Mixed markets as energy gains while tech lags

Dow went up 67, advancers over decliners better than 3-2 & NAZ lost 8.  The MLP index jumped up again, a whopping 8+ to the 273s & up almost 70 in the last month, & the REIT index was fractionally higher to the 223s.  Junk bond funds advanced & Treasuries were sold, taking the yield on the 10 year Treasury up to 1.9%.  Oil surged to the 37s & gold eased back slightly.

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CLJ16.NYM

....Crude Oil Apr 16

....37.73

...1.81

(5.0%)

Federal Reserve Governor Lael Brainard said the US economy isn't immune to global risks & called for careful adjustments to the policy rate to preserve the expansion.  The speech was one of the most detailed arguments to date by a Fed official on downside risks to the outlook despite several economic reports showing continued underlying strength in hiring & consumption.  Brainard said there are reasons to expect continued gains in employment, stabilizing growth in foreign economies, & an eventual rise of inflation back to the Fed's 2% target.  “However, there are risks around this baseline forecast, the most prominent of which lie to the downside,” she said.  “Given weak and decelerating foreign demand, it is critical to carefully protect and preserve the progress we have made here at home through prudent adjustments to the policy path,” she added.  Speaking at a separate event, Fed Vice Chair Stanley Fischer contested the idea that the connection between low unemployment & inflation was broken, saying it may be reasserting itself now.  The unemployment rate was 4.9% in Feb.  “The link has never been very strong, but it exists, and we may well at present be seeing the first stirrings of an increase in the inflation rate -- something that we would like to happen,” he said.  The central bankers next meet Mar 15-16, & investors see almost no chance of a rate increase at that meeting.  Recent economic reports suggest the economy has shaken off the effects of the financial volatility earlier this year.  Steady hiring, cheap gasoline, & rising home values are powering Americans' ability to boost spending, which accounts for almost 70% of the economy.  “We should not take the strength in the U.S. labor market and consumption for granted,” Brainard warned, noting the challenging transition in China's economy & that “sources of robust demand around the globe are few, and sources of weakness relatively greater.”

Fed's Brainard Urges Patience, Fischer Sees Inflation Signs

Brent crude rose above $40 for the first time since Dec as major producers prepared to meet to discuss a production freeze & US output finally shows signs of declining.  The Euro benchmark rose as much as 5.1%.  A meeting among major producers to discuss freezing output may be held in Russia, Doha or Vienna roughly Mar 20-Apr 1.

Brent for May settlement rose $1.74 to $40.46 a barrel at midday.  The grade gained for a 6th day, the longest rally since Nov 25 & was at a premium of $1.1 to West Texas Intermediate for May.  Speculators reduced their short positions in WTI crude by 25K futures & options contracts combined, to 150K in the last week, the biggest decline since Apr.  The exodus of bearish bets resulted in a 25K-contract jump in the net-long position.  US production dropped for a 6th week to 9.08M barrels a day & are at 518M barrels, the most since 1930.

Brent Crude Tops $40 for First Time Since December on Output

Consumer borrowing rose in Jan by the least since Nov 2013 as Americans' outstanding credit-card debt dropped for the first time in nearly a year.  The $10.5B advance in total credit followed a revised $21.4B gain in the previous month, according to the Federal Reserve.  Revolving debt, which includes credit cards, declined $1.1B, the first decrease since Feb 2015.

Households, wary of spoiling the progress made in repairing balance sheets after the last recession, are being deliberate in their credit-card use.  At the same time, steady car sales indicate Americans a less anxious about taking out low-interest auto loans.  Non-revolving loans, which include funding for college tuition & auto purchases, rose $11.6B in Jan after a $15.9B gain a month earlier.  Lending by the federal gov, mainly for student loans, rose almost $27B before adjusting for seasonal variations.  The forecast called for a $17B increase in total borrowing.  The consumer credit report doesn't track debt secured by real estate, such as home equity lines of credit & home mortgages.

Borrowing by U.S. Consumers Rises Least Since November 2013

This was another mixed day.  Energy did very well, especially the ones that are on death's door, while tech's were weak.  The energy sector still has a ton of problems & wild daily swings have to make even the bulls nervous.  What is given today can be taken very quickly tomorrow.  As long as the shorts have gone into hiding, the bulls are feeling good in this overbought market.

Dow Jones Industrials