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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.
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.”
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.
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.
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.
...1.19 
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