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Monday, August 29, 2016
Higher markets on consumer spending data
Dow climbed 89, advancers over decliners 3-1 & NAZ gained 13. The MLP index lost 1 to the 309s & the REIT index remained strong, adding 3+ to the 362s. Junk bond funds did little & Treasuries were slightly higher. Oil & gold each pulled back (more on oil below).
For a 2nd week, money managers slashed bets on falling prices by a
record & boosted wagers on a rally. Futures have climbed 23%
in less than 3 weeks as some OPEC members raised the possibility of
an output freeze amid signs the global glut is easing.
Saudi
Arabia will be willing to listen to other producers & what they have
to offer when it comes to an output freeze, the kingdom's Energy
Minister Khalid Al-Falih said. Oil suppliers want a deal to manage output, OPEC Secretary General Mohammed Barkindo said. Speculators
slashed their short position in West Texas Intermediate by 66K
futures & options last week, the most in data
going back to 2006. Bets on rising prices jumped to the highest in more than a
year. Futures rose 3.3% to $48.10 a barrel in the report
week. WTI, the US benchmark, entered a bull market Aug 18, less than 3 weeks after tumbling into a bear market. Prices were down 1.4% today.
Consumer spending advanced for a 4th straight month in Jul,
bolstered by stronger income gains, sending the biggest part of the US
economy to a solid Q3 start, according to the Commerce Dept. Purchases climbed 0.3% (matching the estimate) after 0.5% rise that was revised up. Incomes grew 0.4% (matching the forecast) following 0.3% advance that was also revised up. The saving rate increased to 5.7% from 5.5% & disposable income adjusted for inflation climbed 0.4%, the most this year. The figures support projections that economic growth will
rebound this qtr after the weakest H1 since 2011. Adjusted
for inflation, a 0.3% advance in Jul purchases followed an
upwardly revised 0.4% gain in the previous month, indicating a
better start to Q3.
China stocks were steady, with gains in industrial shares
offsetting falls in the banking sector as a slew of interim corp
results showed tentative signs of bottoming-out in struggling sectors
such as coal & steel. The blue-chip CSI300 index was unchanged at 3307, while the Shanghai Composite Index was also flat, at 3070. For investors grappling with an economy showing signs of stress
in many sectors, there were clear earnings improvement in the
much-maligned bloated sectors, including coal, steel & construction
materials. The rise in industrial stocks was offset by falls in the banking sector. Lenders will likely be hit by Beijing's plan, to be rolled out
as soon as next month, that will urge banks to convert loans into
equities in some struggling state-owned borrowers.
Holiday week is starting with a rising stock market. With many traders away, volume is light & price movements don't mean a lot. The jobs report on Fri will be watched for, although that is a long way away.
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