Thursday, June 16, 2016

Markets sink as Treasury yields are at a 6 year low

Dow dropped 120, decliners over advancers 4-2 & NAZ lost 52.  The MLP index was down 4+ to the 301s & the REIT index gave up 1+ to the 344s.  Junk bond funds were lower & Treasuries advanced again, bringing the yield on the 10 year Treasury to 1.5% (close to record lows).  Oil fell to the 46s while gold went over 1300.

AMJ (Alerian MLP Index tracking fund)

CLN16.NYM....Crude Oil Jul 16...47.28 Down ......0.73  (1.5%)

GCM16.CMX...Gold Jun 16.....1,310.40 Up ...24.60 (1.9%)

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Acrimony among Britain's political & economic elite intensified as those campaigning to leave the EU held a steady lead in opinion polls with a week to go until the referendum.  One day after Chancellor of the Exchequer George Osborne was accused of economic scaremongering by supporters of a Brexit, Bank of England Governor Mark Carney hit back against criticism he's sacrificed his independence to back the gov.  Pleas from leaders EU that Britain stay in the group & accusations of bad faith on both sides in the UK underscored the turbulence to follow the Jun 23 ballot whatever the result.  Prime Minister David Cameron faces a struggle to unify his Conservative Party if the UK votes to stay, & could be cast from office if his side loses.  A survey today showed 53% support for leaving with 47% for remain, excluding those who said they didn't yet know.  The telephone, the latest in a string of surveys showing a steady lead for anti-EU campaigners, was conducted from Jun 11-14.  Another poll showed 45% for leaving & 42% for staying, with 13% undecided.  While measures of short-term market volatility have soared this month, suggesting investors are concerned, other gauges paint a more sanguine view.  The £ has risen 1.6% since the end of Feb & bookmakers say that customers still have more money placed on “Remain” than “Leave” even as they shorten the odds on the likelihood of Brexit.

Brexit Polls Show ‘Leave’ Holds Lead

The cost of living in the US excluding food and fuel rose in May, propelled by rising rents.  The core measure of the consumer price index rose 0.2% last month, the same as in Apr, according to the Labor Dept.  The broader measure of consumer prices also climbed 0.2%.   Federal Reserve policy makers project strengthening demand combined with more stable energy costs & less appreciation in the $ will allow more businesses to regain pricing power in coming months. The officials expect inflation will move toward their goal in the medium term.  The forecast projected consumer prices would rise 0.3%.  The gauge increased 1% in the 12 months ended in May, after a 1.1% year-over-year advance.  Core CPI measure, which excludes volatile food & fuel costs, increased 2.2% from May 2015, after rising 2.1% in the prior 12-month period, matching the forecast.  Shelter costs climbed 0.4% from the prior month, the biggest advance since Feb 2007.  Rents rose 0.4% last month & the rental equivalent of owner-occupied houses increased 0.3%.  Over the past 12 months, 60% of the increase in core consumer prices could be traced back to shelter costs.  Energy costs increased 1.2% from the previous month & food prices dropped 0.2% while medical care prices rose 0.3%.  The Fed's preferred inflation gauge, personal consumption expenditures measure, hasn't reached the Fed's 2% goal since Apr 2012.

Consumer Prices Excluding Food, Fuel Rise as U.S. Rents Up

Jobless claims increased more than expected last week, reflecting a jump in California that otherwise masked steady progress in the US labor market.  Initial applications for unemployment benefits climbed 13K to a one-month high of 277K, according to the Labor Dept.  The forecast called for 270K.  Filings are consistent with Federal Reserve policy makers' view that employment will continue to expand after a recent slowdown.  The 4-week moving average of claims, a less volatile measure than the weekly figures, eased a tad to 269K.  The number continuing to receive jobless benefits rose by 45K to 2.16M & the unemployment rate among people eligible for benefits rose to 1.6% from 1.5.

Initial Jobless Claims Increased More Than Forecast Last Week

The Brexit vote is a biggie next week. In addition, falling oil prices are unsettling & concerns about higher interest rates at the Fed are unnerving the markets.  Dow is down 270 in Jun & the thought of taking it above 18K has vanished.  Risk averse is behind investment thinking now.

Dow Jones Industrials


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