Thursday, December 22, 2016

Markets drift lower on economic data

Dow fell 26, decliners over advancers 4-3 & NAZ retreated 18.  The MLP index rose 2+ to the 314s & the REIT index gave back 1+ to the 333s.  Junk bond funds were higher & Treasuries were a little lower.  Oil went up in the 53s & gold inched higher.

AMJ (Alerian MLP Index tracking fund)

Light Sweet Crude Oil Futures,F

Gold Futures,Feb-2017

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US mortgage rates rose, with the 30-year reaching the highest level since Apr 2014, after the Federal Reserve increased its benchmark lending rate.  The average rate for a 30-year fixed mortgage was 4.3%, up from 4.16% last week, Freddie Mac said.  The average 15-year rate climbed to 3.52%, the highest since Jan 2014, from 3.37%, Freddie Mac said.  Federal Reserve policy makers last week rose interest rates for the first time this year & projected more increases for 2017 as the economy strengthens.  Mortgage rates have shot up since early Nov, tracking a jump in Treasury yields as investors bet that Trump's proposals will boost economic growth.  “A week after the only rate hike of 2016, the mortgage industry digested the Fed’s decision,” Sean Becketti, Freddie Mac's chief economist, said.  Following Fed Chair Janet Yellen’s speech last Wed, “the 10-year Treasury yield rose approximately 10 basis points. The 30-year mortgage rate rose 14 basis points to 4.30 percent, reaching highs we have not seen since Apr 2014.”  Before the election, the average rate for a 30-year loan had been below 4% all year & was hovering near a record low.  The monthly payment on a $300K loan has jumped to $1485 from $1354 at the start of Nov.

U.S. Mortgage Rates Jump to More Than 2-Year High After Fed Hike

Orders for US business equipment climbed more than forecast in Nov, a sign corp investment is starting to firm up.  Bookings for non-defense capital goods excluding aircraft rose 0.9%, the most since Aug, after a 0.2% gain a month earlier, Commerce Dept data showed.  The forecast called for a 0.4% increase.  Demand for all durables, items meant to last at least 3 years, fell 4.6% on a slump in orders for planes.  Increased business sentiment about the economy following the presidential election has the potential to boost sales of productivity-enhancing equipment.  Leaner inventories, resilient household demand & the longer-term prospects of more infrastructure spending may help boost durable-goods orders even as a soaring $ risks slowing exports.  Orders for communications equipment jumped 6.7%, the most since the start of 2015.  Bookings for machinery increased 1.3%, the biggest gain since Jan, while orders for primary metals were the strongest this year.  Shipments of non-defense capital goods excluding aircraft, used in calculating GDP, rose 0.2%.  While a touch stronger than forecast, it followed an Oct decrease of 0.3%, which was weaker than the 0.1% decline previously estimated.  The durables report showed bookings for commercial aircraft plunged 73.5% after a 94.6% surge.  This category is volatile.

Not a lot going on today with many traders away, starting early holidays.  The Dow is still struggling to get above 20K, but a serious attempt may have to wait until next week (with only 4 days of trading).

Dow Jones Industrials


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