Monday, March 21, 2016

Mixed markets fluctuate on hints of an interest rate hike in April

Dow added 21, decliners just ahead of advancers & NAZ rose 13.  The MLP index tumbled 6+ to the 267s (after its recent run) & the REIT index was off 2+ to the 332s.  Junk bond funds crawled higher & Treasuries were sold.  Oil is up to the 41s & gold retreated.

AMJ (Alerian MLP Index tracking fund)

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CLJ16.NYM....Crude Oil Apr 16....39.90 Up ...0.46 (1.2%)

Live 24 hours gold chart [Kitco Inc.]

This is an update from the prior post below.  Lockhart said the U.S. economy is strong enough to weather another rate increase as early as next month.  “There is sufficient momentum evidenced by the economic data to justify a further step at one of the coming meetings, possibly as early as the meeting scheduled for end of April,” he said.  Policy makers “will reevaluate whether the real economy -- the Main Street economy -- remains on the assumed path to full employment & price stability” & “take account of the context of risks and uncertainties surrounding the outlook,” he added.  The FOMC meets Apr 26-27.  It held off from raising borrowing costs last week & scaled back forecasts for how high interest rates will rise this year, citing the potential impact from weaker global growth & financial-market turmoil on the US economy.  Lockhart supported the decision.  “Although I believe further normalization of interest rates will likely be justified by economic performance this year, and possibly relatively soon, I felt a patient approach made sense at this meeting,” he said.  While the economy “remains substantially on the path envisioned” in Dec, when officials raised interest rates for the first time, “the context of risks and uncertainties has shifted somewhat,” he said.  Among recent global developments that have fueled uncertainty, Lockhart cited volatility in global financial markets at the start of the year, an economic slowdown in China, the Bank of Japan's adoption of negative interest rates & “strong measures” by the ECB to spur inflation.  Despite those headwinds, Lockhart predicts the US economy will grow 2-2.5% this year.  While it is yet too early to tell whether the slowdown in Q4 was “a one-off aberration or a sign of slowing growth,” a tracking estimate for Q1 currently points to an economic expansion of 1.9%, he added.  “I am reasonably confident the first quarter will represent something of a bounceback from the fourth quarter of last year,” he said.  “Consumer activity has picked up sufficiently since the fourth quarter to support the view that overall domestic demand, the lead driver of the economy, is expanding at a healthy enough pace.”

Two Fed Officials Point to Possibility of April Rate Hike

Apple, a Dow stock, unveiled a new, smaller iPhone that will start at $399, seeking to jump-start sales of its flagship product by enticing more users to upgrade, especially in high-growth markets such as China & India.  The iPhone SE has a 4" screen with a stainless steel finish, & incorporates the faster A9 processor that also runs the larger iPhone 6S handsets, VP Greg Joswiak said at today's event.  The phone has full support for the Siri voice-enabled digital assistant, a 12-megapixel camera, & includes features found on the larger phones like Apple Pay & Touch ID.  AAPL will ship the iPhone SE starting Mar 31.  The company sold 30M of the older 4" iPhones last year, Joswiak said.  The company also said it’s cutting the price of the cheapest Apple Watch, to $299 from $349.  The stock lost a penny.  If you would like to learn more about AAPL, click on this link:

Apple Unveils Smaller-Screened iPhone SE to Jump-Start Sales

Apple (AAPL)

Stocks in China jumped today after authorities signaled they may want to make it easier for investors to borrow to buy shares, a practice that took off last year & ultimately led to a bubble in the market.  A surge in brokerage stocks pushed the Shanghai Composite Index to close above the 3K mark for the first time since Jan.  The Shanghai Composite Index finished up 2.2% at 3018, while the Shenzhen Composite Index was up 2.7% at 1886.  The gains came after a state-backed company called China Securities Finance  published new interest rates on a range of loans that it gives to brokerages.  The lender, which is tasked with providing funds to brokerages so they can lend cash to investors for buying shares, lowered the rate on 182-day loans to 3% from 4.8% previously.  That effectively offers support for the market, which is on a nascent recovery.  The statement by China Securities Finance was widely circulated & appeared to have given the markets that dose of confidence.  Still, the release was no longer available on the lender's website & officials declined to comment.  The unwinding of the margin loans, which rose to more than 2T yuan, was a key reason why Chinese stocks tumbled so quickly last summer.  The Shanghai Composite Index remains off 42% from its peak in Jun, while the value of margin loans had since fallen to 847B yuan.  Even as margin loans have dropped this year, the Shanghai stock market has been rebounding, is up 12% since beginning of the month & now on a 7-session winning streak.

China Stocks Jump to Start the Week

This was a good day to take a nap while the stock markets just churned.  Very little was accomplished as the month & Q1 wind down to a close.  The election goings on & basketball madness are getting most of the attention.  High yielding stocks have done very well on the recent market rise, but gave up some of those gains today.

Dow Jones Industrials


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