Friday, August 14, 2015

Mixed markets on mixed economic data

Dow rose 13, advancers slightly ahead of decliners & NAZ lost 9.  The MLP index went up 4+ to the 362s & the REIT index was flat, just above 320.  Junk bond funds did little & Treasuries pulled back.  Oil gained to the 43s & gold inched higher.

AMJ (Alerian MLP Index tracking fund)

CLV15.NYM....Crude Oil Oct 15...43.33 Up ...0.35 (0.8%)

GCQ15.CMX...Gold Aug 15.....1,118.30 Up ...2.60 (0.2%)

Confidence among US consumers eased for a 2nd month in August as households braced for an increase in interest rates that could slow growth.  The University of Michigan’s preliminary index of sentiment decreased to 92.9 from 93.1 in Jul.  The forecast called an increase to 93.5.  Concern about the economy was counterbalanced by the most optimistic views on wages in 15 years.  Americans’ spirits have been boosted as gasoline prices retreat & companies continue to increase headcounts & limit dismissals.  The global financial turmoil caused by China’s recent currency devaluation have yet to effect sentiment, heightening the focus on future reports.  “Given the increase in uncertainty, its potential impact on consumer sentiment must be carefully monitored,” Richard Curtin, director of the Michigan Survey of Consumers, said.  “The declines in prospects for the economy probably reflect the expected increases in interest rates.”  The survey’s gauge of consumer expectations 6 months from now fell to 83.8 from 84.1 in Jul & the gauge of current conditions was little changed at 107.1 in Aug from 107.2 the prior month.  Americans expected an inflation rate of 2.8% in the next 12 months, the same as in Jul.  Over the next 5-10 years, they anticipated a 2.7% rate of inflation, down from 2.8%.

Consumer Sentiment in U.S. Decreased in August for Second Month

US wholesale prices climbed at a slower pace in Jul, a harbinger of things to come as energy prices plunge.  The 0.2% increase in the producer-price index followed a 0.4% gain in Jun, according to the Labor Dept.  The forecast called for a 0.1% advance.  Costs dropped 0.8% over the past 12 months.  A firming in inflation may be on its last legs as oil prices drop this month, driven by a global supply glut that’s expected to last thru 2016.  Fed officials have previously said such slumps are transitory as they look for signs that inflation will move toward their 2% target in order to raise interest rates.  Energy expenses declined 0.6% in Jul after climbing 2.4% the month before & food prices decreased 0.1% after a 0.6% gain.  Wholesale prices excluding these 2 components rose 0.3% for a 2nd month, compared with the 0.1% gain forecasted.  Those costs were up 0.6% from Jul 2014.  The increase last month in the index excluding food & fuel was paced by a 0.4% advance in the cost of services.  About 40% of that gain was traced to a 9.9% surge in hotel-room rates, the biggest since 2009.  Eliminating food, fuel & trade services to arrive at a reading that some prefer because it excludes one of the report’s most volatile components, wholesale costs climbed 0.2% after rising 0.3% the month before.  As part of their dual mandate, Fed policy makers are keeping a close watch on inflation trends.  The personal consumption expenditures index, the Fed’s preferred inflation gauge, rose 0.3% in Jun from a year earlier & has been below its 2% goal since May 2012.

Wholesale Prices in U.S. Increased at Slower Pace in July

Greek legislators approved a bailout package to unlock €86B ($96B) & help it avoid a default next week when it has to make a payment to the ECB.  After an all-night debate, Prime Minister Tsipras had to rely on opposition votes to secure parliament’s backing on Fri morning for a deal that includes sweeping economic reforms & budget cuts mandated by Greece’s creditor institutions.  Tsipras will request a confidence vote later this month after he suffered multiple defections from his Syriza-led coalition.  “The first phase of a tough, painstaking process closes today,” Tsipras told lawmakers before the vote. “The real dilemma wasn’t a memorandum or an uncontrolled default; nobody could have chosen an uncontrolled default. The real dilemma was a memorandum with the euro, or a memorandum with the drachma.”  The IMF said late yesterday that the agreement reached in Athens was a “very important step forward” that “puts in place far-reaching policies to restore fiscal sustainability, financial sector stability, & sustainable growth.”  It also urged Greece’s European partners “to make decisions on debt relief that will allow Greece’s debt to become sustainable.”  The bailout package includes a clampdown on early retirement, state asset sales, the recapitalization of Greece’s banks & changes to the regulation of pharmacies & bakeries.  Any delay in signing off on the deal risks derailing the narrow timetable for national parliaments in other euro-area countries to vote on the 3-year package before a €3.2B payment to the ECB falls due next Thurs.  Germany’s gov has said the plan needs more work & that a bridge loan remains an option to meet the ECB repayment.

Greek Lawmakers Back Rescue Package After All-Night Session

On this Aug Fri, very little is going on in the stock market.  The Greek debt bailout is crawling forward, &, has been the case for months, is far from a done deal.  The US economic data  is inconclusive.  While China is not in the news today, its presence can be felt.  Next week traders will return, bringing more excitement to the stock market.

Dow Jones Industrials

stock chart 

3 Stocks You Should Own Right Now - Click Here!


No comments: