Cautious rise in markets on consumer spending data

Dow added 32, advancers over decliners about 5-4 & NAZ went up all of 1.  The MLP index lost 2+ to the 259s & the REIT index crawled up a fraction to the 331s.  Junk bond funds retreated & Treasuries traded higher.  Oil was up pennies & gold slid back.

AMJ (Alerian MLP Index tracking fund)

CL.NYM

...Crude Oil May 16

...39.72

...0.26

(0.7%)

GC.CMX

...Gold Apr 16

......1,220.90

...0.70

(0.1%)

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Federal Reserve Bank of San Francisco pres John Williams said the global economy, particularly China & Brazil, was having a significant impact on measures that US policy makers watch to determine interest rates.  The US economy is doing "quite well," Williams said, citing stable inflation & strong employment growth.  The economy grew at a faster pace than expected in Q4, with an annual rate of a 1.4% increase. That compared with the prior estimate of 1%.  "The real issue is the global financial and economic developments. There’s uncertainty about what’s happening around the world and how that feeds back to the dollar and the U.S. economy," Williams said.  "We understand that we’re in a global economy so what happens in Brazil or China has a huge impact on the U.S. in terms of our inflation and employment goals."  He added:  "I would say there’s broad agreement on the committee that our basic strategy, which is to gradually remove policy accommodation and raise interest rates over the next couple of years, has strong support. The real question is when we should raise rates, what pace we should raise rates. That’s going to be driven by the data so we’ll have to wait and see."

Fed's Williams Sees 'Huge Impact' on U.S. From China, Brazil

Personal spending barely increased in Feb & the prior month's advance was revised down as Americans saved more of their incomes.  Spending on goods & services climbed 0.1% for a 3rd month, the Commerce Dept reported.  Jan outlays were revised from a previously reported 0.5% gain.  Incomes rose 0.2%, pushing the saving rate to a one-year high.  The steady & slow advances in purchases over the past 3 months show consumers are being cautious about over-extending themselves.  Robust labor conditions & savings from cheaper gasoline are nonetheless providing a solid foundation for households, whose spending is underpinning the economy.  After adjusting for inflation, in order to generate the figures used to calculate GDP, purchases increased 0.2% last month after no change in Jan.  Household outlays on services increased 0.3% after adjusting for inflation.  The services category, which also includes tourism, legal help, health care, & personal care items such as haircuts, is typically difficult to estimate accurately until more information is available in later months.  Spending on durable goods also rose 0.3%, while outlays for non-durable goods fell 0.3%.  Disposable income, or the money remaining after taxes, increased 0.3% for a 3rd month after adjusting for inflation.  The saving rate increased to 5.4% from 5.3% in Jan.

Wages fell 0.1% after a 0.6% advance the prior month.  The price index tied to consumer purchases fell 0.1% from the prior month & rose 1% from the same time in 2015.  This inflation gauge is preferred by Federal Reserve policy makers & hasn't met their 2% goal since Apr 2012.  Stripping out food & energy, the price measure climbed 0.1% from Jan & rose 1.7% in the 12 months ended in Feb.

Consumer Spending in U.S. Rose 0.1% in February for Third Month

China stocks fell as property developers slumped after some its biggest cities introduced real-estate curbs, overshadowing a rebound for industrial profits.  The Shanghai Composite Index slipped 0.7%, erasing a gain of as much as 1%.  Shenzhen joined Shanghai in introducing measures late last week to tame soaring real-estate prices, including increasing down-payment requirements.  Industrial profits broke a 7-month losing run to climb 4.8% in the Jan-Feb period.  Property prices in the largest cities have begun to diverge severely from values in less-populated areas, spurring People's Bank of China Governor Zhou Xiaochuan to warn lenders this month about increased credit risk from this trend.  Shenzhen will also limit local residents to purchases of 2 homes, while Shanghai will tighten approval criteria for non-resident homebuyers & ban unregulated lending.  The Shanghai Composite closed below the 3K level for a 3rd day at 2957, with trading volumes almost 7% below the 30-day average.  The CSI 300 Index retreated 0.9%. The Shanghai index has rebounded 11% from a Jan low as regulators loosened curbs on margin trading & investors speculated the gov was propping up equities during this month's National People’s Congress.

• China Stocks Fall as Property Curbs Overshadow Industrial Profit

With the month & Q1 ending this week, stocks are taking it easy.  They also are resting after the huge huge 5 week advance prior to last week.  The GDP data for Q4, reported on Fri, was routine.  Dow is up about 100 YTD.

Dow Jones Industrials