Friday, October 9, 2015

Markets fluctuate on growing MidEast tensions

Dow went up 36, advancers over decliners 4-3 & NAZ rose 24.  The MLP index slid back 1+ to the 344s & the REIT index lost 1, taking it to the 317s.  There was buying in junk bond funds & Treasuries were higher.  Oil is above 50 on growing fighting in the MidEast & gold advanced.

AMJ (Alerian MLP Index tracking fund)

CLX15.NYM...Crude Oil Nov 15...49.87 Up ...0.44 (0.9%)

GCV15.CMX...Gold Oct 15......1,154.10 Up ...9.40 (0.8%)

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Federal Reserve Bank of Atlanta pres Dennis Lockhart said the first interest rate increase since 2006 will likely be warranted later this month or in Dec.  “The economy remains on a satisfactory track, and, speaking for myself, I see a liftoff decision later this year at the October or December FOMC meetings as likely appropriate,” Lockhart said.  He supported the FOMC decision last month to leave interest rates unchanged, after market turmoil and slowing growth in China raised doubts about the US outlook.  The committee hesitated because it saw risks to its forecast that inflation would return to its 2% target as expected.  "The ambiguity of the moment reinforces the need to closely watch the vital signs of the economy over the coming weeks to determine if the outlook has changed," he added.  Lockhart, who has never dissented, said consumer activity will be a key signal that the US economy can sustain its momentum despite the global slowdown.  “The consumer-based dimension of the economy has been robust for several months,” Lockhart said even as manufacturing & exports have been hurt by a stronger US dollar.  The Atlanta Fed’s tracking estimate for Q3 is a “relatively soft 1.1 percent,” though much of the weakness is due to a swing in inventories.  Last month’s employment report was “certainly disappointing” but didn’t change the overall picture of improvement, with labor market slack continuing to be reduced in Q3, he said.  "In the third quarter, payroll job gains have averaged 167,000 per month. While this is a step down from the brisker pace of job growth we’d enjoyed over the first half of the year, it is still more than enough to accommodate the trend growth in the labor force," he continued.  Lockhart also said financial market turmoil shouldn’t be overly influential to the Fed.

Lockhart Says He Still Backs Fed Rate Liftoff by December

US import prices barely declined in Sep, with oil prices rebounding & the drag on prices from a weak global economy appearing to moderate, Labor Dept data showed.  The smaller-than-expected 0.1% decline in import prices could help lay the groundwork for an eventual interest rate hike by the Federal Reserve.  Prices for imported oil rose 1.1% after declining sharply in Aug.  Non-oil import prices declined only 0.2% in Sep, which was half the pace of the declines registered in Jul & Aug.  Fed chief Janet Yellen has argued that import prices have been a major factor keeping inflation well below the Fed's 2% target.  The surge in value of the dollar, which has been fueled by expectations a strengthening US economy would lead to higher interest rates, has been a factor decreasing the price of non-oil import prices.  Yellen has argued that this dynamic was bound to fade & that US inflation would then trend higher.  The Fed held off from hiking interest rates in Sep largely because a weak global economy had raised doubts within the US central bank that inflation would rise toward the Fed's target as expected.  Analysts had expected a 0.5% decline in import prices during Sep.  Export prices fell 0.7%, more than the 0.2% forecast.

U.S. Import Prices Barely Decline in September

The Obama administration is overhauling its faltering program to train & equip Syrian rebel forces as the strategy in the region faces a new challenge from Russia’s intervention in the Syrian civil war.  Defense Secretary Ashton Carter said that he was dissatisfied with the approach to supporting moderate fighters who have taken on Islamic extremists.  Obama will announce the changes “very shortly,” he said.  “We have devised a number of different approaches to that going forward and taken them to President Obama,” Carter added.  He cited the support the US has offered Syrian Kurdish forces, who have seen some success against the terror group, as the direction the administration is pursuing.  General Lloyd Austin, the head of US Central Command, told a Senate hearing last month that only “four or five” of about 50 US-trained rebels were in the fight against Islamic State at that point.  Lawmakers of both parties called the program a failure.  “So we’re counting on our fingers and toes at this point,when we had envisioned 5,400 by the end of the year,” Senator Claire McCaskill said.  The change in approach is likely to prompt additional questions about the viability of Obama’s Syria strategy.  The pres signaled last Fri that he wasn’t happy with the train-&-equip program, saying it had "not worked the way it was supposed to."  The US had hoped to train a force of Syrian rebels to take on Islamic State, which has seized swaths of Syria & Iraq.  Obama has ruled out sending US ground troops into the battle.  In Iraq, the US has about about 3.6K troops at 6 locations to train & advise Iraqi army forces & Kurdish Peshmerga fighters.  Kurds are also involved in the Syria fight.  “The work we’ve done with the Kurds in northern Syria is an example of an effective approach where you have a group that is capable, motivated on the ground, that you can enable their success,” Carter said.  “That’s exactly the kind of example that we would like to pursue with other groups in other parts of Syria going forward. That is going to be the core of the president’s concept.”  Obama’s Syria strategy also has been been complicated by Russia stepping into the conflict to defend its ally, pres Bashar al-Assad.

Obama Revamps Syria Rebel Strategy Amid Challenge From Russia

There is not much for traders to do ahead of next week when earnings season will kick into high gear.  Tensions & fighting keep going from bad to worse while the US is struggling to figure out a strategy (as it has been doing for years).  Dow has risen 1K in the last couple of weeks & remains heavily overbought.

Dow Jones Industrials

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