Tuesday, March 28, 2017

Markets fluctuate after consumer confidence rises to 17 year high

Dow rose 17, advancers slightly ahead of decliners & NAZ lost 4.  The MLP index went up 1+ to the 315s & the REIT index was fractionally lower to the 339s.  Junk bond funds were higher & Treasuries retreated.  Oil advanced to the 48s & gold inched up 1 to 1257.

AMJ (Alerian M LP Index tracking fund)

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US single-family home prices accelerated at a faster pace than expected in Jan supported by a low inventory of housing stock.  The S&P CoreLogic Case-Shiller composite index of 20 metropolitan areas rose 5.7% in Jan on a year-over-year basis, from a downwardly revised 5.5% increase in Dec.  Jan results topped the estimate for a 5.6% increase, the biggest year-on-year increase since Jul 2014.  David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices, said recent rate increases by the Fed are not lifting mortgage rates dramatically & should not present a significant headwind to further price gains.  The Fed raised rates ¼ percentage point at 2 of its last 3 meetings.  If the pace of Fed increases accelerates, however, "rising mortgage rates could become a concern," he added.  On a monthly basis, prices in the 20 cities rose 0.9% in Jan on a seasonally adjusted basis, outpacing expectations for a 0.7% increase.  On a non-seasonally adjusted basis, prices increased 0.2$% from Dec.
China stocks fell on concerns about tightening liquidity conditions after the central bank refrained from injecting short-term funds into the banking system for the 3rd session in a row.  The blue-chip CSI300 index fell 0.2% to 3469 while the Shanghai Composite lost 0.4% to 3252.  The People's Bank of China (PBOC) skipped open market operations again, saying liquidity levels in the banking system were "appropriate" & there was no reason to inject more funds.  Interbank borrowing costs remained elevated, however, with the Shanghai Interbank Offered Rate (SHIBOR) for the 7-day tenor at 2.791%, around its highest level since mid-2015.  Adding to the usual concerns about tighter liquidity heading into the month- & quarter-end, some lenders are believed to be hoarding cash ahead of the central bank's quarterly assessment of the health of commercial banks.   The PBOC's decision to withhold funds is reinforcing expectations it will gradually tighten monetary policy this year as it looks to reduce risks in the financial system & encourage more deleveraging.  It has nudged up money market & short-term rates several times already this year.  For China's stock market investors, concerns about the impact of further tightening have overshadowed a raft of upbeat economic data, including robust industrial profits released yesterday.

China Shares Down on Liquidity Concerns

US consumer confidence climbed to its highest level in more than 16 years, a strong gain for one Trump's preferred economic indicators.  The Conference Board  consumer confidence index rose to 125.6 in Mar from 116.1 in Feb, the best reading since 2000.  The index measures both consumers' assessment of current conditions & their expectations for the future.  Both improved this month.  Consumers' "renewed optimism suggests the possibility of some upside to the prospects for economic growth in the coming months," said Lynn Franco, director of economic indicators for the business group.  Consumer spending accounts for about 70% of US economic activity.

US Consumer Confidence Hits 16-Year High

Not much going on today in the stock market.  Traders need time to assess the confusing mess in DC & try to guess where that will take the economy.  The consumer confidence data supports the optimism that investors are showing by taking the Dow to record levels since the election & then holding those values reasonably well this month.  However as has been the case all month, gold (negative bets on the stock market) has been in demand all month.

Dow Jones Industrials

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