Friday, July 14, 2017

Marets rise after economic data

Dow rose 16, advancers over decliners 5-2 & NAZ added 13.  The MLP index gained 2+ to 300 & the REIT index went up 3+ to the 349s.  Junk bond funds edged higher & Treasuries finally advanced.  Oil went higher & gold gained 10 to 1228.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil46.57


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Retail sales unexpectedly dropped for a 2nd month in Jun, signaling consumers are providing only modest support for the US economy, Commerce Dept data showed.  Purchases dropped 0.2% (forecast was 0.1% gain) after falling 0.1% the prior month (previously reported as 0.3% drop).  Sales minus car dealers & gas stations fell 0.1% after no change a month earlier.  Retail control-group sales, which are used to calculate GDP & exclude the categories of food services, auto dealers, building materials outlets & gasoline stations, decreased 0.1% after no change.  Sales fell in 6 of 13 major retail categories.  The figures suggest households remain cautious about spending and may provide less of a boost for Q2 after a weak start to the year.  Receipts weakened at department store, sporting goods outlets & restaurants.  Sales within the retail control group have weakened for 3 straight months & the decline in Jun indicates a weak finish for H1.  While the release accounts for only a small part of consumer purchases, household spending on services probably has kept up a moderate pace as steady job gains bolster Americans' pocketbooks.  Faster wage gains, still elusive in this expansion, would provide a further boost to consumption.  The data doesn't reflect changes in prices & consumers enjoyed lower gasoline costs in Jun, which households may have opted to save rather than spend elsewhere.  Sales at department stores dropped 0.7% after a 0.8% decline.

Second Straight Drop in U.S. Retail Sales Shows Tepid Spending

A successful Federal Reserve chair must be a respected analyst of the economy who can “stand on their own two feet in that regard” to forge a consensus among colleagues who serve on the policy-setting Federal Open Market Committee, Dallas Fed Pres Robert Kaplan said.  The central bank needs a leader who’s an “expert person that can analyze the economy and have views on monetary policy that are respected,” Kaplan added.  “The reason that’s so critical is the second part of the job -- which is they’ve got to be able to mobilize a consensus, forge a consensus among presidents and governors,” on the FOMC.  Janet Yellen’s term ends in Feb & many analysts expect Pres Trump will replace rather than renominate her.  Turning to the US economy, Kaplan noted that a recent price-gain slowdown was probably partly due to temporary factors & partly due to business’s diminished pricing power in an era of technological progress & globalization. “I believe strongly that some of this is transitory,” Kaplan said ahead of the release of consumer price data, published later this AM, “but I think some of it is not transitory.”

Fed's Kaplan Says Chair Must Command Respect as Economic Analyst

US factory production increased in Jun in line with forecasts, as demand for natural resources, automobiles & machinery rebounded, Federal Reserve data showed.  Factory output was up 0.2% (est. 0.2% gain) after falling 0.4%.  Total industrial production, which also includes mines & utilities, increased 0.4% (est. 0.3% gain) after a revised 0.1% advance.  Capacity utilization, measuring the amount of a plant that is in use, climbed to 76.6% (est. 76.8%) from 76.4%.  The nation's industrial production has strengthened for 5 straight months amid robust domestic demand & stronger growth abroad, the longest stretch of improvement since 2014.  Manufacturing posted a modest gain, in line with a gradual improvement that's been slowed by weak output of motor vehicles, business equipment & construction supplies.  Mining companies, in particular, have shown healthy advances for the past 3 months & utilities have stabilized after a weak start to the year.  Capacity utilization reached the highest level since Aug 2015.  A big focus of the report has been auto production, a bright spot in the economy's expansion in recent years.  After weakening in 3 of the first 5 months of the year  auto output edged up last month.  Utility output was unchanged after rising 0.8% the prior month.  Production of motor vehicles rebounded 0.7%; excluding autos & parts, manufacturing output rose 0.1%.  Mining production gained 1.6%, the 3rd straight month of increases; oil & gas well-drilling jumped 6.8%.

Manufacturing Production in the U.S. Increased 0.2% in June

The Dow is heading for another record close & its eyes are looking at 22K.  Trump's trip in France is going well & early earnings are coming out.  Traders feel good, maybe they're hoping dysfunctional DC will get its act together & pass healthcare legislation.

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