Friday, September 16, 2016

Markets drift lower as oil falls to $43

Dow dropped 58, decliners over advancers 5-2 & NAZ gave back 8.  The MLP index was off a fraction to the 287s & the REIT index lost 1+ to the 345s.  Junk bond funds were mixed & Treasuries were slightly higher.  Oil is down to the low 43s & gold continued weak.

AMJ (Alerian MLP Index tracking fund)

Light Sweet Crude Oil Futures,O

Gold Futures,Dec-2016

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European leaders are meeting today without the UK for the first time in 43 years, aiming to build a shared vision for the post-Brexit bloc.  The trouble is the vision may be more blurred than shared.  At the summit in Bratislava, Slovakia's capital, some will be looking to deepen integration.  Others, particularly those in the east, think the lesson of Brexit is to return power to the capitals.  Germany sits in the middle.  The looming Brexit talks, a divisive refugee crisis, the rise of populist parties, differences over how to speed growth & upcoming elections all undermine the ability of govs to unite.  Yet failure to do so risks holding back the economy further & potentially plunging the EU into extended malaise or, worse still, another crisis.  "We need to be united," German Chancellor Angela Merkel said.  "This is about showing that we can do better through action in the areas of security–internally and externally–fighting terrorism, cooperation on defense, that we can do better in the area of growth and employment."
Angela Merkel, Germany's chancellor, speaks to journalists in Bratislava, Sept. 16
Angela Merkel, Germany's chancellor, speaks to journalists in Bratislava, Sept. 16
Photographer: Jasper Juinen/Bloomberg

Merkel Admits She’s Worried About the Future of the EU

Consumer sentiment in Sep held at the lowest level since Apr, as people became more optimistic about the economic outlook but less sanguine about their incomes & buying plans.  The University of Michigan preliminary index of sentiment was unchanged at 89.8.  The projection called for a reading of 90.6.

Consumer views of current economic conditions fell to an almost one-year low, while households’ plans to purchase automobiles & other big-ticket items became more dependent on low interest rates.  The preliminary index of sentiment was unchanged at 89.8.  The projection called for a reading of 90.6.  Retail sales fell in Aug for the first time in 5 months, hinting at a smaller rebound in the economy this qtr.  “Consumers reported somewhat less favorable assessments of their current finances largely due to fewer reports of income increases,” Richard Curtin, director of the Michigan survey, said.  Still, “consumers remain reasonably optimistic about their future economic prospects.”  This figure compares with an average consumer sentiment reading of 92.9 in 2015 & 91.5 in the first 8 months of this year.  The current conditions index, which is an assessment of the state of personal finances, dropped to 103.5, the lowest since Oct, from 107 in Aug.  Among all households, 42% reported an improvement in their financial situation this month, down from 49% 3 months ago.  A gauge of expectations for the next 6 months improved to 81.1 from 78.7 last month.

Michigan Consumer Sentiment Index Holds at Lowest Since April

The cost of living in the US rose more than projected in Aug on higher shelter & health-care prices, indicating that inflation continues to move toward the Fed's goal.  The consumer-price index climbed 0.2% after being little changed the previous month, according to the Labor Dept.  The estimate was for a 0.1% advance.  Excluding volatile food & fuel costs, the core measure rose a bigger-than-forecast 0.3% from a month earlier.  While many expect the Fed to leave interest rates unchanged when policy makers meet next week, a sustained pickup in inflation would bolster the case for a hike later this year.

Expenses for shelter climbed 0.3% from the prior month.  Owners-equivalent rent, one of the categories designed to track rental prices, also rose 0.3%.  Prices for medical care services, which include health insurance, doctor visits & hospitalizations, increased 0.9%, the most since 1990.  These readings often vary from results for this category within the Fed's preferred measure of inflation, the core personal consumption expenditures deflator.  Another category covering prescription & nonprescription drugs rose 1.2% from Jul, the most in records dating to 2009.  Health insurance costs rose 1.1%, the fastest pace since Feb.  The consumer price gauge increased 1.1% in the 12 months ended in Aug, after a 0.8% year-over-year advance the prior month.  The month-over-month gain in the core CPI measure follows a 0.1% gain in Jul.  It increased 2.3% from Aug 2015, after rising 2.2% in the prior 12-month period.

Consumer Prices in U.S. Rose More Than Forecast in August

The decline in oil prices is a depressant for stocks.  Another major worry is banks losing favor & fast.  Wells Fargo (WFC)  has a ton of problems & they are affecting the entire sector.  Dow is hanging in above the important 18K support level.  That looks like it will be tested again, especially when Janet speaks next week.

Dow Jones Industrials


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