Thursday, December 15, 2016

Early markets gains pared on uncertainties about rate hike effects

Dow rose 59 (100 below the highs), advancers over decliners 5-4 & NAZ went up 20.  The MLP index added 3+ to the 301s & the REIT index lost 2+ to the 331s.  Junk bonds funds were little changed & Treasuries continued under selling pressure, taking yields higher.  Oil was off pennies (but above 52) & gold had a major sell-off (more below).

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Live 24 hours gold chart [Kitco Inc.]

The $ climbed to the highest level since 2003 against the € & gold plunged as the prospect of a steeper path for US interest rates filtered thru markets.  US stocks rebounded from the worst day in 2 months.  Financial shares led gains in major American equity benchmarks, while rate-sensitive stocks slipped after US 10-year yields reached the highest level in more than 2 years.  The greenback extended its advance against major & emerging-market peers after the Fed's interest-rate hike with a signal of 3 more next year.  Gold tumbled 2.6% to a 10-month low.  The Fed's move marks a step in what is expected to be a shift away from global central-bank policy dominating financial markets toward what a potential rise in fiscal stimulus.  While stocks have rallied & bonds have tumbled since Trump's election fueled such expectations, the US central bank stands largely alone in actively tightening policy, a stance that's sent the $ surging.  The Bank of England kept its key rate at a record low today, a week after the ECB extended quantitative easing.

Dollar Climbs to Strongest Since 2003 on Fed Path; Bonds Drop

Gold futures dropped nearly 3% to settle at their lowest level since early Feb as the Fed's interest-rate hike & the potential for more aggressive moves in the new year fueled a rally in the $.  Feb gold fell a whopping $33.90 (2.9%) to settle at $1129 an ounce.

Gold Futures Settle Nearly 3% Lower On Fed-induced Dollar Rally

Long-term US mortgage rates climbed for the 7th straight week following Trump's victory, again marking new highs for the year.  Mortgage giant Freddie Mac says the average rate on a 30-year fixed rate loan rose this week to 4.16% from 4.13% the previous week.  The benchmark rate is well above its 3.97% level of a year ago.  The rate on 15-year home loans, a popular choice for people who are refinancing, ticked up to 3.37% from 3.36%.  Long-term mortgage & interest rates have surged in the weeks since Trump's surprise victory in Nov.

US average 30-year mortgage rate rises to 4.16 percent

The U.S. current-account deficit, a measures of the nation's debt to other countries, dropped 4.5% in the Q3 to $113B from $118.3B.  The decline was mostly tied to a lower trade deficit in goods, the gov said.  The US posted an unusually large increase in agricultural exports, mainly soybeans, in Q3 after a poor harvest among South American producers.  The current account reveals if a country is a net lender or debtor.  The current account deficit was 2.4% of GDP in Q3, down from 2.6% in Q2 & well below a peak of 6.3% in 2005.

Soybeans Again: U.S. Current Account Deficit Falls 4.5% In 3rd Quarter

The Philadelphia Federal Reserve's gauge of manufacturing activity in the Mid-Atlantic region jumped to 21.5 in Dec from a reading of 7.6 the month prior.  The expectation was for a reading of 9.  A reading above zero indicates expansion

Mid-Atlantic Manufacturing Activity Leaps in December

Stocks were up, with hopes of taking the Dow to 20K.  But not today.  Enthusiasm faded in late day trading & market breadth continues to be weak.  A correction is needed, but so far nervous Nellies have remained optimistic about the future.  The longer this rally goes on, the more vulnerable the market is to a substantial correction.

Dow Jones Industrials

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