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Monday, August 15, 2016
Stock averages at record highs on hopes for oil production cuts
Dow climbed 59, advancers over decliners almost 2-1 & NAZ gained 29. The MLP index was up 1+ to the 316s & the REIT index lost a fraction to 367. Junk bond funds crawled higher & Treasuries retreated. Oil rose to the 45s (a 4 week high) & gold finished higher.
Federal Reserve Bank of San Francisco pres John Williams called
for monetary & fiscal policy makers to rethink the way they operate,
saying America is getting a taste of a new economic normal that warrants
a change in orthodoxy. This centers on the idea that neutral interest rates, those that neither
stoke nor slow the economy, are historically depressed and are poised
to stay that way. To better adapt, he urged govs to prepare to
provide a stronger fiscal backstop & central bankers to consider
scrapping the practice of targeting low inflation. “We can wait
for the next storm and hope for better outcomes or prepare for them now
and be ready,” Williams wrote in an essay. While he isn't a voting member of the
FOMC this year, Williams is one of the foremost
experts on the natural interest rate.
Williams, who was Janet Yellen's top policy adviser when she was San Francisco Fed chief, joins a chorus of central bankers calling for stronger fiscal measures & a rethink
as years of ultra-low interest rates & unconventional policies fail to
stimulate breakout growth. He's also the 2nd Fed policy maker
in 2 months to suggest a major break with how the central bank
conducts itself. The St. Louis Fed's James Bullard on Jun 17 announced
that he would stop submitting long-term economic forecasts & lowered
his rate projection to one hike in 2016 & none during 2017 & 2018,
based on his thinking that the economy is in a new, low-productivity & low-growth regime.
Confidence among US homebuilders climbed in Aug as steady job
growth & low interest rates boosted prospects for the residential
real-estate market in H2, according to the National Association of Home Builders/Wells Fargo. Builder sentiment gauge rose to 60 from revised 58 (readings
greater than 50 indicate more respondents reported good market
conditions) & the Aug figure matched the median forecast. Measure of 6-month sales outlook rose to 67 from 66, while index of current sales climbed 2 points to 65. The gauge of prospective buyer traffic eased to 44 from 45. The NAHB index has held within a narrow 3-point range this year,
signaling builders are generally positive about the outlook although
there has been little additional momentum to propel sentiment to a
higher level. Demand for properties remains elevated as borrowing costs
stay low & employers retain workers, hire & slowly lift wages. The
index reached an all-time low of 8 in Jan 2009 & a high of 78 in
1998. “Builder confidence remains
solid in the aftermath of weak GDP reports that were offset by positive
job growth in July,” NAHB chief economist Robert Dietz said. “Historically low mortgage rates, increased household
formations and a firming labor market will help keep housing on an
upward path during the rest of the year.”
Oil production from 7 major US shale plays is forecast to decline
by 85K barrels a day to 4.47M barrels a day in Sep from
Aug, according toa monthly report from the Energy Information Administration. Oil output at the Eagle Ford shale play in South Texas
is expected to see the largest decline, down 53K barrels a day.
However, output from the Permian Basin, which covers parts of western
Texas & southeastern New Mexico, is expected to edge up 3K
barrels a day.
Sysco, a Dividend Aristocrat, shares rose after the food
company reported fiscal Q4 earnings that beat expectations. EPS was 38¢, up from 12¢ last year. Adjusted EPS was 64¢, beating the 61¢ estimate. Revenue was $13.65B, up from $12.4B last year & just below the $13.68B estimate. The company said food
cost deflation was 1.2%, with deflation in meat & dairy offset by
inflation in other categories. The stock finished down pennies (following a strong pop after the earnings release). If you would like to learn more about SYY, click on this link: club.ino.com/trend/analysis/stock/SYY?a_aid=CD3289&a_bid=6ae5b6f7
After the stock market dropped in Jan, the Dow is up a staggering 3K+ for one of the biggest rises in history. That boggles the mind. Beaten up MLPs have bounced back, junk bond funds are doing very well & REIT with high yields are near or at record highs. Meanwhile US GDP growth has been drab & Britain has voted to leave the EU, among many economic disappointments. Enjoy these valuations because they may not last when a dose of reality hits stock traders.
![Live 24 hours gold chart [Kitco Inc.]](http://www.kitco.com/images/live/gold.gif?0.8937615285325485)
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