Friday, March 31, 2017

Mixed markets on mixed economic data

Dow lost 24, advancers over decliners 4-3 & NAZ went up 3.  The MLP index was pennies lower in the 318s & the REIT index went up a fraction to the 344s.  Junk bond funds were a little higher & Treasuries were up a tad.  Oil was fractionally lower but still above 50 & gold was flat.

AMJ (Alerian MLP Index tracking fund)

Light Sweet Crude Oil Futures,M

Gold Apr 17

3 Stocks You Should Own Right Now - Click Here!

Federal Reserve Bank of NY pres William Dudley says the Fed forecast for 3 rate hikes this year “is in a reasonable place” & that it could begin shrinking its balance sheet late this year or in 2018, possibly pausing rate increases in the process.  “Where the FOMC is, I think is in a reasonable place,” he said.  “A couple more hikes this year seems reasonable.”  He has a permanent vote on the policy-setting FOMC & is widely seen as one of its most influential members.  His comments suggested no great pressure to tighten quickly.  But they also showed that the Fed is still on track to lift rates further this year, after hiking in Mar, & is potentially headed toward beginning to roll off its $4.5T balance sheet.  “It wouldn’t surprise me” if the Fed started to roll off its assets “later this year” or in 2018, he added.  “If we start to normalize the balance sheet, that’s a substitute for short-term rate hikes,” he said, & “we might actually decide at the same time to take a little pause in terms of raising short-term interest rates.”  Dudley is “not that worried that the markets are going to react to changes to our balance sheet in a very violent way because it’s already factored in.”  The Fed has been treading carefully when it comes to the balance sheet because they want to avoid market disruptions.  “I don’t think there is a strong need to differentiate between mortgages and Treasuries,” Dudley said, referring to the assets held by the central bank.  Some Fed officials have argued they should prioritize allowing MBS to roll off.

Dudley Says a Couple More Hikes Seem Reasonable

Consumer sentiment rose in Mar as Americans registered sunnier views about the state of their finances while becoming less upbeat about the long-term economic outlook, Univ of Mich survey data showed.  The final sentiment index rose to 96.9 from 96.3 in Feb, which with the 97.6 estimate.  The preliminary reading was also 97.6.  Current conditions gauge, which measures Americans' perceptions of their personal finances, increased to 113.2 from 111.5 the prior month; while that’s the strongest since 2005, it's below a preliminary reading of 114.5.  Sentiment is holding close to its healthiest levels in more than a decade even as Americans, especially middle & upper income earners, monitor an easing in the stock-market rally that could moderate household wealth.  Optimism since the election has largely cut along party lines, with Reps feeling much better that the new administration's policies will boost growth.  At the same time, Americans of all political stripes have been buoyed by further labor-market strengthening.  “The data indicate both rising optimism as well as rising uncertainty due to the partisan divide,” Richard Curtin, director of the survey, said.  “Optimism promotes discretionary spending, and uncertainty makes consumers more cautious spenders, which will result in uneven gains over time and across products.”

Consumer Sentiment in U.S. Rises on Views of Current Finances

US consumer spending rose less than forecast in Feb even as wage growth improved, according to gov data that also showed inflation reached the Fed's goal for the first time in almost 5 years.  The 0.1% advance in consumption followed a 0.2% gain the prior month, the Commerce Dept said.  A price gauge based on consumer spending habits, the Fed's preferred inflation measure, climbed 2.1% from a year earlier, the most in 5 years.  The figures are consistent with projections of softer consumer spending in Q1, partly due to smaller outlays for household utilities amid milder weather.  The slowdown may prove temporary because of steady hiring, cheap financing & a surge in household optimism.  Incomes rose 0.4% after a 0.5% gain that was more than initially estimated.  The February increase reflected a 0.5% pickup in wages, the most in 5 months.  Disposable income, or the money left over after taxes, increased 0.2% after adjusting for inflation (after falling 0.1% in the prior month).  The forecast called for a 0.2% gain in nominal consumer spending.  Adjusting consumer spending for inflation, which generates the figures used to calculate GDP, purchases fell 0.1% after a 0.2 % decrease the previous month.  The data follow the revised Q4 GDP report that showed consumer spending climbed at a 3.5% annualized rate.  Consumption is projected to slow in Q1, moving closer to the 2.5% average of the past 5 years.  That would reflect a slowdown in utility use amid unseasonably mild weather.  Household outlays on services fell 0.1% for a 2nd month after adjusting for inflation.  The category includes tourism, legal help, health care, & personal care items such as haircuts & is typically difficult for the gov to estimate accurately.  Purchases of durable goods, which include automobiles, also fell 0.1% after adjusting for inflation.  That followed a 1.1% plunge in Jan.  Spending on non-durable goods, which include gasoline, rose 0.1%.  The core price measure, which excludes food & fuel, rose 0.2% from the prior month & was up 1.8% from Feb 2016.  The saving rate increased to 5.6% from 5.4% the prior month.

Not much doing as Mar draws to a close.  Data today is uneven.  This has been a tough month for the stock market while gold had a good rise, but recent stock buying has cut the Dow's loss to about 100.  Consumer & business confidence remain high, the bulls like to see that.

Dow Jones Industrials

stock chart  

No comments: