Tuesday, November 24, 2015

Markets decline after Russian jet is downed over Syria

Dow dropped 107, decliners over advancers 2-1 & NAZ fell 50.  The MLP index rose 2+ to the 301s & the REIT index lost 3+ to the 318s.  Junk bond funds did little & Treasuries rallied.  Oil is weak & demand for gold increased on growing conflicts in the MidEast.

AMJ (Alerian MLP Index tracking fund)

CLZ15.NYM....Crude Oil Dec 15...39.39 Down ...1.15  (2.8%)

GCX15.CMX...Gold Nov 15.....1,076.40 Up ....9.60 (0.9%)

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Turkey shot down a Russian warplane near the border with northwestern Syria, drawing an angry rebuke from pre Putin & marking the first direct clash between foreign powers embroiled in the civil war.  Turkey said its planes fired after the pilots ignored repeated warnings about violating its airspace.  Putin called the attack “a stab in the back from the accomplices of terrorism,” saying the plane was operating over Syria & targeting terrorist groups.  He said Russia “won’t tolerate such crimes” but stopped short of threatening any military response against Turkey, which is a member of the NATO, warning only of “serious consequences” for bilateral ties.  NATO ambassadors were to gather in Brussels later today for a report from Turkey on the incident, the first time in decades that a member country has downed a Russian military aircraft.  Russia’s Foreign Minister Lavrov canceled a trip to Turkey planned for tomorrow & recommended citizens avoid traveling there, citing the threat of terrorism in a country that millions of Russian tourists visit every year.  While global financial markets slumped on fears the shoot-down could be a sign the Syrian civil war is spiraling to a new level, political analysts said major escalation seems unlikely given the risk of any conflict between Russia & a NATO member.  Putin highlighted the need for cooperation in fighting terrorism in Syria in his comments. “We expect the international community will find the strength to join forces in the fight against a common evil,” he said before talks with Jordan’s King Abdullah.  The incident highlights the rising risks of inadvertent conflict since Russia started its military campaign in Syria on Sep 30.

Turkey Says It Shot Down Russian Warplane Near Syria Border

The Conference Board’s index of consumer confidence decreased to 90.4 in Nov, the lowest since Sep 2014, from a revised 99.1 a month earlier.  The forecast called for a reading of 99.5.  The index averaged 96.9 during the last expansion & 53.7 in the recession that ended in Jun 2009.

Consumer Confidence Index in U.S. Fell to 90.4 in November

The US economy expanded at a faster pace in Q3 than previously reported, reflecting a smaller hit from efforts to rein in bloated inventories.  GDP rose at a 2.1% annualized rate, up from an initial estimate of 1.5%, according to the Commerce Dept.  The report also showed corp profits slumped while worker incomes jumped.  The consumer continues to power the US economy, with cheap gasoline giving households the means & greater job security giving them the confidence to spend.  Still, stockpiles remained elevated compared with sales, indicating that new orders & production will cool further to clear shelves & warehouses heading into 2016.  The rate of growth matched the forecast.  The economy grew at an average 2.3% pace in H1 as a 3.9% surge in Q2 more than made up for a Q1 slowdown.  The revisions toQ3 GDP showed the pickup in growth estimates was concentrated in stockpiles.  Inventories grew at a $90.2B annualized rate in Q3, almost twice as much as previously estimated.  Still, the slowdown in stockpiling from Q2, when it grew at a $113.5B rate, reduced growth by 0.6 percentage point.  That compared to a previously reported drag of 1.4 points.  Household consumption, which accounts for almost 70% of the economy, grew at a 3% annualized rate, less than the previously estimated 3.2%.  The good news for consumers is that incomes are picking up.  Wages & salaries rose by $102.7B following a $109.4B gain in Q2 that was almost $62B larger than previously estimated.  After-tax total personal incomes adjusted for inflation climbed 3.8% in Q3 from the same time in 2014, the biggest year-to-year gain since the end of 2012.  That helped push the saving rate up to 5.2% from 5% in Q2, indicating consumers have plenty of cash to spend for the holidays.

This report also offered a first look at corp profits.  Pretax earnings dropped 1.1% after a 3.5% gain in Q2.  The decrease reflected a $30B slump in profits from affiliates overseas that was the biggest since the height of the financial crisis at the end of 2008.  Corp earnings were down 4.7% from the same time last year, the largest 12-month drop since Q2-2009.

U.S. Economy Expands More Than First Estimated on Inventories

Military action is getting more attention after Turkey shot down a Russian plane.    Belgium is also in a lockdown mode which is scheduled to be lifted tomorrow.  With these growing tensions, gold & Treasuries are in demand after stocks were sold.  Dow is back in the red YTD.

Dow Jones Industrials

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