Tuesday, September 27, 2016

Higher markets on improving consumer confidence

Dow went up 50, advancers  barely ahead of decliners & NAZ gained 24.  The MLP index lost 4+ to the 307s & the REIT index was flat in the 362s.  Junk bond funds rose along with stocks & Treasuries climbed higher.  Oil dropped to the 44s (see below) & gold rose.

AMJ (Alerian MLP Index tracking fund)

Light Sweet Crude Oil Futures,N

Gold 100 oz. Dec 16

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Home prices in 20 US cities continued to gain at a solid pace in Jul, according to S&P CoreLogic Case-Shiller data.  20-city property values index climbed 5% from Jul 2015 (forecast was for 5.1%), after a 5.1% year-over-year rise in Jun.  National home-price gauge increased 5.1% from 12 months earlier.  On a monthly basis, the seasonally adjusted 20-city gauge was little changed.  Steady price appreciation is keeping the housing market on a reassuring path at the start H2-2016.  The residential real estate market took a breather last month, with existing-home sales unexpectedly declining in Aug while purchases of new properties retreated from a 9-year high.  Durable job gains & borrowing costs lingering near record lows should remain a support for potential home buyers.  “Both the housing sector and the economy continue to expand,” David Blitzer, chairman of the S&P index committee, said.  While some cities are seeing rapid price gains, “there is no reason to fear that another massive collapse is around the corner” because mortgage debt is rising at a relatively slow pace.  All 20 cities in the index showed year-over-year gains.

Home Prices in 20 U.S. Cities Rose 5% in July From Year Earlier

Consumer confidence rose in Sep to the highest level since before the last recession on optimism about the labor market, according to the Conference Board.  Confidence index increased to 104.1 (forecast was 99.0), the highest since Aug 2007, from a revised 101.8.  Present conditions gauge rose to 128.5, also highest since Aug 2007, from 125.3.  A measure of consumer expectations for the next 6 months climbed to 87.8, highest since Oct, from 86.1.  Share of those who said jobs were plentiful rose to 27.9, highest since Jul 2007.  The survey may bode well for consumer spending, which has cooled after a robust Q2, reflecting resilient labor market conditions & steady income growth.  The assessment of the availability of jobs is consistent with data showing vacancies at a record high nationwide, suggesting that wages could see further gains.

Consumers were more optimistic about the outlook for the labor market, as 15.1% said more jobs will be available in 6 months, the most since Jun 2015.  The share of Americans who see their incomes increasing in the next 6 months fell to 17.1% from 18.5%.

Consumer Confidence in U.S. Hits Nine-Year High on Job Optimism

Oil fell after Iran said it’s unwilling to freeze output at current levels & wants to raise production to 4M barrels a day, curbing hopes for OPEC to reach a deal to stabilize markets when the group meets tomorrow.   Futures dropped as much as 3%, continuing the gyrations of recent days.  It's “not on our agenda” to reach agreement at the OPEC talks in Algiers, Iranian Oil Minister Bijan Namdar Zanganeh said.  Influential forecasters gave a worsening outlook for the market, with the head of the International Energy Agency saying supply & demand won't be in balance until late 2017.

West Texas Intermediate for Nov delivery dropped $1.29 (2.8%), to $44.64 a barrel & total volume traded was 22% above the 100-day average.  Prices have averaged about $44.80 in Q3.

While the stock market is high, this hardly qualifies as a significant rally, especially with market breadth about even.  Confusion about the big meeting on reducing oil production adds to market uncertainties.  Meanwhile, gold & Treasuries are rising (negative bets on the stock market).  Dow continues to hover a little above the important 18K support level.

Dow Jones Industrials


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