Friday, November 13, 2015

Lower markets on rate hike expectations

Dow sank 133, decliners over advancers 2-1 & NAZ lost 47.  The MLP index lost 6+ to the 298s & the REIT index pulled back 2+ to 311.  Junk bond funds were lower & Treasuries rallied as stocks sold off.  Oil fell below 41 & gold inched higher.

AMJ (Alerian MLP Index tracking fund)

CLZ15.NYMCrude Oil Dec 1541.17 Down 0.58 (1.4%)

GCX15.CMXGold Nov 151,085.40 Up 4.60 (0.4%)

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Consumer sentiment climbed more than forecast in Nov as Americans took heart in lower interest rates & store discounts.  The University of Michigan’s preliminary consumer sentiment index for this month rose to 93.1, a 4 month high, from 90 in Oct.  The projection called for a reading of 91.5.  The gain in confidence was propelled by those in the bottom 2/3 of the pay scale as a firming job market & cheap fuel costs made for the most-favorable income expectations in almost 9 years.  That bodes well for the holiday-shopping season after retail sales were weaker than projected last month.  “Confidence rose in early November mainly due to a stronger outlook for the domestic economy,” Richard Curtin, director of the survey, said.  “Buying plans remained very favorable in early November due to low prices and currently low interest rates.”  The gauge matched the 2015 average thru Oct, which is on track to be the highest since 2004, Curtin said.  The index of expectations 6 months from now increased to 85.6, a 5-month high, from 82.1 in Oct.  The gauge of current conditions, which measures Americans’ views of their personal finances, rose to 104.8, the highest since Aug, from 102.3 last month.  Americans expected an inflation rate of 2.5% in the next year compared with 2.7% in Oct.  Over the next 5-10 years, they expected prices would also rise 2.5%, matching the lowest in monthly data going back to 1979.

Consumer Sentiment Climbs as Americans Buoyed by Price Discounts

Sales at U.S. retailers rose less than forecast in Oct as consumers pocketed the money saved after fueling up their cars.  Purchases increased 0.1% after being little changed in Sept, the Commerce Dept reported.  The forecast called for a 0.3% gain.  Receipts at service stations dropped for a 4th consecutive month as gasoline prices declined.  Consumers are showing some caution going into the key holiday-shopping season even as hiring reached a 10-month high in Oct & subdued prices at the pump support household budgets.  The possibility of the Federal Reserve’s first increase in the benchmark interest rate since 2006, in addition to the fluctuations in stock prices, could limit Americans’ enthusiasm for shopping sprees.  7 of 13 major retail categories showed gains last month, led by building-material stores, restaurants & non-store merchants, which include internet sales.  Receipts at gasoline stations dropped 0.9% after falling 4% in Sep, pushing the value of sales over the past 12 months down 20.6%.  Core sales, the figures that are used to calculate GDP which exclude categories such as autos, gasoline stations & building materials, climbed 0.2%, less than the 0.4% forecast.  The readings for Sep were revised up to show a 0.1% gain compared with a previously recorded 0.1% drop.  Sales at general merchandise stores, which include warehouse big-box merchants that also sell gasoline, fell 0.4%.  Grocery stores, which typically see receipts rise, saw a 0.3% decrease.  The rate of purchases last month was also held back by a 0.5% decrease at auto dealers.

Retail Sales Rise Less Than Forecast

Germany is planning a balanced budget for the 2nd year in a row even as Europe’s biggest economy faces a record influx of people fleeing from war & poverty.  The parliament’s budget committee approved a draft budget for 2016 that allows Chancellor Angela Merkel’s gov to increase spending by 3.3% to €316.9B ($341B) without taking on new debt.  To help pay for refugee-related costs, €6.1B in surplus revenue from 2015 will be shifted to next year.  “With the 2016 budget, the federal government does its financial responsibility in the refugee crisis justice” a budget policy spokesman said.  Merkel promised voters before the 2013 federal election that won her a 3rd term to keep spending in check & avoid new debt.  Her ability to deliver on that pledge may depend on the number of migrants coming to Germany, which could reach around 1M this year alone.  The draft budget is based on the gov official forecast of 800K refugees in 2015.  The committee awarded the Interior Ministry an extra €1B to help cover additional refugee-related costs.  Funding for integration measures was raised by €293M.  The draft foresees €23.8B in interest expenses.

Germany Plans 2016 Balanced Budget Amid Rising Refugee Costs

Stocks  continue to give up gains from last month.  Sub par earnings did not command attention, but when combined with a like-hood that there will finally be a rate hike next month, stocks have been heading south.  Dow is down more than 350 this month & selling is in the wind.

Dow Jones Industrials

stock chart 


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