Markets pause after extraordinary month long rally

Dow rose 58. decliners just ahead of advancers & NAZ lost a fraction. The MLP index gained 3+ to the 337s & the REIT index fell 2 to the 326s.  Junk bond funds were mixed & Treasuries retreteated, taking the yield on the 10 year Treasury to 2.2%.  Oil is higher, trying to go over 47, while gold lost more ground.

AMJ (Alerian MLP Index tracking fund)

CLZ15.NYM

....Crude Oil Dec 15

...47.12

.....0.98

(2.1%)

GCX15.CMX

...Gold Nov 15

.....1,122.50

...13.30

(1.8%)

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General Motors (GM) & Fiat Chrysler (FCAU) projected another blockbuster month for US auto sales.  In addition, Toyota (TM) & Nissan reported Oct sales that topped estimates, while Ford's (F) 13% gain came up just short.  GM forecast an annualized selling rate, adjusted for seasonal trends, of 18.2M, the same as in Sep, which would be the first time the industry has posted back-to-back months of better than an 18M pace since 2000.  That’s the year the industry set a sales record of 17.4M.  The estimate was for a sales pace of 17.7M.  All of the major automakers, except Volkswagen, which is mired in a diesel-emission scandal, were projected to report Oct increases.  TM, with the smallest of those projected gains at 8.5%, said that its sales rose more than 10%.  GM sales rose 16%, exceeding the estimate of 12%.  FCAU sales rose 15%, extending its streak of monthly gains to 67 thanks to a 33% increase for the Jeep brand.  The industry was estimated to report a 10% increase in sales to 1.41M.  Ford’s gain missed estimates for a 14% increase.

Automakers See Another Blockbuster Month of Sales in the U.S.

New orders for US factory goods fell for a 2nd straight month in Sep as the manufacturing sector continues to struggle under the weight of a strong dollar & deep spending cuts by energy companies.  The Commerce Dept said new orders for manufactured goods declined 1.0% after a downwardly revised 2.1% drop in Aug.  Factory activity, which accounts for about 12% of the economy, is also being constrained by efforts by businesses to reduce an inventory overhang & tepid global demand.  Economists forecasted factory orders falling 0.9% after a previously reported 1.7% decline in Aug.  Orders for transportation equipment fell 3.1% in Sep, largely reflecting a drop in aircraft orders.  Motor vehicle production remains a bright spot in manufacturing, with orders for automobiles & parts rising 1.5% in Sep.  The Commerce Dept also said orders for non-defense capital goods excluding aircraft, seen as a measure of business confidence & spending plans, slipped 0.1% instead of the 0.3% drop reported last month.  Shipments of core capital goods, used to calculate business equipment spending in the GDP report, increased 0.5% as reported in Aug.  Inventories of factory goods fell 0.4% after a similar drop in Aug, also an encouraging sign for the sector.  That left the inventories-to-shipments ratio unchanged at a still lofty 1.35.  Unfilled orders at factories fell for a 2nd straight month.

Orders at the Factory Gate Fall for Second-Straight Month

Greece’s 4 biggest banks may need as little as €1.2B ($1.3B) of new private funds to meet their expected contributions toward filling a capital shortfall, if they succeed in raising €3.2B thru debt swaps.  The Greek gov said it expects the banks to raise at least €4.4B of the €14.4B needed and will make up any difference between what they get privately & the overall goal.  2 of the lenders can surpass their expected contributions just thru debt swaps, underlining how capital shortfalls identified by the ECB were lower than anticipated.  The 4 banks must submit plans for covering the shortfalls by Fri.  Steps may also include selling units, winding down non-core businesses or shedding staff.

The ECB found a €4.4B shortfall at the Greek banks using its baseline economic assumptions & a €14.4 gap under the most pessimistic scenario.  That’s less than the €25B by Greece’s European creditors in Jul to support bank recapitalizations.  The central bank reviewed the Greek lenders’ assets & conducted stress tests to see how they would perform if the economy deteriorated further. Capital gaps should be “covered as much as possible with private means,” the ECB said.

Greek Banks May Need Only $1.3 Billion of New Private Capital

The stock market needs to catch its breath after Dow advanced 1.6K in just over a month.  The current rally may need more time to absorb the higher values.  Earnings keep coming in & they tend to be soggy, but traders are not concerned.

Dow Jones Industrials