Markets decline on sluggish auto sales in July

Dow fell 104, decliners over advancers 4-1 & NAZ gave up a big 48 following recent strength.  The MLP index dropped another 9+ to the 307s & the REIT index lost 4+ to 373.  Junk bond funds slid lower & Treasuries were sold today.  Oil rebounded after yesterday's selling (see below) & gold climbed higher.

AMJ (Alerian MLP Index tracking fund)

CL=F

Crude Oil Sep 16

40.61

0.55

1.37%

GC=F

Gold Futures,Dec-2016

1,370.30

10.70

0.79%

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Consumer purchases climbed a bit more than anticipated in Jun, exceeding a gain in incomes that prompted American households to tap into savings.  The 0.4% advance in spending followed a similar gain in the previous month, according to the Commerce Dept.  The forecast called for a 0.3% gain in consumption, which accounts for about 70% of the economy.  Incomes rose a less-than-projected 0.2%, while the saving rate declined to a more than one-year low.  Purchases are broadening out beyond big-ticket items such as cars & houses as more Americans benefit from steady hiring, low inflation & cheap borrowing costs.  The Jun figures underscore momentum heading into Q3 after household spending grew in the previous 3 months by the most since 2014.  The advance in purchases was led by a rebound in spending on durable goods & more outlays for services.  Disposable income, or the money left over after taxes, increased 0.1% after adjusting for inflation, little changed in the prior month.  The saving rate declined to 5.3%, the lowest since Mar 2015, from 5.5%.  Wages & salaries advanced 0.3% following a 0.2% gain.  Adjusting consumer spending for inflation, which generates the figures used to calculate GDP, purchases rose 0.3% after a 0.2% increase in the previous month. 

Consumer Spending in U.S. Rose 0.4% for Second Month in June

Ford (F) & General Motors (GM) reported US light-vehicle sales in Jul that fell more than anticipated while Nissan & Fiat Chrysler (FCAU) gained less than expected, reinforcing concerns that the market may have peaked with last year's record deliveries.  GM sales slid 1.9%, after analysts projected a 1% drop.  #2 Ford reported 215K light-vehicle sales for a 3% decline that was wider than the 0.5% decline predicted.  Nissan reported a 1.2% increase, short of the 3% rise projected.  FCAU sales rose 0.3%; analysts had projected a 1.9% gain.  Analysts had projected that the industry seasonally adjusted selling rate was 17.6M vehicles, little changed from a year earlier.

Ford’s sport utility vehicles had a rare down month, dropping 5.6% & Explorer sales were off 22%, while the Escape compact SUV fell 10%.  Its sales to fleet buyers rose 6% while deliveries to individual customers fell 6%.  GM's Chevrolet division had a 5.3% drop in total sales, though the brand's retail sales rose 3%.  The automaker has been cutting back on sales to rental fleets in pursuit of better profit margins.  While Nissan brand sales rose 1.7% on strong light-truck demand, the company’s Infiniti premium line reported a 4.7% drop as car sales fell by more than 1/3.

U.S. July Auto Sales Missing Analyst Estimates in Early Results

Oil rose amid a weaker $ & speculation the oversupply still weighing on global markets will diminish, even after prices fell into a bear market yesterday.  Futures gained as much as 2% after dropping below $40 on Mon for the first time since Apr.  While crude & gasoline inventories are forecast to have declined, they will remain at the highest seasonal level in at least 2 decades.  The $ fell for the 5th time in 6 days, increasing investor appetite for commodities.

Oil has tumbled more than 20% from its peak in Jun, halting a recovery that saw prices almost double from a 12-year low in Feb.  The supply glut is upsetting industry expectations, with the majors reporting Q2 earnings last week that were worse than estimated.

• Oil Rises From $40 After Dropping Into Bear Market on Oversupply

Stocks are weak once again.  As said yesterday, Aug may not be a pretty month for stocks which remain vastly overbought especially after the run-up in Jul.  REITs, with their yields (partially tax advantaged), saw selling today, a sign the bulls are getting very tired supporting the stock markets with little economics to support the gains.  There are even slight, I repeat slight, hints that the Fed might raise interest rates.  The big jobs report comes on Fri.

Dow Jones Industrials