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Wednesday, February 17, 2016
Markets rise led by higher oil prices
Dow went up 180, advancers over decliners more than 6-1 & NAZ gained 59. The MLP index rose 5+ to the 234s & the REIT index added 3+ to the 301s. Junk bond funds climbed higher & Treasuries retreated again. Oil had a big jump to the 29s & gold inched higher.
US manufacturing output rose in Jan by the most since Jul
2015, a sign the industry was starting to stabilize at the beginning of
the year. The 0.5% advance, which make up 75% of all production, followed a 0.2% decrease the prior
month, according to the Federal Reserve. Total output, which
also includes mines & utilities, jumped a larger-than-projected 0.9%. Factory production was boosted by the biggest gain in the
output of consumer goods since Jul on increases in both durables &
nondurables. The improvement indicates the worst of the drag from a
stronger $, malaise in overseas markets & less spending in the
energy sector may be starting to diminish. For total industrial production,
the survey called for a 0.4% rise & the prior
month was revised to a 0.7% decrease from a previously reported
0.4% decrease. The Jan increase was the biggest since
Nov 2014. Utility output surged 5.4%, the most since 2009, after a 2.9% drop the
previous month. Production rebounded as more
seasonable weather revived demand for home heating following the warmest
Dec on record. Mining
production, which includes oil drilling, was unchanged following 4
straight declines. The report showed
drilling dropped 5.9% last month. Capacity utilization,
which measures the amount of a plant that is in use, rose to 77.1% from 76.4% in the prior month. Capacity at factories
climbed to 76.1%, the first increase in 3 months. Factory
output of consumer goods climbed 1.6% after falling 4
consecutive months. The output of motor vehicles & parts increased 2.8%. Excluding autos & parts, manufacturing rose 0.3%
after no change.
New-home construction in the US unexpectedly cooled in Jan,
indicating there is a limit to how much gains in residential real estate
will boost growth. Housing starts dropped
3.8% to a 1.1M annualized rate, the weakest in 3
months, from a 1.14M pace the prior month, according to the Commerce Dept. The forecast was 1.17M. Permits, a proxy for
future construction, were little changed.
While
all 4 regions of the US saw a decline in construction, a crippling
East Coast winter storm probably deepened the setback at the end of the
month. A strengthening job market is projected to buoy housing demand
this year, helping offset still-tight credit standards for some
prospective buyers & turmoil in financial markets. Permits declined 0.2% to a 1.2M annualized rate, indicating little scope for a rebound in construction this month. The drop in starts last month was led by a 3.9% decrease in construction of single-family houses to a 731K rate. Work
on multifamily homes, such as condominiums & apartment buildings,
fell 3.7% to an annual rate of 368K. While
Jan on the whole was warmer than usual across the country, a
crippling winter storm in the Mid-Atlantic & Northeast probably curbed
homebuilding later in the month.
US wholesale prices unexpectedly increased in Jan as higher food costs more than made up for the plunge in energy. The 0.1% gain in the producer-price index followed a 0.2% decline in Dec, the Labor Dept reported. Wholesale prices were down 0.2% from
Jan 2015. Inflation has been muted for much of the past few years, exacerbated
recently by a continued drop in oil prices. As that decline stabilizes & the labor market strengthens, Federal Reserve policy makers are
betting that inflation will drift closer toward their goal. The forecast called for
a 0.2% month-over-month decrease in wholesale prices. Food prices increased 1%, the
biggest gain since May, after a 1.4% drop & energy expenses
declined 5% after a 3.5% drop the month before. Wholesale prices excluding these 2 components climbed 0.4% from the month before, compared with the 0.1% increase
forecast. It followed a 0.2% increase in Dec & those costs were up 0.6% from
Jan 2015. Also eliminating trade services to arrive at a reading some
economists prefer because it excludes one of the most volatile
components, wholesale costs rose 0.2% from a month
earlier (the same as in Dec).
This has been a very good week for the stock market which is trying to put together 3 consecutive days of higher prices. Optimism about limits on oil production is behind much of this enthusiasm. Meanwhile economic data keeps coming in mixed. The economies of China & Europe still need a lot of help for them to contribute to growth around the world. After this rally, Dow is down more than 1K YTD.
...1.10 
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