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).

AMJ (Alerian MLP Index tracking fund)

Crude Oil Oct 16

Gold Futures,Dec-2016

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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.

Oil Pessimists Exit as OPEC Cap Talk Spurs Bets Glut Easing

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.

Solid Earnings Offset Drop in Chinese Bank Shares

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.

Dow Jones Industrials


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