Friday, July 10, 2015

Markets maintain gains after Yellen's speech

Dow soared 212 (near the highs), advancers over decliners more than 3-1 & NAZ added 75.  The MLP index climbed 5+ to go over 400 & the REIT index went up 3+ to the 314s.  Junk bond funds rose cautiously & Treasuries retreated, taking the yield on the 10 year Treasury up a very big 12 bsp to 2.42%.  Oil slid lower & gold continued sideways trading.

AMJ (Alerian MLP Index tracking fund)

CLQ15.NYM....Crude Oil Aug 15....52.68 Down ...0.10  (0.2%)

Live 24 hours gold chart [Kitco Inc.]

Janet Yellen, speaking after financial-market turmoil over China & Greece, maintained her call for an interest-rate increase this year as the US economy improves.  “I expect that it will be appropriate at some point later this year to take the first step to raise the federal funds rate and thus begin normalizing monetary policy,” Yellen said.  She added a note of caution, saying that “the course of the economy and inflation remains highly uncertain, and unanticipated developments could delay or accelerate this first step.”  In her only mention of Greece, she identified that nation’s debt crisis as one cause of uncertainty.  Yellen is moving cautiously toward the first rate increase in almost a decade as the economic expansion enters its 7th year & unemployment falls.  In a generally upbeat assessment of the economy, though, she said the job market “still has not fully recovered.”  Fed policy makers in Jun forecast 2 qtr-point rate increases this year.  The pace of tightening next year will be more gradual than they expected in Mar, the latest forecasts show.  Since the Jun meeting, the labor market has shown further gains, along with housing & manufacturing, adding to evidence the economy is overcoming Q1 slump.  Yellen said her outlook for the economy & inflation is “broadly consistent with the central tendency of the projections submitted by FOMC participants at the time of our June meeting.”  A large section of her speech explained how labor markets still haven’t met her criteria for full employment which stood at 5.3% in Jun.  “A significant number of individuals still are not seeking work because they perceive a lack of good job opportunities,” she said.  “While the labor market has improved, it still has not fully recovered.”  She said there have been “some tentative hints” of a pick-up in wages that “may indicate that the objective of full employment is coming closer into view.”In her overall assessment of the economy, she was similarly cautious but upbeat.  “Many of the fundamental factors underlying U.S. economic activity are solid and should lead to some pickup in the pace of economic growth in the coming years,” Yellen said.  “In particular, I anticipate that employment will continue to expand and the unemployment rate will decline further.”  She noted 2 specific drags on the economy: the strengthened dollar’s impact on exports & the decline in business investment linked to lower oil prices.  “We expect the drag on domestic economic activity from these factors to ease over the course of this year, as the value of the dollar and crude oil prices stabilize, and I anticipate moderate economic growth, on balance, for this year as a whole,” she said.

American Airlines lowered its plans for capacity growth in the US, seeming to heed calls to slow its expansion in light of weaker-than-expected travel demand.  AAL, the world's largest passenger carrier, expects 2015 capacity to grow about 1% compared with 2014, versus an earlier forecast of 2% growth.  While its intl expansion forecast remains unchanged, it said US capacity will grow 1-2% this year, compared with a prior outlook of a 2-3% rise.  The airline recently has taken other actions such as deferring the delivery of 35 jetliners to keep capacity in check.  The carrier also expects to retire one more plane than it previously planned.  It expects to increase its regional fleet aircraft, compared with earlier guidance of adding 25 of those planes.  The Dept of Justice has launched an investigation into whether US airlines have worked together illegally to keep airfares high by signaling plans to limit flights.  The stock gained 1.54.  If you would like to learn more about AAL, click on this link:

American Airlines Lowers Plans for U.S. Capacity Growth

American Airlines (AAL)

Diplomats will take 3 more days to salvage an agreement with Iran that seeks to put to rest concerns over its nuclear program in return for sanctions relief.  Foreign ministers missed a 3rd deadline in 2 weeks 2 now have thru Mon to resolve the remaining sticking points in an accord that they say is mostly complete.  Extending the talks past a Jul 9 cutoff means the Congress would have 60 days to review any deal instead of 30 days, delaying the lifting of sanctions.  “It’s safe to say we have made progress,” Sec of State John Kerry told reporters.  He said the latest session focused on “a couple of very difficult issues” & “the atmosphere is very constructive,” with more meetings scheduled later Fri & Sat.  For energy-rich Iran, an agreement could speed its return to oil markets & lift financial restraints that have stifled its economy.  For the US & its regional allies, the goal is to restrict Iran’s ability to obtain nuclear weapons.  14 days into the talks, the sides are still struggling to resolve disputes on key issues of timing, reciprocity & sanctions relief.  Obama “has indicated to his negotiating team that they should remain in Vienna and they should continue to negotiate as long as the talks continue to be useful,” his spokesman said.

Diplomats Allow Three More Days to Salvage Iran Nuclear Deal

Janet didn't say anything new, but the words were well received.  No major waves when increasing interest rates.  The big question is whether there will be 1 or 2 hikes of 25 bps this year.  Talks with Iran continue, & sanctions will remain in place for the rest of this year at a minimum, which keeps that supply limited.  Dow continues in the YTD as earnings season begins next week but NAZ worked its way to just under 5K.

Dow Jones Industrials

3 Stocks You Should Own Right Now - Click Here!

No comments: