Wednesday, July 19, 2017

Markets rise as earnings come in

Dow rose 27, advancers over decliners better than 3-1 & NAZ gained 25.  The MLP index lost 1+ to the 302s & the REIT index was pennies lower in the 351s.  Junk bond funds are little changed & Treasuries were unchanged.  Oil climbed higher in the 46s & gold was about even at 1241.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil46.55

GC=FGold   1,242.40

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Residential construction ended Q2 on a stronger note as groundbreaking on new homes rebounded in Jun to the fastest annualized pace in four months, Commerce Dept data showed.  Residential starts increased 8.3% to a 1.22M annualized rate (est. 1.16M). Starts for May were revised to 1.12M from 1.09M.  Permits, a proxy for future construction, climbed 7.4% to a 1.25M annualized rate. The pickup in construction last month reflected more starts of single-family homes as well as apartment & other multifamily dwellings.  The gain in Jun starts ended a 3-month slide that indicates residential building will do little for Q2 economic growth.  While construction improved in Jun & demand is holding up, builders have become a bit less upbeat because of higher costs for construction materials such as lumber.  Sentiment dropped to an 8-month low, according to an industry report yesterday, wiping out the post-election boost in enthusiasm as builders expected deregulation & tax reform to spur more growth.  Homebuilders also say shortages of land & skilled labor are limiting construction even as affordable borrowing costs & solid labor-market gains encourage prospective buyers.  Construction of single-family houses rose 6.3% to an 849K annualized pace, also the strongest in 4 months.  Groundbreaking on multifamily homes, such as townhouses & apartment buildings, jumped 13.3K to an annual rate of 366K.

U.S. Housing Starts at Four-Month High Give Boost at Quarter-End

Reps are pressing ahead with a budget plan designed to help the party to deliver on a GOP-only effort to overhaul the tax code.  The plan before the House Budget Committee also features promises to cut more than $5T from the budget over the coming decade, though Reps only appear serious about actually enacting a relatively modest $203B deficit cut over the same period.  The importance of the effort has been magnified by the cratering in the Senate of the Trump-backed effort to repeal ObamaCare, leaving a rewrite of the tax code as the best chance for Trump to score a major legislative win this year.  The budget plan unveiled yesterday is crucial because its passage would pave the way to pass a tax overhaul this fall without the fear of a filibuster by Senate Dems.  But it also proposes $T in cuts to the social safety net & other domestic programs & puts congressional Reps at odds with Trump over cutting Medicare.  It also would sharply boost military spending.

GOP panel presses ahead on budget plan

Oil prices fell after a rise in US crude inventories & ongoing high output from OPEC producers revived concerns of a fuel supply overhang.  West Texas Intermediate (WTI) crude futures were at $46.20 per barrel, down 20¢ (0.4%). Since the start of the year, crude prices are down around 15%, making oil one of the worst performing commodities in 2017. US crude stocks rose last week, adding 1.6M barrels in the latest week to 497M barrels, industry group the American Petroleum Institute said.  Outside the United States, supplies from OPEC remained high, largely due to rising output from member-states Nigeria & Libya, despite the club's pledge to cut production.  A Saudi industry source said on yesterday that the kingdom, which is by far OPEC's biggest producer, was committed to tighten the market.  "We hope to accommodate the rise in production from Libya and Nigeria taking into consideration other supply adjustments as well. But we emphasize that we have to work together with other producers and with the two countries," he said.  Nigeria & Libya are exempt from the deal between OPEC and other producers, including Russia, to cut production by around 1.8M barrels per day between Jan this year & Mar 2018

Oil dips on rising US crude inventories

Tech stocks are climbing as NAZ is back into record territory while the Dow is flirting with setting new records.  Earnings are coming in somewhat mixed, but the goings on in DC are also important & that is a confusing mess.  The new healthcare bill is probably a lost cause now.  That increases the significance of passing tax relief, something that can only be rated as "iffy."  So far, the bulls are still optimistic.

Dow Jones Industrials


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