Wednesday, July 15, 2015

Markets ease back on economic data and Greek debt uncertainties

Dow slid back 3 but holding above 18K, decliners over advancers 3-2 & NAZ fell 5.  The MLP index lost a huge 7+ to the 399s & the REIT index was up chump change in the 415s.  Junk bond funds were mixed & Treasuries rose.  Oil dropped again & gold continued drifting lower.

AMJ (Alerian MLP Index tracking fund)

CLV15.NYM....Crude Oil Oct 15....52.54 Down ...1.34  (2.5%)

Live 24 hours gold chart [Kitco Inc.]

As the Greek parliament prepares to vote on whether to accept a new euro-area bailout, Prime Minister Tsipras said he accepted the harsh terms "with a knife at my neck."  He also found an ally in the IMF, which he once called "criminal."  The IMF produced a brutal assessment of the €86B ($95B) deal, which it can only join if it believes the plan would create a "sustainable" debt path for Greece.  Instead, it said the country's debt is set to peak at a "highly unsustainable" 200% of GDP, & that forecasts for growth & budget surpluses are unrealsitic.  The only way to fix this, according to the IMF, would be to offer debt relief "far beyond what Europe has been willing to consider so far."  Without a major political U-turn from the German chancellor Merkel, that kind of large-scale debt relief won't be possible.  Meanwhile Greece's creditors are scrambling to assemble the bridging loan they'll need to keep the country from defaulting on a loan payment of €3.5B due to the ECB on Mon.  It turns out that no one is especially anxious to pay up.  Among other things, the European Commission wants to dip into a supposedly mothballed crisis-response fund, the European Financial Stabilization Mechanism.  Problem is, the fund includes money from non-euro members such as the UK, which unsurprisingly doesn't wish to be on the hook for 15% of any bridge loan to Greece.  And if that all sounds like a fine old mess for Greek legislators as they prepare to vote, it is.

IMF to Euro Area: Get Real

US factory output was little changed in Jun for a 2nd month, held back by a decline in motor vehicle production.  Manufacturing excluding the output of automobiles rose 0.3%, the biggest gain since Nov, after a 0.1% decline, a Federal Reserve’s report showed.  Total industrial production, which also includes mines & utilities, climbed 0.3% after a 0.2% decrease.  A recovery in manufacturing will probably take time as factories contend with the dollar’s advance, soft overseas markets & limited business spending in the wake of slumping oil prices.  A faster pace of output would help improve prospects for a stronger economy.  Utility output increased 1.5% after a 1.2% gain the previous month.  Mining production advanced 1%, the biggest gain this year & reflecting a pickup in oil extraction.  Oil & gas well drilling decreased 3.7%, the smallest decline this year, following an 8.7% plunge.  The forecast called for a 0.2% gain in industrial production & a 0.1% gain in factory output.  For manufacturing, which makes up 75% of total production & accounts for 12% of the economy, the May reading was revised from a 0.2% drop.  Capacity utilization, which measures the amount of a plant that is in use, climbed to 78.4% from 78.2% the prior month.  The output of motor vehicles & parts decreased 3.7% after a 2.3% increase a month earlier.  Excluding autos & parts, total industrial production rose 0.5%, the first gain in 4 months.  Vehicle demand, while slower in the most recent tally, remains a mainstay for factories.

Manufacturing Shows Signs of Steadying

Amazon's inaugural Prime Day event offering reduced prices on television sets, lawnmowers & other goods helped the online retailer increase sales even as the promotion was skewered by customers on social media.  Its US daily sales were up around 80% at midday, compared with a year earlier.  Sales in Europe rose about 40% which helps merchants sell on marketplaces including AMZN.  The event was held to coincide with the company’s 20th anniversary & lead into the back-to-school shopping season.  It featured deals exclusively for Amazon Prime members, who pay $99 a year for delivery discounts, video & movie streaming & other benefits.  Nonmembers could sign up for a free 30-day trial to participate in the promotion.  The company said on its Facebook (FB) page that “peak order rates” surpassed those of Black Friday last year, as the company ripped thru over 1K televisions priced at $999 in less than 10 minutes.  Customers purchased “tens of thousands” of Fire TV sticks, 35K Lord of the Rings Blu-Ray sets, 28K Rubbermaid kitchenware sets & 4K Echo devices.  AMZN is  believed to have 44M Prime members in the US at the end of Jun, up 57% from a year earlier & prime members spend an average of $1200 a year, 71% more than nonmembers.  The stock dropped 4.38.  If you would like to learn m ore about AMZN, click on this link:

Amazon’s First Prime-Day Promotion Boosts Sales (AMZN)

All is not well in the global economy.  The Greek debt mess drones on.  Nobody knows how it will turn out with the make it up as we go along attitude.  The US economic recovery continues to stumble has it has for years.  The leaders in China are struggling to juice up their economy.  Plus there is the threat of more oil coming from Iran in a market that already has too much oil.  However, popular stock averages remain near record highs after a spectacular run from the lows 6 years ago.  The bulls are ignoring this disconnect.

Dow Jones Industrials

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