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Friday, December 11, 2015
Markets tumble led by oil falling to new lows
Dow lost 230, decliners over advancers 5-1 & NAZ sank 71 taking it below 5K. The MLP index fell 9+ to 261 following its recent recovery rally & the REIT index was flat in the 314s. Junk bond funds were weak & Treasuries rallied. Oil dropped to the 35s & gold inched higher.
Consumer confidence climbed in Dec to the highest level in 4
months as favorable perceptions about household finances made Americans
more upbeat about shopping. The University of Michigan preliminary index of sentiment rose to
91.8 from 91.3 in Nov. The projection called for 92. The gauge has averaged 92.9 this year, the best since
2004. All of the increase in confidence this month was attributed to
households at the bottom 2/3 of the income ladder, reflecting the
cheapest gasoline since 2009 & better employment prospects. At the
same time, consumers were less sanguine about the outlook for wages even
as they anticipated inflation to remain tame. “Buying plans remained very favorable due to the availability of
discounted prices and low interest rates,” Richard Curtin, director of
the University of Michigan consumer survey, said. “Buying
conditions for household durables were rated favorably by 81 percent of
all consumers, the highest level since January 2006.” The current conditions index, which takes stock of Americans’ view of
their personal finances, advanced to 107, the highest since Jul from
the prior month’s 104.3. The measure of expectations 6 months from now decreased to 82 from 82.9. Americans expected the inflation rate in the next year will be 2.6%, compared with 2.7% in the Nov survey. Over the next
5-10 years, they expect a 2.6 % rate of inflation, the same
as the previous month.
Retail sales climbed in Nov by the most in 4 months as
American consumers put to work some of the money saved from the cheapest
gasoline since early 2009. The 0.2%t increase,
less than forecast, followed a 0.1% gain in the previous month,
according to the Commerce Dept. Excluding purchases of autos & gasoline, retail purchases climbed 0.5%, also the biggest
advance since Jul. A labor market that’s put millions back to
work this year & propelled disposable income has also given households
a little more to spend, a development that may help retailers during
the holidays. Faster wage growth would provide an even bigger boost for
consumers & encourage broad-based spending beyond big-ticket items
such as autos & appliances. The forecast called for a 0.3%. Compared with the same time last year, retail sales in Nov were up 1.4%.
8 of 13 major categories showed increases last month. Those seeing an
improvement in demand included internet retailers, general merchandise
stores, apparel shops & sporting-goods merchants. Restaurant sales
climbed 0.7%, the most since Apr. Receipts
at gas stations weighed on the retail sales figures, as the
cost of a gallon of regular gasoline fell 6.7% last month. The retail sales data aren’t adjusted for changes in
pricing. Sales also fell at automobile dealers last month. The 0.4% decrease, after a 0.3 percent decline, is at odds with industry
data from Ward’s Automotive Group that showed sales exceeded an 18M annualized rate for a record 3rd straight month.
US producer prices unexpectedly rose in Nov as the cost of
services increased, but the underlying trend continued to point to weak
inflation pressures. The Labor Dept said its producer price index advanced 0.3% after falling 0.4% in Oct. In the 12 months thru Nove, the PPI declined 1.1% after
sliding 1.6% in Oct. Nov marked the 10th straight
12-month decrease in the index. The forecast was for the PPI to be unchanged & sliding 1.4% from a year ago. Dollar strength & continued declines in oil prices amid a glut &
slowing global growth have dampened price pressures, leaving inflation
running persistently below the Federal Reserve 2% target. Services increased 0.5% after falling 0.3%
the prior month. Nearly 80% of the increase was attributed to
margins received by wholesalers & retailers, which jumped 1.2%. Within services, more than 40% of the increase was due to a
6.2% increase in margins for apparel, jewelry, footwear &
accessories retailing. There were also gains in machinery & equipment
wholesaling, loan services, fuels & lubricant retailing, & portfolio
management. However, prices for securities brokerage, dealing, investment advice, & related services fell 3.9%. Energy prices fell 0.6% after being unchanged in Oct.
Wholesale food prices rose 0.3% after slipping 0.8% the prior month.
The bear market in oil is dragging down all markets. Nothing seems to be going right in the economy. The increase in terror alert is a hidden negative that is starting to get more attention & the strength of retail sales in Dec has become an open question. Dow is down 400 this month & should remain on defense thru the FOMC meeting next Wed at a minimum.
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