Friday, June 10, 2016

Markets decline ahead of FOMC meeting next week

Dow was off 88, decliners over advancers 4-1 & NAZ retreated 49.  The MLP index lost 2+ to the 314s & the REIT index gained 2+ to the 345s.  Junk bond funds slid lower & Treasuries gained as stocks were being sold.  Oil pulled back to the 49s & gold rose.

Dow Jones Industrials

Crude Oil   49.74   -0.82 (-1.62%)

Gold      1,279.90      7.20 (0.57%)

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The ECB has pledged enough stimulus to return euro-area inflation to its goal, policy maker Bostjan Jazbec said, in a sign that officials may sit tight over the summer months.  “At the current juncture, I’d firmly confirm that the measures work and that we can only look forward to responding to everything that comes to our table,” Jazbec, the Slovenian central-bank governor, said.  “Of course, if you ask is there anything more we can do, my answer would always be yes. But is it needed today? No.”  Inflation has missed the ECB target of just under 2% for more than 3 years & hasn't been above zero since Jan, prompting the Governing Council to ramp up stimulus yet again in Mar.  While economists see fresh measures being needed before the end of the year, Jazbec said updated staff forecasts indicate that the central bank's existing measures could be sufficient.  Projections published this month, showing that inflation should average 1.6% in 2018, are “exactly close to our goal,” he said.  His comments come amid intl concern that central-bank policies are near the limit of their effectiveness & pressure for govs to be more proactive.  ECB pres Mario Draghi said that delaying structural reforms in the euro area for domestic political reasons would slow the impact of monetary stimulus & come with an economic cost that is “simply too high.”

ECB Doesn’t Need New Stimulus to Hit Goal, Policy Maker Says

Confidence among American consumers in Jun eased from an almost one-year high as favorable views about personal finances were offset by concerns about the economy’s prospects.  The University of Michigan preliminary index of sentiment cooled to 94.3 from 94.7 in May.  The projection called for a reading of 94.  Consumers rated their current financial situation stronger than at any time since 2007, reflecting improved wage gains & low inflation.   At the same time, households didn’t see the economy growing as fast as last year.  “Anticipated gains in inflation-adjusted incomes rose to the highest levels since the January 2007 peak,” Richard Curtin, director of the survey, said.  “Indeed, compared with a year ago, the sole reason for more favorable financial prospects was lower inflation.”  Over the next 5-10 years, they project a 2.3% rate of price growth, the lowest in records going back almost 5 decades.  It was 2.5% in the prior month.  Respondents expected a 2.4% inflation rate in the next year, matching the May survey as the lowest since Sep 2010.  The current conditions index, which measures Americans' perceptions of their personal finances, advanced to 111.7, the highest since last Jul, from the prior month's 109.9.  The gauge of expectations six months from now declined to 83.2 from 84.9 that was the best since Jun 2015.  The report showed a measure of buying conditions for the purchase of durable goods such as automobiles rose to the highest level this year.

American Consumer Sentiment in June Eases From a One-Year High

Oil prices dropped as investors braced for another likely rise in the US oil rig count this week & as a strong $ again weighed on demand for crude futures denominated in the greenback.  A slide in equity prices also pressured futures.  More sabotage of Nigeria's oil industry by rebels had limited losses earlier in the session.  The Niger Delta Avengers group blew up the Obi Obi Brass trunk line for oil run by ENI, adding to the woes of Africa's largest oil economy.  Oil remained on track for a weekly gain, although that could change if prices slipped further on the weekly reading for the US oil rig count.  Baker Hughes said last week US oil drillers added 9 rigs in the week, bringing the count up to 325, as oil prices traded above or near $50.  That was only the 2nd time this year that oil rigs had risen.  Prior to that, drillers cut on average 10 oil rigs per week this year, after reducing on average 18 rigs per week last year, on worries of oversupply.

Oil Down Ahead of U.S. Rig Count; Strong Dollar Weighs

Stocks are being sold ahead of the FOMC meeting next week, even though bets are Janet will not do anything.  Oil has been having a good week, but much of that strength comes from supply outages, which are temporary.  Production in Canada is ramping up & outages from Nigeria are always a threat.  Dow is back down to 17.9K, trying to break thru 18K as it has been doing for months.  Economic data behind the sideways trading has been disappointing.

Dow Jones Industrials

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