Thursday, September 15, 2016

Markets advance on hopes for no rate hike next week

Dow rose 61, advancers over decliners more than 3-2 & NAZ gained 38.  The MLP index was off fractionally in the 299s & the REIT index was up a fraction in the 346s.  Junk bond funds inched higher & Treasuries declined.  Oil slid lower in the 43s & gold fell.

AMJ (Alerian MLP Index tracking fund)

Light Sweet Crude Oil Futures,N

Gold Futures,Dec-2016

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Sales at US retailers dropped more than forecast in Aug, indicating a pause in recent consumer-spending strength that has carried the economy.  Purchases declined 0.3% from Jul, the first drop in 5 months, after a revised 0.1% advance in the previous month, reported by the Commerce Dept.  The projection called for a 0.1% decline.  Excluding cars, sales unexpectedly fell 0.1%.  An easing in vehicle buying matched a lackluster performance elsewhere, with sales falling in 7 of 12 retail categories outside autos.  While low borrowing costs, cheap gasoline prices & steady job gains should keep a floor under demand, wage growth remains slow & sustained weakness in consumer spending could limit any economic rebound in H2.

The report represents one of the last major data releases before Federal Reserve policy makers meet next week to debate raising interest rates.  While officials are split on the urgency to increase borrowing costs, most investors & economists expect the central bank to hold off this month.

Retail Sales in U.S. Decline in August by More Than Forecast

Output at American manufacturers fell more than forecast in Aug, a sign the industry is having trouble finding its footing.  The 0.4% decline at factories was the biggest drop since Mar & followed a 0.4% increase the prior month, a Federal Reserve report showed.  The survey called for a 0.3% drop.  Total industrial output, including mines & utilities, dropped 0.4%, also a steeper decline than anticipated.  The data add to concerns sparked last week by a private survey of purchasing managers that showed manufacturing contracted last month.  Any slowdown in US or global demand would further worsen the outlook for producers, who are trying to recover from the energy sector pullback, bulging inventories & lingering effects of the surge for the $.  The latest results are consistent with the Institute for Supply Management's factory survey for Aug, which signaled a contraction, albeit for the first time in 6 months.  Orders plunged, production was cut by the most since 2012 & employment fell, according to that report.

Factory Output in U.S. Declines More Than Forecast in August

Business activity fell across NY state as both orders & shipments declined, according to the NY Federal Reserve Sep survey.  The Empire State's business conditions index was -2 compared with -4.2 in Aug.  The gauge has been swinging around the zero mark, which separates expansion from contraction, in recent months.   Economists had expected the index to be -1.0.  The Empire report is the first in this month's batch of regional factory surveys conducted by Fed banks, looked to for clues about the state of the manufacturing sector.   Both the new orders index & the shipments index became negative from the month before, in "developments that pointed to a marked decline in both orders and shipments," the report said.  Shipments fell to -9.38 from 9.01 as new orders fell to -7.45 from 1.04.  The employment & average workweek indexes both posted lows for the year, with the employment index falling to -14.29 from -1.03 in Aug.  Still, the outlook was more positive.  The index for the next 6 months, "suggested that respondents were more optimistic about future conditions."  A gauge of overall expectations grew to 34.53 from 23.74 as an index of future hiring grew to 7.14 from -6.19.

New York Manufacturing Activity Falls

With these reports, Janet has plenty of excuses to do nothing next week (as if she needed more excuses).  Stocks like that kind of thinking.  Anything to lengthen the "temporary emergency" which began a decade ago makes traders happy & they respond by buying stocks.

Dow Jones Industrials


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