Thursday, September 27, 2018

Higher markets after strong economic data

Dow rose 101, advancers over decliners 2-1 & NAZ jumped up 63.  The MLP index crawled higher in the 71s & the REIT index lost 4 to the 346s.  Junk  bond funds dipped lower & Treasuries were pretty much even.  Oil crawled up to 72 gold dropped 9 to 1190.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil71.87

GC=FGold   1,188.80
-10.30  -0.9%

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Stocks were flat as traders assessed the economic data reports, which included GDP, durable goods orders & weekly jobless claims while they digested the Fed's decision to hike rates.  The final Q2 GDP reading came in at 4.2%, matching estimates, while there was an uptick in weekly jobless claims.  Durable goods orders climbed to a 6-month high in Aug.  Yesterday, the FOMC increased its benchmark federal funds rate by a qtr-percentage point, setting a range of 2.0-2.25% & continued to forecast one more rate hike in 2018.  The policy-setting board also removed the word “accommodative” from its statement to describe their position on interest rates.  The move indicates that the Fed, encouraged by rising inflation & strong US hiring, is inching closer to the end of the current rate-hike cycle.  In commodities, oil rose after the gov held out on releasing oil from its strategic reserve.

Stocks flat as traders digest economic data, Fed rate hike

Durable goods orders rose 4.5% in Aug, the most in 6 months, driven primarily by a jump in aircraft demand.  Durable goods are items that are expected to last 3 years or more.  Strong durable goods orders are a signal of a solid economy, as businesses & individuals are only willing to shell out the money for big-ticket items when they are confident in their economic prospects.  However, the solid reading was primarily due to an increase in orders for aircraft, cars & other transportation equipment.  Excluding these items orders increased only 0.1%.  US manufacturing is expanding at a solid pace, with orders up 9.2% year-to-date.  A category of orders that is a proxy for business investment fell 0.5% in Aug after 2 strong months.  Such orders are up 7.4%  this year.  Other measures of the factory sector also point to solid growth.  A survey of purchasing managers found that factory activity expanded in Sep at its fastest pace in 14 years.  Production soared & manufacturers added jobs at a faster pace.  Separately, the gov announced that the economy expanded at a 4.2% annual rate Q2, the fastest pace in 4 years.

Durable goods orders hit six-month high

America's economy extended its strong momentum in Q2 with GDP increasing at a 4.2% rate, according to the final revision.  The prior, first revision pegged Q2 GDP at a 4.2% annual rate, above the originally reported 4.1%.  GDP is one of the main indicators used to measure the health of a country's economy, & according to Q2 GDP reading, the economy appears to be firing on all cylinders.  Corp profit growth moderated in Q2 versus the first, while consumer spending was steady at a 3.8% annual rate, unrevised from the previous estimate.  Business investment and global trade were slightly higher than the prior calculation.  The strong growth in Q2 followed a 2.2% increase in Q1.

America's GDP advances by 4.2% in 2Q

The number of Americans filing for unemployment benefits rose last week, though remained at a historically low level.  Initial jobless claims for unemployment benefits rose 12K to a seasonally adjusted level of 214K for the week ended Sep 22, according to data released by the Labor Dept.  The forecast called for 206K claims.  The 4-week average, considered to be a better gauge of trends in the labor market & a less volatile number, remained at 206K.  Non-seasonally adjusted claims in the Carolinas increased in the past week from the week before, likely due to the effects of Hurricane Florence, which made landfall in North Carolina as a Category 1 storm on Sep 14.  On a seasonally adjusted basis, claims declined in both states from a week earlier.  Initial jobless claims unexpectedly fell to a near-49-year low last week to a seasonally adjusted level of 201K, which was revised to 202K.  The 4-week average remained at 206K.

Weekly jobless claims rise to 214,000

Buyers are back after selling previously this week.  Today's volume may be light with traders more interested in watching the Senate hearings.  However, the ones who are reading the economic news must be encouraged by the strong data.

Dow Jones Industrials

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