Wednesday, April 13, 2016

Markets rise after China data

Dow jumped up 129, advancers over decliners a relatively mild 2-1 & NAZ rose 58.  The MLP index shot up 13+ to the 276s & the REIT index added 2+ to the 339s.  Junk bond funds were higher & Treasuries were sold as stocks rose.  Oil finally retreated, falling back to the 41s, & gold was also lower.

AMJ (Alerian MLP Index tracking fund)

CL.NYM....Light Sweet Crude Oil Futures,M...41.77 Down ...0.40  (1.0%)
GC.CMX...Gold Futures,Apr-2016.............1,250.20 Down ...9.20  (0.7%)

Sales at US retailers unexpectedly fell in Mar, raising concern consumer spending is losing momentum.  The 0.3% drop followed little change the prior month, according to the Commerce Dept.  The forecast called for a 0.1% gain.

The decrease was led by the biggest drop in demand for autos in a year, & cutbacks at clothing stores, internet merchants & restaurants.  Sustained gains in consumer spending, the biggest part of the economy, are needed at a time exports are still depressed by cooling global markets & US manufacturing is barely emerging from a slump.  While 9 of 13 major categories showed gains last month, those increases weren't large enough to offset the drop in autos, clothing & restaurants.  Auto dealer sales dropped 2.1%, the biggest decrease since Feb 2015.  That was in line with industry data earlier this month that showed the torrid pace of car demand was leveling off.  Excluding autos, purchases rose 0.2% last month after being little changed in Feb.  The increase was paced by a 0.9% jump in receipts at service stations that probably reflected the recent pickup in gasoline prices.  Retail sales excluding automobiles & service stations increased 0.1%, less than the projected gain of 0.3%.  That suggests Americans are boosting savings even as the job market continues to improve.  Sales decreased 0.9% at clothing chains, the biggest retreat since Oct, & there was an 0.8% drop at restaurants and bars.

Retail Sales Unexpectedly Fall as U.S. Consumers Scrimp

China exports jumped the most in a year & declines in imports narrowed, adding to evidence of stabilization in the economy.  Overseas shipments rose 11.5% in $ terms in Mar from a year earlier, compared with a 25% slump in Feb, when factories & offices were closed for a week-long holiday.  Imports extended declines to 17 months with a 7.6% drop.  The trade surplus decreased to $29.9B, the least in a year.  The export rebound may suggest China's economy fared better than expected in Q1.

China’s Exports Rebounded in March, Boosting Growth Outlook

US wholesale prices unexpectedly fell in Mar for a 2nd month, showing inflation is still well-contained as Fed officials weigh whether further increases in the benchmark interest rate are warranted.  The 0.1% drop in the producer-price index followed a 0.2% decrease in Feb, reported buy the Labor Dept.  Over the past 12 months, wholesale prices fell 0.1%.  Dollar appreciation that's been slow to wane amid sluggish global growth is helping to mute inflation at all stages.  The absence of bigger gains is keeping Fed officials patient on interest-rate increases while inflation has lingered below their goal for 4 years.  The estimate was for a 0.2% increase.  The decrease in the producer price index was paced by a 0.2% drop in the cost of services, the first decline since Oct.  ¾ of that setback was traced to a 1.9% plunge in margins at machinery & equipment wholesalers.  Energy costs climbed 1.8%, the most since May, & food prices decreased 0.9%.  Excluding food & energy & also eliminating trade services, producer costs were little changed after rising 0.1% in Feb.

Wholesale Prices in U.S. Unexpectedly Fall as Margins Shrink

Hopes for stock buyers are riding high as they keep bidding up prices.  Earnings season should be weak once again & the rally in oil prices may end after the meeting by producers later this week.  But blind optimism continues as Dow approaches its record high with little economic fundamentals to backup this rally as shown in the chart below.

Dow Jones Industrials

stock chart

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