Thursday, August 31, 2017

Higher markets as the month closes

Dow gained 23, advancers over decliners 5-2 & NAZ advanced 34.  The MLP index rose 2+ to the 277s & the REIT index added 1+ to the 354s.  Junk bond funds inched higher & Treasuries went up.  Oil rose to the 47s & gold climbed to 1321, close to its yearly highs.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil46.98

GC=FGold   1,317.30

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US stocks rose with the $ after data underscored the resilience of the American & Chinese economies, while concern over North Korea shifted to the background.  The S&P 500 Index pared a monthly loss with its 5th straight gain & the $ continued its ascent from the lowest level in 2 years.  Miners led an advance in the Stoxx Europe 600 Index after a rise in Chinese manufacturing buoyed industrial metals.  The € slipped after a report that some central Bank officials are worried about the currency's strength.  Gasoline climbed for an 8th day as Harvey continued to pound the energy-rich Gulf of Mexico coast.   Data today showed China's official factory gauge strengthened further in Aug, defying expectations, after reports yesterday revealed US Q2 growth reached the fastest pace in 2 years & hiring was robust in Aug.  Consumer spending increased by less than estimated in Jul, though rising incomes and an upward revision to Jun purchases put the economy on a stable footing for H2.  The focus now moves to jobs data tomorrow as diplomatic efforts to contain North Korea's nuclear program continue.

Stocks Gain on Growth Outlook; Dollar Extends Run: Markets Wrap

US consumer spending increased by less than estimated in Jul, though rising incomes & an upward revision to Jun purchases put the economy on a stable footing for H2, Commerce Dept figures showed.  Purchases rose 0.3% M/M (est. 0.4% rise) after upwardly revised 0.2% increase in Jun.  Incomes rose 0.4% M/M (est. 0.3% rise), the most since Feb, after no change.  Price gauge tied to consumption rose 0.1% M/M (matching est.); up 1.4% Y/Y (matching est.).  Excluding food & energy, prices rose 0.1% M/M (matching est.) & the core index was up 1.4% Y/Y (matching est.), lowest since 2015.  The steady gains in consumption, which accounts for about 70% of the economy, reflect robust hiring, healthier finances & low inflation.  They also signal consumers will keep driving the expansion, though recent reports show economic growth may be broadening out to include a pickup in business investment.  One bright spot was that wages & salaries rose 0.5% in Jul for a 2nd month, the best back-to-back performance since the first 2 months of 2017.  While real disposable incomes gained, the saving rate dipped to the lowest this year.  Faster pay growth would allow Americans to ramp up their spending while also socking away more cash for the future.  The data on prices showed inflation remains stubbornly below the Federal Reserve's 2% goal.  The central bank's preferred inflation gauge has matched or topped its target in just 2 months since 2012.  While less convenient for the Fed, low price pressures help to boost consumer purchases.

U.S. Consumer Spending, Incomes Signal Stable Second-Half Start

An unexpected decline in Jul contract signings for the purchase of previously owned US homes shows the continuing impact of limited supply on the real-estate market, National Association of Realtors figures showed.  The index fell 0.8% (est. 0.3% gain) after revised 1.3% advance.  It decreased 0.5% from Jul 2016 on unadjusted basis.  The decline in contract signings, the 4th in the last 5 months, highlights that a limited number of properties for sale remains the biggest hurdle for the housing market.  That's particularly true for those wanting to buy for the first time as rising home prices are outpacing gains in wages.  The Realtors group reduced its projection of sales this year to 5.49% from last month's estimate of 5.56M.  Supply is failing to keep up with demand & the outlook for sales is also less favorable because purchases in the Houston area will likely slow in the aftermath of Hurricane Harvey, the NAR projects.  “The housing market remains stuck in a holding pattern with little signs of breaking through,” Lawrence Yun, NAR's chief economist, said.  “The pace of new listings is not catching up with what’s being sold at an astonishingly fast pace.”  “Buyer traffic continues to be higher than a year ago, the typical listing has gone under contract within a month since April, and inventory at the end of July was 9 percent lower than last July,” Yun added. “The reality, therefore, is that sales in coming months will not break out unless supply miraculously improves. This seems unlikely given the inadequate pace of housing starts in recent months and the lack of interest from real estate investors looking to sell.”

U.S. Pending Home Sales Unexpectedly Fall on Lean Inventory

Stocks are closing the month on an up note.  Dow is a little higher, not bad considering the rise in uncertainty which has increased demand for gold.  Repair work in the Houston area is mind boggling, made worse by the explosion of a chemical plant.  Next week Congress returns, that will be a testing time for the bulls.

Dow Jones Industrials


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