Thursday, August 13, 2015

Markets waffle on lower oil prices and economic data

Dow edged up 6, decliners over advancers 3-2 & NAZ climbed 11.  The MLP index lost 3+ to 361 & the REIT index was off 2+ to the 318s.  Junk bond funds declined & Treasuries were lower.  Oil dropped to below 43 & gold also pulled back.

AMJ (Alerian MLP Index tracking fund)

CLV15.NYM....Crude Oil Oct 15...43.58 Down ...0.43  (1.0%)

GCQ15.CMX...Gold Aug 15.....1,115.70 Down ...7.50  (0.7%)

European institutions voiced “serious concerns” about Greece’s ability to repay its debt, putting pressure on Germany as the main creditor to offer debt relief as part of the next aid program.  Greek debt will peak at 201% of GDP next year, before dropping to 160% in 2022, according to the “baseline” scenario of European institutions.  The IMF in the past has wanted to see debt levels closer to 120% before putting its own money on the line.  In talks over Greece’s 3rd bailout, it has rankled Germany by calling for more debt relief.  While the European estimates “point to serious concerns regarding the sustainability of Greece’s public debt,” the euro document said that problem can be solved without resorting to a nominal haircut.  Dealing with the debt burden is one of the trickiest issues facing euro-zone finance ministers when they meet tomorrow to discuss the new 3-year aid program worth around €85B ($94B).  European creditors are readying more interim financing to help Greece make next Thurs payment to the ECB in the event of a disagreement over the full package.

EU Said to Have ‘Serious Concerns’ on Greece Debt Sustainability

Applications for unemployment benefits in the US are hovering close to a 4-decade low, a sign of muted firings & steady progress in the labor market.  Jobless claims rose 5K to 274K, from a revised 269K in the prior period, according to the Labor Dept.  The 4-week moving average, a less-volatile measure of job cuts, declined to the lowest level in more than 15 years.  Limited staffing reductions indicate employers are content with headcounts as US demand holds up against weaker global markets.  Applications for benefits dropped to 255K in mid-Jul, the lowest level since 1973.  The 4-week moving average decreased to 266K last week, the lowest since 2000, from 268K.  The number continuing to receive jobless benefits rose 15K to 2.27M in the latest week & the unemployment rate among people eligible for benefits held at 1.7%.  Beginning in Mar, claims have remained below the 300K level that is typically consistent with an improving job market.

Jobless Claims in U.S. Holding Just Above a Four-Decade Low

Sales at US retailers rose in Jul on growing demand for everything from cars to clothing, & a decline the previous month was wiped away, signaling consumers are propelling growth in the economy.  The 0.6% advance matched the forecast & followed little change in Jun that was previously reported as a 0.3% drop, according to the Commerce Dept.  11 of 13 major categories showed gains.  Rising employment, stronger finances & still-cheap fuel is helping draw consumers into stores & auto dealerships.  Growth in household spending is bolstering the expansion as Federal Reserve policy makers move toward lifting interest rates this year.  The Commerce Dept report showed retail sales excluding autos increased 0.4% for a 2nd month.  The revised reading for Jun also reversed a previously estimated 0.1% drop, painting a healthier picture for consumer spending.  The updated Jun figures, combined with upward revisions to May, will probably prompt economists to boost tracking estimates for Q2 growth.  Sales at automobile dealers grew 1.4% after dropping 1.5% the prior month.  The figures used to calculate GDP, which exclude categories such as food services, auto dealers, home-improvement stores & service stations, showed a 0.3% gainy after the prior month’s 0.2% increase in the control group.  Purchases at non-store retailers, which include online merchants, were among the best performers last month.  Sales rose 1.5%, the biggest gain since Feb.

Retail Sales Show Broad Gain as U.S. Consumers Spur

Stocks are confused, trying to understand today's news.  The retail sales & jobless data are encouraging, although that can give the Fed courage to raise interest rates next month.  The Greek debt mess is going nowhere fast.  Oil at the lowest prices in years is very gloomy for the whole market.  Prices at the pumps will head south, but there is a lot of pain when that happens.  During the 6 year recovery, low gas prices have not had a significant effect on increasing consumer spending which continues sluggish & uneven.  The Dow chart looks dreary.

Dow Jones Industrials

stock chart 

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