This blog gives investors more financial information for very smart investing!
Thursday, August 4, 2016
Markets drift lower after factory orders report
Dow fell 4, advancers over decliners 4-3 & NAZ gained 8. The MLP index was off 6+ to 310 & the REIT index lost 1 to the 368s. Junk bond funds were a little higher & Treasuries rose. Oil was a little lower & gold was bid higher
Mark Carney unleashed a package of stimulus, including the Bank of
England's first interest-rate cut in 7 years, & said more easing
could come as Britain feels the effects of its decision to leave the
EU. Officials voted
unanimously to reduce the benchmark by 25 basis points to a record-low
0.25%. They split over other elements of the plan that will
expand the central bank’s balance sheet by as much as £170M
($223M) via purchases of gilts & corp bonds & a lending
program for banks. “We took these steps because the economic outlook has changed markedly,”
Carney said. “Indicators have all
fallen sharply, in most cases to levels last seen in the financial
crisis, and in some cases to all-time lows.” Policy makers slashed growth forecasts by the most ever & Carney
declared that all elements of the stimulus can be taken further,
including another rate cut. The Monetary Policy Committee's measures
include a plan to buy £60B of gov bonds over 6
months, as much as £10B of corp bonds in the next 18
months & a potential £100B loan program for banks. Should
their outlook for the economy prove correct, “a majority of members
expect to support a further cut in bank rate to its effective lower
bound” later this year, they said. Carney said multiple
times that this doesn’t mean rates will be negative. “The MPC is
very clear that we see effective lower bound as a positive number, close
to zero, but a positive number,” he added. “I’m not a fan of negative
interest rates,” he said, noting that they had produced “negative
consequences” elsewhere.
The number of Americans filing applications for unemployment benefits
rose last week to a level that still underscores health in the labor
market. Jobless claims rose 3K to 269K in the latest week, according to the Labor Dept. The forecast called for
265K. Continuing claims decreased. A limited number of layoffs
indicates companies are retaining employees at a time when skilled &
experienced workers are in greater demand. Further improvement in the
job market will be critical in helping drive consumer spending, the
biggest part of the economy, during H2. For 74 consecutive weeks, claims have been below the
300K, a level that is consistent with an
improving job market (the longest stretch since 1973). The 4-week moving average increased to 260K
last week after falling to 256K in the previous period (the 2nd-lowest level since 1973).
The
number continuing to receive jobless benefits dropped 6K to 2.14M & the unemployment rate
among people eligible for benefits held at 1.6%.
New orders for US factory goods fell for a 2nd straight month in
Jun on weak demand for transportation equipment & capital goods, but
signs of stabilization in business spending offered some hope for
struggling industries. The Commerce Dept said that new orders for
manufactured goods declined 1.5% after a downwardly revised 1.2% decrease in May. The forecast for factory orders called for the figure to drop
1.8% after a previously reported 1.0% decline in
May. Core capital goods shipments, which are used to calculate
business equipment spending in the GDP report, fell
0.2% in Jun. Manufacturing, which accounts for about 12% of the
economy, has been pressured by the residual effects of a strong $ & a weak global demand, which have undermined exports of factory goods.
Production has also been hurt by businesses placing fewer orders as they
try to clear an inventory glut. The sector has also been hurt by spending cuts by energy firms as they adjust to reduced profits from cheaper oil. An outright drop in inventories & sustained weakness in
business spending weighed on economic growth in Q2, with
GDP rising at a tepid 1.2% annualized rate. In Jun, orders for transportation equipment tumbled 10.5%, the biggest drop since Aug 2014. That largely reflected weak
orders for aircraft. Orders for motor vehicles & parts increased 3.2%, the largest gain since July 2015. Orders for machinery, which have been hurt by weak demand in the
energy & agricultural sectors, rose 0.2%. Orders for electrical
equipment, appliances & components gained 0.3%. Orders for
computers & electronic products slumped 1.9%, the largest drop
in more than a year. Inventories of factory goods dipped 0.1%. Inventories have
declined in 13 of the last 14 months. Shipments increased 0.7%, lowering the inventories-to-shipments ratio to 1.35 from 1.36 in
May. Unfilled orders at factories decreased 0.8% after 3 straight months of increases.
Stocks are not doing very much as traders wait for the Jul jobs report tomorrow. Dow is down slightly in Aug & still looks like it will be heading lower this month without positive news to bring out buyers.
No comments:
Post a Comment