Wednesday, November 22, 2017

Markets edge higher ahead of Fed minutes

Dow pulled back 26 after recent strength, advancers over decliners better than 4-3 & NAZ went up 5.  The MLP index was up fractionally in the 357s & the REIT index fell 1+ to 360.  Junk bond funds fluctuated & Treasuries were bid higher.  Oil climbed into the 57s (more below) & gold added 7 to 1289.

AMJ (Alerian MLP Index tracing fund)

CL=FCrude Oil57.71

GC=FGold    1,286.80

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Consumer sentiment cooled from a 13-year high in Nov while remaining at levels that signal Americans will open their wallets for holiday purchases, a Univ of Mich survey showed.  The sentiment index fell to 98.5 (est. 98) from 100.7 in Oct., the preliminary reading was 97.8.  Current conditions gauge, which measures Americans’ perceptions of their finances, fell to 113.5 from 116.5.  Expectations measure decreased to 88.9 from 90.5.  While the decline reflects an easing of confidence in both consumers' current financial situation & their expectations, sentiment still matches the 2nd-highest level since 2004.  Respondents are voicing more certainty about the outlook for incomes, employment & inflation.  The data signal consumer spending will rise 2.7% in 2018, adjusted for inflation, as well as “the best runup to the holiday shopping season in a decade.”  Unemployment has fallen to a 16-year low, property values have increased & stocks are at record highs.  While inflation expectations remain relatively low by historical standards, Fed policy makers may be heartened to learn from the report that survey respondents gave a relatively narrow range of responses -- “strong evidence that inflation expectations are firmly anchored and are held with the greatest degree of certainty in the history of these questions.”  “Increased certainty about future income and job prospects has become a key factor that has supported discretionary purchases,” Richard Curtin, director of the survey, said in a statement.  “The data indicate that neither changes in fiscal nor monetary policies have yet had any noticeable impact on consumer expectations.”  The annual gain of 2.1% in household incomes expected in both Oct & Nov surveys, the best 2-month average since 2008.

Consumer Sentiment Falls From 13-Year High

US business equipment orders unexpectedly fell in Oct, the first time in 4 months, even as a gain in capital goods shipments pointed to steady investment growth, Commerce Dept data showed.  Non-military capital goods orders excluding aircraft declined 0.5% (est 0.5% gain) after rising an upwardly revised 2.1% the prior month (prev 1.7% gain).  Shipments of those goods, used to calculate GDP, rose 0.4% (est 0.3% increase) after an upwardly revised 1.2% increase (prev 0.9% gain).  Bookings for all durable goods dropped 1.2% (est 0.3% advance) following an upwardly revised 2.2% increase.  Excluding transportation-equipment demand, which is volatile, orders rose 0.4% after rising 1.1%.  While the decline in non-defense capital orders excluding aircraft raises the risk capital equipment sales will cool in coming months, the Oct advance in shipments & a stronger Sep point to firm investment demand this qtr.  The 3-month annualized gain of 13.1% in Oct shipments of core capital goods follows an 11.7% advance for the same period ended in Sep.  Sustained growth in investment, along with steady consumer spending, bodes well for the economy.  Slower aircraft orders, meanwhile, weighed on total durable goods bookings.  Orders for commercial aircraft & parts fell 18.6% after a 33.9% jump a month earlier.  That's in sync with industry reports. Boeing (B), a Dow stock, said it received 64 orders for aircraft in Oct, down from 72 the prior month.

U.S. Business Equipment Orders Fall for First Time Since June

Oil climbed to a 2-year high as US industry data showed crude stockpiles resumed declines & investors awaited a decision by OPEC on extending output cuts.  Jan futures rose over 2%, the highest since mid-2015.  US inventories fell 6.36BM barrels last week, the American Petroleum Institute was said to report, more than the forecast which showed a drop of 2.2M.  Oil has risen this month on speculation that OPEC & its partners will decide to prolong supply cuts beyond Mar when they meet next week.  Saudi Arabia, OPEC’s de facto leader, has been reducing exports as well as production, with shipments in Sep dropping to the lowest since Mar 2011.  West Texas Intermediate for Jan gained as much as $1.22 to $58.05 after advancing 41¢ to $56.83 yesterday.  Brent for Jan increased 57¢ (0.9%) to $63.14 a barrel after climbing 0.6% on yesterday.  The global benchmark traded at a premium of $5.35 to WTI.  US crude stockpiles at Cushing, Oklahoma, the delivery point for WTI & the biggest oil-storage hub, dropped by 1.8M barrels last week, the API said, & gasoline inventories expanded by 869K barrels.

The stock market is quiet, waiting to see what the Fed minutes have to say later today.  Little excitement is expected, but on a slow day anything can move markets.  Those guys in DC are generally home for the holiday.  Fri, being a semi-holiday, will only have ½ day of trading.  Next week serious trading will resume.

Dow Jones Industrials


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