Tuesday, March 29, 2016

Markets decline led by falling gold prices

Dow fell 38, advancers just ahead of decliners & NAZ added 10.  The MLP index sank 7+ to the 254s & the REIT index rose 3+ to the 333s   Junk bond funds were flattish & Treasuries rose.  Oil dropped to the 38s & gold climbed higher.

AMJ (Alerian MLP Index tracking fund)

CL.NYM...Crude Oil May 16...38.15 Down ...1.24  (3.2%)

GC.CMX...Gold Apr 16......1,224.70 Up ...4.60 (0.4%)

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Federal Reserve Bank of San Francisco pres John Williams said the US economy appears to be weathering cooler global growth & he repeated that the central bank will raise interest rates at a gradual pace.  "Despite recent financial market volatility, my overall outlook for both the U.S. and the global economy remains largely unchanged over the past few months," Williams said.  "We took the first small step with a modest rate hike in December, and the future pace will be, as we’ve said repeatedly, gradual and thoughtful."  Fed officials are discussing how quickly they should raise rates a 2nd time following their first hike in Dec.  Williams didn't comment on the timing in his text, though he was among Fed officials who last week said increases could be considered as soon as Apr.  "I see continued growth in the U.S., and I don’t see the global situation as dire," Williams said.  "The ability of governments and central banks to respond to their own needs while navigating global conditions may not be a miracle cure, but it offers stability."  He expects the US economy to expand at "a bit above 2 percent this year," pushing the unemployment rate down to around 4.5% by the end of 2016.  "On the inflation side, we’re not quite where I’d like us to be, but recent developments have been very encouraging and add to my confidence that we’re on course to reach our goal" of 2%, he added.  The threat of a "pretty big correction" in the bond market argues for gradual moves from the Fed, Williams said.  "Bond yields are very low because of policy actions taken around the world,"

Fed's Williams Sees Gradual Hikes as U.S. Economy on Track

Consumer confidence rebounded more than forecast in Mar as American households grew more upbeat about prospects for the labor market & economy.  The Conference Board sentiment index rose to 96.2 this month from a revised 94 reading in Feb that was higher than previously reported.  The forecast called for an increase to 94.  Employment opportunities & a rebound in stock prices boosted optimism enough this month to overcome rising gasoline prices.  Greater wage gains would probably help propel confidence further & make consumers more comfortable about boosting their spending after a weak start to the year.  The gauge averaged 98 in 2015.  The gauge of consumer expectations for the next 6 months improved to 84.7 from a revised 79.9 in Feb.  The proportion of consumers expecting more jobs to become available in the next 6 months climbed to 12.9% from 12.2% in Feb & the share anticipating improving business conditions also increased.  At the same time, income expectations were slightly weaker.  The measure of present conditions decreased to 113.5 from a revised 115 the prior month.  “On balance, consumers do not foresee the economy gaining any significant momentum in the near-term, nor do they see it worsening,” the Conference Board said.  While respondents were more upbeat about the outlook for the labor market, views were mixed about its present state.  The share who said jobs were currently plentiful jumped to 25.4%, the highest since Sep 2007, from 22.8%.  At the same time, more also indicated that positions were harder to get.

Consumer Confidence in U.S. Climbed More Than Forecast in March

Home values in 20 US. cities kept climbing in Jan, a sign the limited supply of available properties may push prices out of reach for some buyers.  The S&P/Case-Shiller index of property values increased 5.7% from Jan 2015, following a 5.6% gain in the year ended in Dec.  That matched the projection.  Nationally, prices rose 5.4% year-over-year.  Home values that are rising more quickly than incomes could pose a problem for the housing recovery, as they put purchases out of reach for first-time & low-income buyers.  A wider selection of available homes will be needed to help keep price increases in an accessible range.  All 20 cities showed a year-over-year increase.  11 cities saw year-to-year prices climb at a faster rate than in Dec.  The year-over-year gauge provides better indications of trends in prices.  On a monthly basis, home prices in the 20-city index adjusted for seasonal variations increased 0.8% in Jan for a 2nd month.  Unadjusted values were little changed.  Steady improvement in home prices is an important component of the recovery because it helps lift household wealth.  As Americans see the values of their homes appreciating, they may be inclined to spend more as well, providing a boost to economic growth.

Home Prices in 20 U.S. Cities Kept Climbing in January

Stocks are meandering with little news to drive buyers or sellers.  Dow is a little higher YTD.  Price swings in the last 2 days of the month are difficult to predict when money managers are more concerned about adjusting positions.  The Mar jobs report on Fri is not expected to be a good one.

Dow Jones Industrials



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