Tuesday, November 24, 2015

Markets fluctuate while uncertainties around the globe grow

Dow went up 19, advancers over decliners 3-2 & NAZ inched up a smidgen.  The MLP index climbed 3+ to the 302s & the REIT index slid back 1 to below 321.  Junk bond funds did little & Treasuries were slightly higher.  Oil was bid up & gold had a modest gain.

AMJ (Alerian MLP Index tracking fund)

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CLF16.NYM....Crude Oil Jan 16....42.88 Up ...1.13 (2.7%)

Live 24 hours gold chart [Kitco Inc.]

The Federal Reserve Bank of Boston joined 8 other reserve banks in requesting a quarter percentage-point increase in the discount rate before the Oct 28 meeting of the FOMC.  Directors of the 9 regional banks seeking the increase to 1% saw the move as warranted “in light of the improvements in labor market conditions this year & their expectations for inflation to rise gradually” toward the Fed’s 2% target, according to minutes of the Oct 26 meeting released today.  8 Fed banks had preferred a discount-rate increase in Sep.  The Board held another review of discount rate-requests yesterday.  US central bankers signaled in their Oct 28 FOMC statement that they’re preparing to raise the benchmark federal funds rate target in Dec if the economy makes additional progress toward their goals of maximum employment & stable prices.  The governors didn’t approve any change when they met last month.  The discount-rate votes can indicate the preferences of Fed bank presidents, who rotate as voting members on the FOMC.

Boston Fed Joins Eight Other Banks in Seeking Discount-Rate Rise

If you’re traveling this Thanksgiving holiday, brace yourself.  Wait times at US airport security checkpoints were already up this year as passenger counts grew & the TSA imposed more thorough screening protocols.  Now, after terrorist attacks in Paris & a suspected airliner bombing in Egypt, people enduring the normal chaos of the busy travel period will also face a gauntlet of bomb-sniffing dogs, extra armed officers & the near-certain prospect of even longer lines.  While there are no specific threats indicating terrorists intend to strike during the holiday travel surge, US & local authorities have been hiking security measures as a precaution, Homeland Security Secretary Jeh Johnson has said in recent days.  Increased security goes for travel by passenger rail as well, Amtrak said.  “Passengers might notice an increased police presence at stations, on trains and along the tracks,” it said.  The TSA issued a statement urging travelers to review its rules, such as the ban on carrying items with more than 3.4 ounces of liquid, to prevent unnecessary delays during screening.  “As we experience every year during the busy holiday season, passengers can expect to see some increase in wait times,” the TSA said in an e-mail.  Atlanta’s Hartsfield-Jackson International Airport, the world’s busiest, is advising people to arrive 2½ hours before flights during peak travel days over the next week.  With an improving economy and lower fuel prices, the number of people hitting the road this year may be the most in years.  AAA predicts 46.9M in the US will venture more than 50 miles from home, the highest since 2007.  Airlines for America, the trade group for most large carriers, estimated 25.3M will fly on US carriers from Nov 20-Dec 1, a 3% increase over 2014.

Long Lines, Police Await Holiday Travelers Amid Terror Fear

US banks earned $40.4B in profits for Q3, a 5.1% increase from a year earlier, according to the FDIC.  Lower non-interest expenses were the main reason for the higher earnings, the FDIC said in its quarterly report on industry performance.  Reductions in costs tied to litigation outweighed weaknesses in operating revenue at large banks.  Loan portfolios grew & the quality of banks’ assets improved.  At the same time, “there are signs of growing interest-rate risk and credit risk that warrant attention” & “lending in higher-risk loan categories has been growing,” it said.  But the FDIC, Federal Reserve & Office of the Comptroller of the Currency have said that leveraged lending by US banks remains too risky, & credit tied to oil-&-gas exploration is getting weaker.  That report highlighted deficiencies in loan underwriting.  Of the 6270 firms reporting Q3 results, 59% had year-over-year earnings growth.  The proportion of banks that were unprofitable declined to 5% from 6.6% a year ago, the lowest since 2005.  The deposit insurance fund, which protects customers’ holdings against bank failures, rose $2.5B to $70.1B, from $67.6B in Q2.  The reserve ratio increased to 1.09% from 1.06% & remains on target to reach the congressionally mandated level of 1.35% by 2020.  The number of banks on the FDIC’s problem list, those deemed at greater risk of failing, declined to 203, the smallest number in nearly 7 years & a sharp decline from the peak of 888 in 2011.  Only one lender failed in Q3.

Bank Profits Hit $40.4 Billion in Third Quarter, FDIC Says

Stocks rallied to around breakeven, but now there is a hostage situation in Northern France.  Chaos from the MidEast is spreading around the world with a lot of emphasis in Europe.  Holiday travel in the US looks to require long delays, adding to uncertainty in peoples' minds.  Obama & Hollande held a news conference & Obama only uttered empty words about trying harder to fight bad guys.  This background is not good for lifting economics out of their lethargic state.  But Dow has hardly noticed, still down only slightly YTD.

Dow Jones Industrials


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