Monday, August 10, 2015

Markets advance as Berkshire makes a $37 billion acquisition

Dow jumped 186, advancers over decliners better than 3-1 & NAZ climbed 52.  The MLP index recovered 4+ to the 348s (still 200+ below the record high last year) & the REIT index inched up pennies in the 318s.  Junk bond funds were mixed & Treasuries pulled back as stocks rose.  Oil slid lower in the 44s (near lows for the last year) & gold was flattish.

AMJ (Alerian MLP Index tracking fund)

 stock chart

CLV15.NYM...Crude Oil Oct 15...44.39 Up ...0.03 (0.1%)

GCQ15.CMX...Gold Aug 15....1,095.10 Up ...1.00 (0.1%)

Federal Reserve Vice Chair Stanley Fischer said stubbornly low inflation in the US won’t persist with the economy near full employment.  “A large part of the current inflation is temporary,” Fischer said.  After the effects of cheaper oil & other raw materials dissipate, “these things will stabilize at some point, so we’re not going to be as low as we are forever.”  These remarks indicate that while he’s pleased with progress on employment, he may be waiting for signs inflation will start moving up toward the central bank’s target.  The FMOC meets Sep 16-17 when economists expect it will raise interest rates for the first time in almost 10 years.  Fischer acknowledged that inflation had become the greater concern for policy makers.  “The problem is not with the part that’s unusual in the dual mandate, namely employment, that’s doing just fine,” he said.  “It’s with the inflation part.”  The Fed is looking for signs that inflation will strengthen toward its 2% goal before it starts to increase rates.  Policy makers’ preferred gauge of prices has been below target for more than 3 years, climbing by 0.3% in the year thru Jun.  “The concern about the situation is not to move before we see inflation, as well as employment, returning to more normal levels,” Fischer added.  He also said the Fed’s “ultra-accommodative” policy over the past several years had worked.  “The low interest rates are designed to help the recovery,” he said. “In terms of employment, they’ve done that very well.”

Fischer Says Low Inflation Won’t Persist as Job Market Heals

Greece & intl creditors sought to put final touches on a multi-billion euro bailout accord to keep the country financially afloat & meet an important debt repayment to the ECB within days.  Greek ministers & representatives of European institutions & the IMF resumed talks on this AM after a marathon session that ended in the pre-dawn hours.  An accord for €86B ($94B) in fresh loans to the debt-stricken nation must be in place in 10 days, when the repayment to the ECB is due.  "From 12 midnight the two sides started the final stretch, discussing the final stretch - combing through the final text, sentence by sentence, word by word," a Greek finance ministry official said.  Greek officials earlier said they hoped to conclude negotiations with creditors by early Tues at the latest.  Greek officials have previously said they expect the bailout accord to be vetted by the eurogroup on Aug 14, & be approved by the Greek parliament by Aug 18.  "When the new bailout comes to parliament for a vote it will be one bill with two articles - one article will be the loan agreement & the MoU (memorandum of understanding), & the 2nd article will be the prior actions."

Greece Seeks to Seal New Bailout with Lenders

Americans took on consumer debt at a faster pace in Jun, suggesting a firming labor market & low gas prices may finally be prying open consumers' wallets.  Outstanding consumer credit, a reflection of nonmortgage debt, rose $20.7B or at a 7.3% annual rate in June  according to the Federal Reserve, a slight increase from May, when it increased at an upwardly revised annual rate of 5.9%, but less than the 7.6% pace in Apr.  The forecast called for a $17B increase in Jun.  Revolving credit, mostly credit cards, rose at a 7.4% annual rate, a jump from May when it rose at an annual rate of 2.1%.  Nonrevolving credit, made up largely of auto & student loans, rose at a 7.3% annual rate, a slight acceleration from May's upwardly revised rate of 7.2% % the unrevised 6.2% growth pace in Apr.  Some economists still question whether Americans will pick up their spending at a time of stagnant wages, despite nearly 5 straight years of job growth.

U.S. Consumer Credit Picks Up in June

Berkshire Hathaway (BRK.A) is buying Precision Castparts (PCP) for $37B.  That brought our buyers in a big way.  But the markets had been oversold, so it didn't take much of an excuse to bring them out.  The excitement will fade & tomorrow's stock market will have to stand on its own 2 legs.  The Sep FOMC meeting is approaching & this time it is widely expected that the interest rate will finally be raised.  The Greek debt mess is far from over.  Mediocre to dreary earnings are haunting this market.  Dow remains on defense.

Dow Jones Industrials

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