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Tuesday, May 17, 2016
Lower markets on mixed economic data
Dow lost 37, advancers over decliners 5-4 & NAZ gave up 11. The MLP index added 1+ to the 301s & the REIT index fell 4+ to the 442s. Junk bond funds were a little lower & Treasuries had a modest advance. Oil climbed again & gold was also higher.
The cost of living in the US climbed in Apr by the most in 3
years an indication that inflation may be picking up toward the Fed's goal. Consumer prices increased 0.4%, the biggest
gain since Feb 2013, following a 0.1% advance in Mar, according to the
Labor Dept. The core
measure, which strips out food & energy costs, rose 0.2% after
a 0.1% gain the prior month.
The
biggest jump in gasoline prices in almost 4 years is leading a
rebound in fuel costs that is laying the groundwork for overall
inflation to climb higher, while a slight weakening in the $ will
support a pickup in core prices to a level near the Fed's 2%
target. A strengthening job market is also helping boost pay, which may
prompt companies to raise prices to prevent profits from weakening. The CPI climbed 1.1% in the 12 months ended Apr after rising 0.9% in the
previous period. The increase in core prices matched the estimate. At a year-over-year rate, core prices rose 2.1% after climbing 2.2% the prior month. The
report showed energy costs increased 3.4%,
the most since Feb 2013, & gasoline jumped 8.1%, the most
since Aug 2012. Food prices increased 0.2% in Apr after a 0.2% decline the month before. The
core index was boosted by increases in rents, medical care, auto
insurance & airline fares. Declines in costs of household furnishings,
clothing and new & used cars held back the gain.
US manufacturing production rose in Apr for the first time in 3 months, indicating a respite for the industry after a one-year
slump. Factory output, which makes up 75% of production, climbed 0.3%, erasing the prior month’s decline. Total industrial production, including mines & utilities, advanced 0.7%, the most since Nov 2014. Output
at utilities jumped 5.8%, the biggest gain in more than 9
years, as demand for electricity & natural gas returned to normal
after a warm Mar
The
worst of America’s manufacturing slump is probably over, although the
industry may do little to add to economic growth. A decline in the $ this year will help provide some relief going forward for
export-oriented factories. Remaining hurdles includes still-soft
overseas markets & US business efforts to bring inventories more
in line with a recent weakening in sales. Factory output minus motor vehicle production rose a more modest 0.2%. Mining
production decreased 2.3%, reflecting substantial cutbacks in
crude oil and gas extraction as well as coal mining. Output at oil fields & mines has declined in 14 of the last 16 months. Manufacturing
capacity utilization, which measures the amount of a factory that is in
use, crept up to 75.3% from 75.1%.
New-home construction rose in Apr, extending a pattern of gains &
losses that signals the US homebuilding industry is contributing
little to economic growth. Residential starts increased 6.6% to a 1.17M annualized rate from 1.1M in Mar,
according to the Commerce Dept. The forecast projected an increase to
a 1.13M rate. Permits, a proxy for future construction, also
climbed.
The
rebound in construction from the prior month’s slump keeps housing on a
stable if uninspiring path as the economy tries to move
past disappointing Q1 growth. While wages have been slow to
pick up, prospects for further improvement in employment could sustain
orders for new homes. The starts data, while very
volatile from month to month, have held in a narrow range over the past
year, indicating residential real estate will have trouble adding to its
post-recession rebound. Permits
rose 3.6% to a 1.12M annualized rate, indicating little
scope for further gains in starts from 1.08M in Mar. Construction of single-family houses climbed 3.3% to a 778K rate from 753K in Mar. Groundbreaking
on multifamily homes
increased 13.9% to an annual rate of 394K, the most this year.
There is a lot of nothing today in the stock market. Markets did not climb higher with unexciting news stories. Dow continues to look at 18K as a ceiling it has been unable to crack in a meaningful way for weeks.
...0.30 
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