Friday, June 16, 2017

Markets dip lower on consumer confidence data

Dow fell 27, decliners over advancers about 5-4 & NAZ was off 24.  The MLP index added a fraction to the 285s & the REIT index was off fractionally in the 354s.  Junk bond funds were mixed & Treasuries rose in price.  Oil crawled higher in the 44s (more below) & gold was up a tad.

AMJ (Alerian MLP Index tracking fund)
stock chart


Crude Oil Jul 1744.74
0.28  0.6%


Gold Futures,Aug-20171,256.40
1.80  0.1%

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This US expansion may be moving like a tortoise, but it’s on its way to win the race.  Widely disdained for its relatively weak growth & pay gains, the expansion is about to complete its 8th year, & it's headed to become the longest on record, according a recent survey of economists.  Respondents put a 60% probability on the growth streak running thru at least Jul 2019 & thereby reaching 121 months, topping the 10 years of gains during the 1990s.  They're betting on it even as the Federal Reserve raises interest rates & Pres Trump's fiscal policy-induced bump increasingly seems more hope than reality.  As the economy made up lost ground after the financial crisis, the lack of big spurts or excesses resulted in an expansion that’s more slow & steady, which makes it well-placed to be extended.  A strong job market, subdued inflation, low borrowing costs & healthier finances will be a tailwind for consumer spending while business investment, a laggard so far, is expected to join the drivers of growth.  Even trade may become less of a drag.  Beyond 2019, though, the outlook dims.  The probability of the expansion lasting thru at least Jan 2021, the last month of Trump's 4-year term, drops to 30%.  The possibility of a recession rises even more after that, with analysts seeing a 10% chance of the expansion enduring thru Jan 2025.  Current demand is getting help from the labor market.  About 15M jobs were added since the recession ended in Jun 2009, & unemployment is at a 16-year low.  Payroll gains have probably peaked, though they're exceeding what's needed to keep the jobless rate steady as people enter the workforce.  A sustained acceleration in wages is still missing even with the US near maximum sustainable employment.

Don’t Underestimate This U.S. Expansion: It’s Headed to a Record

Oil headed for the longest run of weekly losses since Aug 2015 as OPEC member Libya restored production just as the surplus in the US showed few signs of abating.  While futures added 0.9% today, they're down 2.1% for the week, a 4th straight decline.  US inventories fell less than forecast last week, keeping supplies more than 100M barrels above the 5-year average.  Libya, exempt from the OPEC-led deal to cut supply, will boost output to 1M barrels a day by the end of Jul, according to the country's National Oil Co.  Oil slumped to the lowest close in 7 months this week as concerns grew that rising US supplies will offset the production curbs by OPEC & allies including Russia.  New non-OPEC output next year will be more than enough to meet demand growth, the International Energy Agency said in its first forecast for 2018.  West Texas Intermediate for Jul delivery was at $44.85 a barrel, up 39¢.  Total volume traded was in line with the 100-day average.  The contract lost 27¢ to $44.46 yesterday, the lowest since Nov 14.

Oil Set for Longest Run of Weekly Losses Since 2015 Amid Glut

The biggest drop in US consumer sentiment since Oct represents a break from the greater optimism seen after the presidential election, Univ of Mich survey data showed.  Preliminary sentiment index fell 2.6 points to 94.5 (forecast was 97), lowest since Nov.  Expectations measure decreased to 84.7, lowest since Oct, in Jun from 87.7.  Current conditions gauge, which measures Americans' perceptions of their personal finances, dropped to 109.6 from 111.7.  The slide in confidence reflects concerns about Trump's economic policies & their chances of passing thru Congress.  Responses since Jun 8, the date of former FBI Director James Comey's congressional testimony, show even greater declines, although few respondents referred to the event when explaining their views.  Even so, that trend suggests the final number for Jun may be lower when it's reported in 2 weeks.  The report shows some signs of eroding economic optimism, as for the first time since Oct, more consumers expected a recession in the next 5 years, than those who saw an uninterrupted expansion.  Dems remain markedly more pessimistic than Reps about the economy.  Still, overall confidence remains higher than last year's average amid a strong labor market & increased household income. “The recent erosion of confidence was due to more negative perceptions of the proposed economic policies among Democrats and the reduced likelihood of passage of these policies among Republicans,” Richard Curtin, director of the consumer survey, said.  80% of Dems reported hearing of negative economic developments while 83% of Reps reported positive ones.  The share of respondents who expect financial gains in year ahead was 42%, the highest in a dozen years.  Consumers saw inflation rate in the next year at 2.6%, unchanged from the prior month. 

U.S. Consumer-Sentiment Drop Shows Post-Election Bump Fading

Stocks are not doing a lot today.  Weaker consumer confidence data was not helpful, although it had to be expected.  Congress is stumbling badly while it tries to make  positive changes for the economy.  Stuck in the mud conditions will not likely change even when current feelings dissipate & partisan bickering returns.  At least the bulls have not given up & are able to keep popular averages near record levels.

Dow Jones Industrials


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