Thursday, January 26, 2017

Markets waver after lower new home sales in the US

Dow gained 22, decliners were slightly of ahead advancers & NAZ lost 6.  The MLP index rose again, up 4 to the 338s, & the REIT index was fractionally higher in the 343s.  Junk bond funds continued strong & Treasuries remained weak, taking the yield on the 10 year Treasury up to 2.55%.  Oil gained 1+ & gold declined.

AMJ (Alerian MLP Index tracking fund)

Light Sweet Crude Oil Futures,M

Gold Apr 17

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Purchases of new US homes fell in Dec to a 10-month low, suggesting the post-election jump in mortgage rates pushed out potential buyers.  Single-family house sales dropped 10.4%, the most in almost 2 years, to a 536K annualized pace, Commerce Dept data showed.  The forecast was for 588K. The figures indicate that the increase in mortgage rates curbed momentum in the housing market after steady job gains & historically low borrowing costs helped push full-year sales to the highest since 2007.  Stricter lending standards also remain a hurdle for buyers this year.  The average interest rate on a 30-year fixed mortgage reached 4.32% at the end of Dec, the highest since Apr 2014, according to Freddie Mac.  That was up from 3.54% just before the election.  It was 4.09% in the week ended Jan 19

Sales of New U.S. Homes at 10-Month Low as Mortgage Rates Jump

Filings for US unemployment benefits rose more than forecast last week amid holiday-related volatility, while remaining low by historical standards.  Jobless claims rose 22K to a 4week high of 259K in the period ended Jan 21, which included the Martin Luther King holiday, according to the Labor Dep.  The projection was for 247K.  Even with the increase, companies remain reluctant to dismiss employees as it becomes tougher to find experienced workers to replace them.  A tightening labor market, with rising payrolls & job vacancies near highs for this expansion, may lead to a sustained pickup in wages this year.  claims figures tend to be more volatile during weeks around holidays, making seasonal adjustments more difficult.  Jobless claims have remained below 300K for 99 consecutive weeks, the longest streak since 1970 & a threshold indicative of a healthy labor market.  The 4-week average of claims, a less-volatile measure than the weekly figure, declined to 245K, the lowest since 1973, from 247K in the prior week.  The number continuing to receive jobless benefits increased 41K to 2.1M in the latest week & the unemployment rate among people eligible for benefits held at 1.5%.

Caterpillar, a Dow stock, forecast 2017 revenue & earnings that trailed estimates as signs of a recovery in mining & energy have yet to translate into a rebound in demand for its signature yellow machines.  Revenue will be $36-39B, with a midpoint of $37.5B, the company said.  That is less than the $38.1B analysts' estimates & indicates annual revenue may fall for a 5th consecutive year.  EPS excluding restructuring costs will be $2.90 at the midpoint, compared with analysts' estimate of $3.08.  The company said the availability of used construction equipment will weigh on sales in 2017 & it expects capital spending among miners to be flat.  Any benefit from Trump's infrastructure-spending plan & tax reforms probably wouldn't be seen until some time in 2018.  “We continue to execute in a challenging economic environment and are focused on improving operating margins, profitability and shareholder returns,” CEO Jim Umpleby said.  “While we see signs of positive activity in some of our key end markets, the overall economic environment remains challenging.”  The stock went up 22¢.  If you would like to learn more about CAT, click on this link:

Caterpillar Forecasts Fall Short as Demand Slump Persists

Caterpillar (CAT)

Stocks are digesting the advance after Dow finally went over 20K (where it remains today).  Trump remains active with new initiatives & investors are adjusting to his way of leadership.  His meeting with the Mexican pres is uncertain now.

Dow Jones Industrials

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