Thursday, March 30, 2017

Higher markets after revised GDP data for Q4

Dow went up 82, advancers over decliners about 3-2 & NAZ gained 14.  The MLP index retreated 1+ to the 318s & the REIT index lost 1+ to the 341s.  Junk bond funds climbed higher & Treasuries were sold.  Oil was higher, near 50, & gold pulled back to 1250.

AMJ (Alerian MLP Index tracking fund)

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The US economy grew in Q4 at a faster pace than previously reported on higher consumer spending, Commerce Dept data showed.  GDP rose at a 2.1% annualized pace (forecast was for 2%), revised from 1.9%.  Consumer spending, the biggest part of the economy, rose at a 3.5% rate, revised up from 3%; added 2.4 percentage points to growth, revised from 2.05 points.  Corp profits jumped 9.3% from a year earlier, the most since 2012, & rose 0.5% from the previous 3 months.  Trade subtracted 1.82 percentage points from growth, the most since 2004, compared with the prior estimate of a 1.7-point drag, on weaker exports & higher imports.  The data reinforce the underlying story of the US economy: the 7 year expansion continues to be led by consumers, who are cushioned by a firm labor market & rising confidence.  At the same time, rising corp profits could provide continued momentum for hiring & support further capital investment.  Q1 growth is forecast at 1.9%, while the Trump administration has said its policies will eventually result in a 3% pace or greater.  Upward revision to consumption reflects spending on net foreign travel & recreation services, as well as gasoline & other energy goods.  Pre-tax corp profits were down 0.1% for all of 2016, after a 3% drop in 2015.  Inventories added 1.01 percentage point to growth, revised from 0.94 point.  Stripping out inventories & trade, final sales to domestic purchasers increased at a 2.8% rate, revised from a 2.6% pace.

U.S. Fourth-Quarter Growth Revised Upward to 2.1% on Consumption

Filings for US unemployment benefits declined last week by less than forecast, while remaining at levels consistent with a solid labor market, a Labor Department report showed.  Jobless claims decreased 3K to 258K (forecast was 247K) in the latest week.  The number continuing to receive jobless benefits increased 65K to 2.05M.  While claims are near the highest level this year, weekly filings have been below 300K since early 2015, a level consistent with a healthy labor market.  US employers remain reluctant to let go of staff amid steady economic growth & increased difficulty finding workers with relevant skills & experience.  The 4 week average of initial claims, a less-volatile measure than the weekly figure, increased to 254K, the highest since Dec, from 246K in the prior week.  The unemployment rate among people eligible for benefits rose to 1.5% from 1.4%.

Jobless Claims in U.S. Declined Less Than Forecast Last Week

Inflation in Europe's largest economy decelerated more than forecast in Mar.  Consumer-price growth in Germany slowed to 1.5% from 2.2% the previous month, the Federal Statistical Office said, marking the first weakening since Aug 2016.  The forecast called for inflation of 1.9%.  The decline partly reflects the timing of the Easter holiday, which was in Mar in 2016, & may be a precursor to softer euro-area numbers.  Consumer-price growth in Spain also weakened more than expected in Mar, with a slowdown to 2.1% from 3% last month.  A drop in the overall euro area rate, forecast to come in at a lower pace of 1.8%, probably won't surprise the ECB, which predicted it would peak in Q1.  Even so, that's a reminder that price trends are being largely driven by volatile components such as energy& food.  While a pickup in inflation in the past year has kickstarted a discussion about the central bank's monetary policy stance, pres Mario Draghi has said he’s waiting for assurances that the improvement is broad based & sustainable.  The ECB said this week that it's too soon to start discussing when to withdraw stimulus.
German Inflation Decelerates in Dip Predicted by ECB

Stocks are recovering, hoping to eke out a gain for the month of Mar.  The Dow needs less than an advance of 100 to be in the black.  The GDP data was a plus today, although that reflects history.  Current events (more jobs & business & expansion), while volatile, keep encouraging investors.

Dow Jones Industrials

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