Thursday, September 10, 2015

Higher markets on hopes for a delay in interest rate hike

Dow gained 112, advancers over decliners 2-1 & NAZ added 48.  The MLP index slid 1+ to the 343s & the REIT index went up 1+ to the 294s.  Junk bond funds were mixed & Treasuries crawled higher.  Oil rose in the 44s & gold also advanced.

AMJ (Alerian MLP Index tracking fund)

CLV15.NYM....Crude Oil Oct 15...44.64 Up ...0.49 (1.1%)

GCU15.CMX...Gold Sep 15......1,109.30 Up ...7.10 (0.6%)

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Fewer Americans lined up last week to file for jobless benefits, highlighting the persistent strength of the labor market.  Claims for unemployment insurance fell 6K to 275K, from a revised 281K in the prior week, according to the Labor Dept (matching the forecast).  For the last 6 months first-time claims have been below the 300K level that is associated with a healthy labor market as steady demand persuades employers to retain workers.  What’s more, the unemployed have a greater chance of finding work after a report that showed a record number of job openings in Jul.  The 4-week moving average was little changed at 275K last week.  The number continuing to receive jobless benefits edged up 1K to 2.26M & the unemployment rate among people eligible for benefits held at 1.7%.

Decline in U.S. Jobless Claims Shows Resilient Job Market

US import prices in Aug recorded their biggest drop in 7 months as the cost of petroleum & a range of goods fell, indicating that a strong dollar & soft global demand continued to put downward pressure on imported inflation.  The Labor Dept said import prices fell 1.8% last month, the largest decline since Jan, after an unrevised 0.9% drop in Jul.  Import prices have now declined in 12 of the last 14 months.  The forecast was for import prices to fall 1.6%.  In the 12 months thru Aug, prices declined 11.4%, the largest drop since Sep 2009.  Very low inflation, in the face of a tightening labor market & strengthening economic growth, poses a challenge for Federal Reserve officials as they contemplate raising interest rates next week.  Last month, imported petroleum prices tumbled 14.2%, the biggest drop since Jan, after falling 5.9% in Jul.  Import prices excluding petroleum slipped 0.4%, reflecting the impact of the dollar's 17.5% rise against the currencies of US main trading partners since Jun 2014.  Imported food prices rose 0.3% after being flat in Jul & prices for imported capital goods fell 0.2%, as did prices for imported automobiles.  Export prices fell 1.4%, also the largest drop in 7 months.  Export prices slipped 0.4% in Jul.  They were down 7.0% in the 12 months thru Aug, the biggest drop since Jul 2009.

Import Prices See Biggest Drop in Seven Months

Computer maker Dell will invest $125B in China over the next 5 years as the company continues to expand in the economy.  The 3rd-largest maker of PCs said the investment would contribute about $175B to imports & exports, sustaining more than 1M jobs in China.  "The Internet is the new engine for China's future economic growth and has unlimited potential," CEO Michael Dell said.  "Dell will embrace the principle of 'In China, for China' and closely integrate Dell China strategies with national policies,"  he said, adding that the company would continue to expand its research & development team in China.  Dell announced in 2010 it planned to spend $250M on procurement & other investments over the next 10 years in China, its 2nd largest market after the US.  Dell has been in China for about 2 decades &, before it went private in 2013, saw annual sales in the country of roughly $5B.  In Jan, it announced partnerships with state-owned China Electronics Corp & the municipal gov of Guiyang.

Dell to invest $125 Bln in China

There was talk about delaying the rate hike next week which always brings out buyers for stocks.  But that is just talk & the rate hike will come soon.  Markets have been expecting the first rate hike for years & that delay is long forgotten.  It will come although it will be mild at only 25 basis points which will be followed by one or 2 meetings before a 2nd hike (if not longer).  In the meantime, economic fundamentals are muddling along in the US & this is the strongest economy in the world.  Dow remains in the red in Sep.

Dow Jones Industrials

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