Tuesday, March 13, 2018

Markets rise after inflation report

Dow advanced 91, advancers over decliners better than 3-2 & NAZ gained 14.  The MLP index was off fractionally in the 264s, following yesterday's advance., & the REIT index added 1+ to the 329s.  Junk bond funds did little & Treasuries hardly budged in price.  Oil crawled higher in the 61s & gold was even at 1320.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil61.95

GC=FGold  1,325.80

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Stocks rose & the $ erased an advance as a middling inflation reading fueled speculation the Federal Reserve won't be forced to accelerate the pace of rate hikes.  The S&P 500 opened higher after shares slipped yesterday ahead of the inflation reading.  The report reinforced the sense that economic growth is picking up without runaway price increases.  The 10-year Treasury yield slumped below 2.85%.  The US inflation data set the tone for traders, who are still trying to 2nd-guess the path of monetary tightening in the world's biggest economy ahead of the Fed meeting next week.  The numbers, which were in line with expectations, gave them little to go on.  A Treasury auction later today may help gauge how much investors are worried about inflation.  Politics remain in focus after Pres Trump ousted Sec of State Rex Tillerson.  That move followed an exec order from Trump blocking Broadcom (AVGO) from acquiring Qualcomm (QCOM), scuttling a $117B  hostile takeover that had been the subject of scrutiny over the deal's threat to US national security.  The European stock benchmark gave up its increase as the trading session wore on.  Earlier, Japanese stocks had also fluctuated, but they closed higher as Hong Kong & Chinese shares slipped.  The ¥ dropped the most in more than a month as investors digested the political fallout from a scandal embroiling the country's finance minister.  Emerging-market equities gained for a 4th day & West Texas crude fluctuated as traders weighed strong demand & swelling supplies.

U.S. Stocks Rise as Inflation Meets Estimates: Markets Wrap

US consumer prices continued to firm in Feb, indicating inflation is creeping up toward the Federal Reserve's target without the kind of breakout that would warrant a faster pace of interest-rate hikes.  Both the main consumer price index & the core gauge, which excludes food & energy, rose 0.2 % from Jan, matching the estimate, a Labor Dept report showed.  The CPI was up 2.2% in the 12 months thru Feb, compared with 2.1% in Jan, while the core index increased 1.8% from a year earlier for a 3rd month.  The data indicate inflation is gradually picking up without any big acceleration, in line with policy makers' outlook for price gains steadily approaching their goal & officials' projection for 3 qtr-point interest-rate hikes this year, including one anticipated at the Fed meeting next week.  Treasury yields dipped while the $ gave up gains following the CPI data & came under further downward pressure following news that Sec Rex Tillerson is being replaced.  The lack of an upside surprise on the CPI figures may help calm a market that remains on edge after data released in Feb showed wages & prices rising faster than anticipated, leading investors to sell stocks on concern the Fed would raise interest rates more aggressively.  Fed officials target 2% annual inflation based on a separate index, the Commerce Dept's gauge linked to consumer spending.  Price increases have largely remained below that goal in recent years.  The increase in the core index brought the 3-month annualized gain to 3.1%, following a 2.9% reading in Jan.

U.S. Inflation Picked Up in February Without Any Big Acceleration

Small businesses in the US were the most optimistic in more than 3 decades as recent tax cuts & economic growth spurred expectations for sales gains, according to a National Federation of Independent Business survey.  The index rose 0.7 points to 107.6 (est 107.1), highest since 1983.  32% said now was a good time to expand businesses, unchanged from previous month's record high.  Net 43% expect business conditions to improve.  Almost all of the 10 index components, including inventory plans & sales expectations, increased or held steady in Feb, propelling the gauge to its 2nd-highest level since the survey began in 1973.  Amid tax cuts & deregulation enacted by the Trump administration, businesses cited improved profit trends at the best level since 1987.  The #1 issue for companies, though, continued to be finding skilled labor, with 34% of respondents reporting job openings they couldn't fill, led by the construction & manufacturing industries.   About 15% said they're using temp workers, the highest level since 2016.  66% of firms reported making capital outlays, the highest reading since 2004.  Net 8% of owners reported higher sales in past 3 months, up 3 percentage points.  Those reporting inventory increases rose to a net 7%, strongest since 2000 & net 4% plan to add to inventory, up 1 point from prior month.

U.S. Small Businesses Are More Optimistic Than They've Been in Decades

The inflation report was viewed as favorable by investors & Tillerson's departure is not a bother.  The Fed meeting next week will get a lot of attention in the coming days.  Probably most important is the survey of small business owners on the economy.  That is a solid plus in spite of the chaos in DC. 

Dow Jones Industrials

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