This blog gives investors more financial information for very smart investing!
Wednesday, August 26, 2015
A vastly oversold market rebounds
Dow shot up 273, advancers over decliners 2-1 & NAZ gained 91. The MLP index went up 2+ to the 335s & the REIT index rose 2+ to 295. Junk bond funds were higher & Treasuries retreated. Oil & gold slid lower.
The ECB is
ready to expand or extend its bond-buying program if needed as a slump
in commodity prices & risks to global economic growth threaten its
inflation goal, said Exec Board member Peter Praet. “Recent developments in the world economy and in commodity markets
have increased the downside risk of achieving the sustainable inflation
path toward 2 percent,” Praet added.
“There should be no ambiguity on the willingness and ability of the
Governing Council to act if needed.” The € weakened after the comments, which echo remarks by ECB VP Vitor Constancio yesterday & come just a week before the
Governing Council will hold its next policy meeting. Inflation in the
euro area was just 0.2% in Jul, & the slowdown in China’s
economy, renewed slump in oil prices & stock-market turmoil could add
downward pressure. The ECB is currently buying €60B ($69B) a month of public-sector & corp bonds & asset-backed
securities under its QE program, which is intended to
run until Sep 2016. Praet said this could be adjusted if needed. The QE program “provides sufficient flexibility to do so, in particular in terms of size, composition and length,” Praet said. Praet also commented on the current market turmoil, which has seen
Chinese stocks suffer their steepest 5-day drop since 1996. European
shares declined on Wed, with the Stoxx Europe 600 Index falling
for a 5th time in 6 days. “We have to take some distance from the short-term volatility of the
market,” Praet said. “From the monetary-policy perspective, we will have
to think about the consequences in the pricing of risk.”
Orders for capital goods increased in Jul by the most in more than a
year, showing corp spending was finding its footing prior to the
turmoil in financial markets. Bookings for non-military equipment
excluding planes climbed 2.2%, the most since Jun 2014, after
increasing 1.4% in Jun, according to the Commerce Dept. Orders for all durable goods, items meant to
last at least 3 years, rose 2%, exceeding all forecasts.
An
expanding economy, buoyed by steady hiring, prompted business managers
to feel more comfortable about updating equipment as the negative
effects of dollar appreciation abated. Consumer purchases, especially on
vehicles, were supporting domestic demand even as overseas sales
remained weak heading into the market turbulence this month. The forecast projected total orders would fall 0.4%. The
Commerce Dept also revised up the Jun increase in non-defense
capital goods orders excluding aircraft from a previously reported 0.7% gain. Shipments of such goods, which are used in calculating GDP, climbed 0.6% after rising 0.9% in Jun (also revised up from a 0.3% increase). The
Jul business-equipment data show a rebound from Q2. In Q2, business investment in new plants,
equipment & research declined at a 0.6% annualized rate, the
worst performance since Q3-2012.
Activity in China's manufacturing sector likely shrank at its fastest
pace in 3 years in Aug, a poll suggests, adding to signs
of deepening economic weakness which are shaking global financial
markets. The official manufacturing
Purchasing Managers' Index (PMI) is forecast to edge down to 49.7, the
weakest level since Aug 2012, from 50 in Jul. A reading above 50 indicates an expansion in activity while one below that points to a contraction on a monthly basis. A
separate private survey released last week revealed that China's
factory sector shrank at its fastest rate in almost 6½ years in
Aug, fanning global concerns that the economy
may be slowing more sharply than earlier feared. The
official PMI survey is heavily weighted toward larger, state-owned
firms, while the private Caixin/Markit PMI is a gauge of smaller ones. Hit
by a property downturn, factory overcapacity, weak exports & high
local gov debt, China's economy is headed for its slowest growth
this year in a qtr of a century. Some believe current growth levels are already well below the gov official 2015 target of 7%. Shockwaves
from the county's collapsing stock markets & the unexpected
devaluation of the yuan earlier this month have added to fears the
economy could be at risk of a hard landing, though most believe a more gradual but protracted slowdown is more likely.
Stocks are looking for friends & found a few today. Dow went over 16K in today's rally, but that support level did not hold. Early gains are vanishing & Dow is down 1700 in Aug. Yesterday's unusually high market volatility suggests that all moves upward are suspicious.
....0.10 
No comments:
Post a Comment