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Tuesday, September 13, 2016
Markets decline on Fed fears and lower oil prices
Dow dropped 258, decliners over advancers a very big 8-1 & NAZ declined 56. The MLP index plunged 10+ to the 299s & the REIT index sank 9+ to the 345s. Junk bond funds remained weak & Treasuries were sold. Oil had another bad day (see below) & gold had a minor loss.
Americans’ incomes jumped in 2015 by the most since the last
recession & the poverty rate fell. Fresh
yearly data from the Census Bureau showed median,
inflation-adjusted household income rose 5.2% to $56.5K in 2015,
the highest level since $57.4K in 2007, when the recession
began. Gains were spread across the income spectrum & by race, while
women's earnings inched closer to men's.
The
data suggest incomes are getting a boost from job gains to help break
out of the stagnancy that's been a blemish on the 7-year economic recovery. The poverty rate was at 13.5%, representing
43.1M Americans, a drop of 1.2 percentage points from 2014. The rise in median income
was due mainly to an increase in employment & in full-time, year-round
workers, with 1.4M men & 1M women added. Even
with a 7.3% gain from its post-recession low of $52.6K in 2012,
median income was still 2.4% below its inflation-adjusted peak
of $57,9K in 1999.
The federal gov recorded a
deficit of $107.1B in Aug, slightly lower than the Jul
deficit. But the imbalance thru 11 months of this budget year is up
sharply from a year ago, reflecting higher spending &
lower-than-expected tax revenues. The Treasury Dept says the deficit, with just one month to
go in the budget year, totals $620.8B, up 17.1% from the
same period a year ago. The Aug deficit was slightly lower than the
$112.8B imbalance in Jul. The Congressional Budget Office last month revised its estimate
for the 2016 deficit up sharply to show an imbalance of $590, up from a Mar projection of $534B. The budget year
ends on Sep 30 & Sep is expected to show a surplus.
Oil fell after a series of predictions on demand growth
that pointed to the global overhang of unused inventories persisting for
much longer than previously expected. The International Energy Agency (IEA) said that a sharp slowdown
in global oil demand growth, coupled with ballooning inventories &
rising supply, means the crude market will be oversupplied at least
thru H1-2017. That view marked a change from the agency's forecast a month ago,
when it forecast supply & demand broadly in balance over the rest of
this year & expected inventories to fall swiftly. The IEA's latest comments follow a surprisingly bearish outlook from OPEC yesterday. West Texas Intermediate futures declined 70¢ to $45.59. Upbeat Chinese data on industrial output growth for Aug failed
to lift oil prices as the crude market remained in profit-taking mode. China's industrial output grew the fastest in 5 months as
demand for products from coal to cars rebounded thanks to higher
gov spending & a year-long credit & property boom. Speculators in US & Brent crude futures took an axe to their
long positions in the latest week, cutting the combined net speculative
length in the 2 contracts by 80M barrels. Ahead of gov data, the forecast is that US commercial crude oil stocks are
likely to have risen last week after marking the largest plunge since
1999 in the previous week.
The Dow chart below does not so pretty. But technicals don't mean much. Traders are most worried about what Janet will have to say regarding an interest rate hike. Today's market shows they are WORRIED. Interest rates have been near zero for a decade in what was supposed to be a temporary fix. Sadly, many have gotten used to these rates & are hoping they will last forever. Maybe as long as Janet is in charge.
![Live 24 hours gold chart [Kitco Inc.]](http://www.kitco.com/images/live/gold.gif?0.38883110569331214)
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