ to the 389s (a new multi year low) & the REIT index was off 1+ to 317. Junk bond funds were lower & Treasuries advanced. Oil is back down to 50 & looks like it wants to test lows in the mid 40s while gold is well below the mid 1150s.
AMJ (Alerian MLP Index tracking fund)
China has created what amounts to a state-run margin trader with $483B of firepower, its latest effort to end a stock-market rout that threatens to drag down economic growth & erode confidence in President Xi Jinping’s gov. China Securities Finance (CSF) can access as much as 3T yuan of borrowed funds from sources including the central bank &commercial lenders. The money may be used to buy shares & provide liquidity to brokerages. While it’s unclear how much CSF will ultimately deploy into the $6.6T equity market, the financing is up to 25X bigger than the support fund started by Chinese brokerages earlier this month. CSF, founded in 2011 to provide funding to the margin-trading businesses of Chinese brokerages, has transformed into one of the key gov vehicles to combat a 32% selloff in the Shanghai Composite since mid-Jun. At 3T yuan, its funding would be about 5X bigger than the new proposed bailout for Greece & exceed China’s 2.3T yuan of regulated margin financing during the height of the stock-market boom last month. Policy makers have gone to unprecedented lengths to put a floor under the market as they seek to bolster consumer confidence & prevent soured loans backed by equities from infecting the financial system. While the measures in China have helped support stock prices, critics say intervention undermines the country’s pledge to increase the role of markets in the economy.
New-home construction in the US climbed in Jun to the 2nd-highest level since Nov 2007 as builders stepped up work on apartment projects. Housing starts rose 9.8% to a 1.17M annualized rate from a revised 1.07M in May that was stronger than previously estimated, according to the Commerce Dept. The estimate was a 1.11M rate. Ground-breaking on multifamily dwellings jumped 29.4%. Building permits for single & multifamily properties, a gauge of future construction, climbed to an almost 8-year high. Job gains, low mortgage rates & a gradual easing of lending standards are propelling sales, indicating housing will become a bigger source of strength for the economy. The gain in starts of multifamily homes followed a 16.9% decrease the previous month & a 37.5% Apr surge. Starts of single-family houses eased to a 685K rate from 691K a month earlier. 3 of 4 regions had a decrease in single-family construction, paced by a 27.3% drop in the Northeast & a 7.1% decline in West. Building permits increased 7.4% to a 1.34M annualized rate, the highest since Jul 2007. They were projected to fall to 1.15M. Applications to begin work on single-family projects rose to 687K in Jun the most since Jan 2008. Permits for construction of apartments & other multifamily dwellings rose 15.3% after a 20% jump the previous month.
Even with NAZ at a new record, the markets are weak evidenced by negative breadth in the NAZ. Housing is stronger but consumer confidence data is not encouraging. Oil keeps sliding lower, dragging along MLPs. On the way up, the MLP index first reached its present level at the start of 2012. Dow will have to be strong to close above 18K today.
AMJ (Alerian MLP Index tracking fund)
| CLQ15.NYM | ...Crude Oil Aug 15 | ...50.92 |  ...0.01 | (0.0%) |
| GCN15.CMX | ...Gold Jul 15 | .......1,136.30 | ...7.50 | (0.7%) |
China has created what amounts to a state-run margin trader with $483B of firepower, its latest effort to end a stock-market rout that threatens to drag down economic growth & erode confidence in President Xi Jinping’s gov. China Securities Finance (CSF) can access as much as 3T yuan of borrowed funds from sources including the central bank &commercial lenders. The money may be used to buy shares & provide liquidity to brokerages. While it’s unclear how much CSF will ultimately deploy into the $6.6T equity market, the financing is up to 25X bigger than the support fund started by Chinese brokerages earlier this month. CSF, founded in 2011 to provide funding to the margin-trading businesses of Chinese brokerages, has transformed into one of the key gov vehicles to combat a 32% selloff in the Shanghai Composite since mid-Jun. At 3T yuan, its funding would be about 5X bigger than the new proposed bailout for Greece & exceed China’s 2.3T yuan of regulated margin financing during the height of the stock-market boom last month. Policy makers have gone to unprecedented lengths to put a floor under the market as they seek to bolster consumer confidence & prevent soured loans backed by equities from infecting the financial system. While the measures in China have helped support stock prices, critics say intervention undermines the country’s pledge to increase the role of markets in the economy.
New-home construction in the US climbed in Jun to the 2nd-highest level since Nov 2007 as builders stepped up work on apartment projects. Housing starts rose 9.8% to a 1.17M annualized rate from a revised 1.07M in May that was stronger than previously estimated, according to the Commerce Dept. The estimate was a 1.11M rate. Ground-breaking on multifamily dwellings jumped 29.4%. Building permits for single & multifamily properties, a gauge of future construction, climbed to an almost 8-year high. Job gains, low mortgage rates & a gradual easing of lending standards are propelling sales, indicating housing will become a bigger source of strength for the economy. The gain in starts of multifamily homes followed a 16.9% decrease the previous month & a 37.5% Apr surge. Starts of single-family houses eased to a 685K rate from 691K a month earlier. 3 of 4 regions had a decrease in single-family construction, paced by a 27.3% drop in the Northeast & a 7.1% decline in West. Building permits increased 7.4% to a 1.34M annualized rate, the highest since Jul 2007. They were projected to fall to 1.15M. Applications to begin work on single-family projects rose to 687K in Jun the most since Jan 2008. Permits for construction of apartments & other multifamily dwellings rose 15.3% after a 20% jump the previous month.
Housing Starts in U.S. Surge to Second-Highest Level Since 2007
Consumer confidence declined in Jul on concerns global risks will dim prospects for the US economy. The University of Michigan’s preliminary index of sentiment dropped
to 93.3 during the month from 96.1 in Jun. The
forecast called for a
reading of 96. Consumers remained upbeat about employment & wages. “When asked to explain how their finances had changed, more
households mentioned income gains,” with the share increasing to 38
percent this month from 32 percent in June, Richard Curtin, director of
the Michigan Survey, said. “Slowly improving
finances were anticipated for the year ahead.” The Greek financial crisis & a slowdown in China were mentioned by
respondents in the survey & help explain why Americans were less
upbeat about the domestic economy. Even with the decline in sentiment,
Jul marks the 8th straight month the gauge has been above
90, the longest stretch since a 17-month period ended in early 2005. The decline in sentiment this month was due to less optimism among households with incomes under $75K. The survey’s gauge of expectations 6 months from now fell to 85.2
from 87.8. The gauge of current conditions decreased to 106 from
108.9. Attitudes toward big purchases, such as houses, were little changed
in Jul from “very favorable levels” a month earlier. Low home prices & borrowing costs were noted by 86% of
all consumers. Americans expected an inflation rate
of 2.8% in the next 12 months, up from 2.7% a month
earlier. Over the next 5-10 years, they also
anticipated a 2.7%rate of inflation compared with 2.6% in
the previous month. This pause in optimism could be explained by more stable prices at
the gas pump, volatility in the stock market during the Greek financial
crisis & scant signs of a bigger pick up in wage growth.
Consumer Sentiment in U.S. Retreated in July
Even with NAZ at a new record, the markets are weak evidenced by negative breadth in the NAZ. Housing is stronger but consumer confidence data is not encouraging. Oil keeps sliding lower, dragging along MLPs. On the way up, the MLP index first reached its present level at the start of 2012. Dow will have to be strong to close above 18K today.
Dow Jones Industrials
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