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Thursday, January 7, 2016
Markets decline again as oil falls to $33
Dow sank 160, decliners over advancers a big 5-1 & NAZ lost 68. The MLP index tumbled another 8+ to 270 & the REIT index lost 3+ to the 321s. Junk bond funds dropped & Treasuries saw selling. Oil hit a 12 year low just above 33 & gold gained, going over 1100.
China’s securities regulator suspended a new stock circuit-breaker
after a selloff forced local exchanges to shut for the 2nd day this
week, signaling that the country's leadership may reconsider or change
the system. The China Securities Regulatory Commission announced
the suspension on its official microblog account on. The
decision came hours after CSRC officials held an emergency meeting to
discuss conditions on the nation's tumbling stock market. China’s CSI 300 Index
plunged 7.2% on Thurs, triggering an automatic shutdown within
30 mins of the open, as declines in the yuan rattled investor
confidence in economy. The market
circuit breakers, which halt exchanges for 15 mins after a 5%
drop in the CSI 300 & for the rest of the day after a 7%
retreat, have been criticized by analysts for exacerbating losses as
investors scramble to exit positions before getting locked in.
Fewer Americans filed applications for unemployment benefits last
week, a sign the labor market remained robust entering 2016. Jobless
claims dropped 10K to 277K, according to the Labor Dept. The figure was in line
with the 275K forecast. Employers
are retaining workers amid steady demand, particularly among consumers,
whose spending accounts for about 70% of the economy. Jobless
claims continue to hover near 4-decade lows, consistent with the
labor-market progress that persuaded Federal Reserve policy makers to
raise interest rates last month. Since early Mar, claims have been below
the 300K level that is typically consistent with an
improving job market.
The 4-week moving average decreased to 275K last week from 277K. The
number continuing to receive jobless benefits rose 25K
to 2.23M & the unemployment rate among
people eligible for benefits held at 1.6%.
Federal Reserve Bank of Richmond pres Jeffrey Lacker expressed
confidence that inflation will return to the central bank's target after
oil prices & the dollar stabilize & called for a continued
tightening in monetary policy. “While there is uncertainty about
the pace at which monetary policy rates will rise, the case for an
upward adjustment in rates should be clear,” Lacker said. The Fed's expectation
that rate increases will be gradual suggests a 1 percentage point
increase a year in rates, though the actual path will depend on how
economic data come in. Lacker said he remained confident, “barring subsequent shocks,”
that inflation will move back to 2 percent ”over the near term.” “In
short, inflation has been held down by two factors, the falling price
of oil and the rising value of the dollar,” he said. “But neither factor
is likely to depress inflation indefinitely. After the price of oil
bottoms out, I would expect to see headline inflation move significantly
higher. And after the value of the dollar ultimately tops out, core
inflation should move back toward 2 percent.” If oil prices &
the $ stabilize, but inflation doesn’t quickly respond, “a
shallower path for interest rates would make sense,” Lacker said. “If
inflation moves rapidly back toward 2 percent, however, a more
aggressive path would be in order.” In his
remarks, Lacker said he expects growth this year of about 2.2%,
in line with the pace since 2009, as stronger consumer spending &
increased gov outlays are offset in part by weakness in exports.
That would be enough to generate further job growth & a decline in
unemployment.
Stocks keep slipping & sliding in the new year. Dow has fallen almost 700 & the first week is not over. Chaos in the Chinese stock market is behind some of the selling. At the same time, fundamentals in the US are not great. Today, there was a fresh reminder that GDP growth in 2016 should be mediocre (as has been the case for this long "recovery"). Jan has the makings of a gloomy start for stocks.
0.61 (1.8%)
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