Monday, October 19, 2015

Markets drift lower on mixed economic data

Dow lost 22, decliners ahead of advancers about 5-4  & NAZ added 12.  The MLP index fell 3+ to the 341s & the REIT index went up a fraction to 323.  Junk bond funds crawled higher & Treasuries pulled back.  Oil dropped to the 46s after failing to reach 50 last week & gold slid lower.

AMJ (Alerian MLP Index tracking fund)

CLX15.NYM....Crude Oil Nov 15...46.07 Down ...1.19  (2.5%)

GCV15.CMX....Gold Oct 15......1,177.80 Down ...5.80  (0.5%)

Confidence among US homebuilders climbed in Oct to a 10-year high, a sign demand for housing may remain solid in the months to come.  The National Association of Home Builders/Wells Fargo sentiment gauge increased to 64 this month, the highest since 2005, from 61 in Sep.  Readings above 50 mean more respondents said conditions were good.  A labor market that’s added 1.8M to payrolls this year & mortgage rates at historic lows are combining to make home-buying a possibility for many Americans.  Higher confidence levels among builders may lead to more construction, which would help alleviate a shortage of available homes & properties that’s pushing up prices.  The homebuilder index’s reading for Sep was revised down from a previously reported 62.  The forecast called for the gauge to hold at that level.  Confidence climbed in 3 of the 4 regions, with builders in the West showing the greatest improvement as sentiment climbed to a decade high of 76 from 65.  The gauge of current single-family sales rose to 70 from 67 the month before, while the measure of the 6-month sales outlook increased to 75, the highest level since 2005, from 68.  A gauge of prospective buyer traffic was unchanged at 47.  “This upward momentum shows that our industry is strengthening at a gradual but consistent pace,” David Crowe, chief economist at NAHB, said.  “With firm job creation, economic growth and the release of pent-up demand, we expect housing to keep moving forward as we start to close out 2015.”

Homebuilder Confidence Reaches Decade High on U.S. Sales Outlook

China’s economy expanded quicker than forecast in Q3 as the services sector offset weaker manufacturing, keeping Premier Li Keqiang’s 2015 growth target within reach.  GDP rose 6.9% from a year earlier, the National Bureau of Statistics said, slightly ahead of estimates for 6.8%.  While that was the slowest quarterly expansion since 2009, based off previously announced data, stabilization will ease fears of a deeper downturn for investors & central bankers globally.  Strength in services & consumption helped reduce the drag from weaker manufacturing & exports, showing the continuing transformation of the economy.  The pace of growth in the services sector quickened to 8.4% YTD, while secondary industry, which includes manufacturing, weakened to a 6%% expansion.  The gov has cut interest rates 5 times since Nov & boosted infrastructure spending in recent months to keep growth from sliding too far below this year’s target for about 7%.  Industrial output in Sep rose 5.7% from a year earlier, compared with the estimate of 6%.  Retail sales increased 10.9%, versus a 10.8% gain forecast for the month.

Fixed-asset investment climbed 10.3%YTD from the same period last year, compared to a projection of a 10.8% increase, the slowest pace of gains since 2000.

China’s GDP Growth Beats Forecasts

OPEC member states should cut crude output to boost prices to a range of $70-$80 a barrel, Iran’s Oil Minister Bijan Namdar Zanganeh said, even as his country prepares to ramp up production in the aftermath of economic sanctions.  “No one is happy” with prices at current levels, he told reporters.  “OPEC should decide to manage the market by reducing the level of production.”  Zanganeh doesn’t expect the producer group to decide to scale back output when its ministers meet next in Dec.  OPEC has exceeded its official production target for 16 consecutive months as the group seeks to defend sales amid a global supply glut.  OPEC plans to assess output when ministers meet on Dec 4.  “We won’t seek permission from anyone for our production,”  Zanganeh said. “We will bring our production back to the market, and the market will absorb it. All of those OPEC members whom I speak with welcome this.”  Iran can boost oil exports by 500K barrels a day within a week after the removal of sanctions, Roknoddin Javadi, managing director of state-run National Iranian Oil, said & it can raise exports by 1M barrels a day within 6 months once the curbs are lifted.  It pumped 2.8M barrels a day of oil in Sep.

Iran Urges OPEC to Cut Oil Output to Raise Prices to $70-$80

Stocks are little changed as a big week for earnings begins.  The Chinese growth data is viewed as weak but it's unclear how that could affect the Fed when it considers raising interest rates next week.  The homebuilder confidence is good, although hardly a great surprise.  My take is that Q3 earnings, on balance, will not be favorable.

Dow Jones Industrials

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