Friday, January 13, 2017

Higher markets on December retail sales data

Dow gained 18, advancers over decliners almost 2-1 & NAZ went up 30.  The MLP index was fractionally higher to the 319s & the REIT index lost a fraction to the 339s.  Junk bond funds crawled higher & Treasuries were sold as stocks were purchased.  Oil & gold slid lower (more on oil below).

AMJ (Alerian MLP Index tracking fund)

Light Sweet Crude Oil Futures,F

Gold Futures,Apr-2017

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Sales at US retailers accelerated in Dec on the heels of stronger demand for motor vehicles, capping a year of improvement for merchants.  The 0.6% gain last month followed a revised 0.2% advance in Nov,  according to the Commerce Dept.  For all of 2016, sales climbed 3.3%, exceeding the 2.3% advance a year earlier.  Americans flocked to auto dealerships last month to top off a record year for the industry at the expense of some other retailers, offering a mixed picture of sales during the year-end holidays.  At the same time, steady hiring, improving incomes & a surge in consumer sentiment about the economy's prospects could help keep shoppers in stores.  The forecast called for a 0.7% increase in Dec.  Nov sales were revised from an initially estimated 0.1% gain, while Oct purchases climbed 0.7%, more than the 0.6% previously reported.  8 of 13 major retail categories showed gains last month.  In addition to gains at car dealers, demand improved at internet retailers, furniture stores & building materials outlets.  Sales declined at department stores, restaurants & electronics & appliances merchants.  Purchases excluding motor vehicle dealers & gasoline stations were little changed, weaker than the  forecast for a 0.4% gain.  Sales at auto dealers increased 2.4% last month, the most since Apr, while receipts at service stations rose 2% as fuel costs climbed.  Core sales, the figures that are used to calculate GDP & which exclude such categories as autos, gasoline stations & building materials, rose 0.2% last month after little change in Nov.

U.S. Retail Sales Picked Up in December on Strong Auto Demand

Wholesale prices in the US rose for the 3rd time in 4 months, boosted by increasing fuel costs that are pushing inflation higher throughout the economy.  The producer-price index gained 0.3% in Dec, matching the projection, following a 0.4% advance the prior month, a Labor Dept report showed.  The measure was up 1.6% from a year earlier, the most since Sep 2014.  The uptick is a sign that broader measures of inflation will continue to approach the goal of Fed policy makers, as costs pick up worldwide.  Steady consumer demand & more stable commodity costs are expected to help keep prices in the production pipeline on an upward track, though the strength of the $ could constrain increases.  Energy prices rose 2.6% from the prior month, as gasoline jumped 7.8%, accounting for almost ½ of the Dec rise in goods prices.  Food costs showed a 0.7% increase, the most since last Jan.  Wholesale prices excluding food & energy rose 0.2% from the previous month following a 0.4% rise.  Those costs were up 1.6% from Dec 2015.  Services inflation moderated, with prices rising 0.1% in Dec following a 0.5% increase.  Excluding food, energy, & trade services, producer costs rose 0.1% after climbing 0.2% the previous month.  This reading strips out the most volatile components of PPI.   Compared with a year earlier, this core measure increased 1.7% after a 1.8% gain.

Oil is poised for its first weekly decline in more than a month as traders waited for proof that OPEC & other producers are following thru on promises to cut production.  Futures slipped 0.7% & were headed for a weekly decline of about 2.4%.  Saudi Arabia reduced output to less than 10M barrels a day & will consider renewing its pledge to trim supply in six months, according to Energy Minister Khalid al-Falih.  Oil has advanced since the deal among members of OPEC & 11 other nations to temper global supply.  It has been unable to sustain its rally above $55 amid concern that rising prices will spur more production.  While Middle East producers including Saudi Arabia have signaled they're sticking to the pledged reductions, the US recently raised this year's output forecast, explorers have added drilling rigs for 10 straight weeks & production rose to the highest level since Apr last week.  West Texas Intermediate for Feb delivery fell 35¢ to $52.66 a barrel.

This looks to be a sleepy Fri with not very much going on in the stock market.  While retail sales were encouraging, thoughts about the future of the economy with Trump as pres are getting more attention.  He will bring changes to the business world.  But how they will play out remains uncertain.  Dow has been treading water for more than a month on concerns about the future of the US economy.  Those thoughts should  continue to hold the Dow under 20K next week.

Dow Jones Industrials

stock chart  

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