Dow was off 33, decliners over advancers 5-4 & NAZ added 1. The MLP index fell 1 to the 239s & the REIT index went up 2+ to the 406s (close to record highs). Junk bond funds were purchased & Treasuries crawled higher in price. Oil sank 3+ to 59 when Saudi Arabia said it will get production up sooner than expected (more below) & gold slid back 2 to 1509.
AMJ (Alerian MLP Index tracking fund)
Stocks open mixed as two-day Fed meeting begins
Oil plunges after report says Saudi Arabia could get production up sooner than expected
Confidence among the nation’s homebuilders rose 1 point to 68 in Sep in the National Association of Home Builders/Wells Fargo Housing Market Index (NAHB) – well above expectations & the highest level of the year. It is also 1 point higher than a year earlier. The reading for Aug, meanwhile, was revised upward by a point. Sentiment sank to a recent low of 56 in Dec, when mortgage interest rates spiked. Anything above 50 on the index is considered positive. A sharp drop in mortgage rates in Aug was clearly behind the confidence in Sep. The average rate on the 30-year fixed fell from 3.96% in mid-Jul to 3.46% by the first week in Sep, according to Mortgage News Daily. “Low interest rates & solid demand continue to fuel builders’ sentiments even as they continue to grapple with ongoing supply-side challenges that hinder housing affordability, including a shortage of lots and labor,” said NAHB Chairman Greg Ugalde. Of the survey's 3 components, current sales conditions increased 2 points to 75, buyer traffic was steady at 50 & sales expectations in the next 6 months fell 1 point to 70. The survey came with warning signs, however. Mortgage rates shot back up at the start of Sep & the US trade war with China continues to be a dark cloud for the industry. “Builders are expressing growing concerns regarding uncertainty stemming from the trade dispute with China,” said Robert Dietz, NAHB’s chief economist. “NAHB’s Home Building Geography Index indicates that the slowdown in the manufacturing sector is holding back home construction in some parts of the nation, although there is growth in rural and exurban areas.” Lack of supply is the biggest barrier to a stronger recovery in today's housing market. The vast majority of new construction is still at the mid to high end of the price spectrum, but demand is strongest at the entry level. Young buyers today are also more interested in urban & suburban homes than previous generations at their age (but that is not where the bulk of construction is growing).
Homebuilder sentiment surges to highest level of the year, but there are warning signs
US manufacturing production rebounds strongly in August
Investors are waiting with bated breath to hear that the Fed will cut its rate again & hope to get a hint there may be more cuts. The Saudi's know how to run their oil business & will have its facilities up & running sooner than expected. With all the recent commotion in the stock market, the Dow is only 300 (1%) below its recent record high.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 58.21 | +0.36 | +0.6% |
| GC=F | Gold | 1,507.70 | -3.40 | -0.2% |
Stocks were mixed at the opening bell. The Dow was the biggest decliner, off 0.3% while the S&P 500 & Nasdaq were little changed. Energy names added to yesterday's gains, which came after drone attacks on Saudi Arabia's biggest oil processing plant caused crude prices to soar more than 14%. West Texas Intermediate crude oil was down 1.3% at $62.09 a barrel. Airlines stocks bounced back after higher energy prices were a headwind yesterday. US manufacturing production bounced back in
Aug, growing at a 0.6% pace, according to the Federal Reserve after growing at 0.4% Jul. This week's headline event is the Fedral Reserve's 2-day meeting on interest rates, which kicks off today. Investors expect the central bank to cut its benchmark interest rate by a qtr of a percentage point to 1.75-2%. It
would be the 2nd such cut in consecutive meetings, as the Fed tries
to protect the economy from a global slowdown & the effects of the
US-China trade war. In Europe,
Germany's DAX was down 0.5% to pace the decline. Overnight,
Japan's Nikkei inched higher for a 10th straight day of gains
while Hong Kong's Hang Seng shed 1.2% after the credit ratings
agency Moody's downgraded the city.
Stocks open mixed as two-day Fed meeting begins
Oil plunged after a report said Saudi
Arabia expects to have its production back to full speed sooner than
expected. The kingdom thinks its facilities will be fully operational in the next 2=3 weeks, according to a Saudi source. Previously it had expected to return to full capacity in a month or longer. Saudi
Arabia, OPEC's most influential member & the world's 2nd-largest
oil producer, accounts for more than 10% of daily crude oil
production. Brent crude was down $3.74 (5.4%) at $65.28 a barrel & West Texas Intermediate was down $3.12 (5.0%) at $59.78 a barrel.
Oil plunges after report says Saudi Arabia could get production up sooner than expected
Confidence among the nation’s homebuilders rose 1 point to 68 in Sep in the National Association of Home Builders/Wells Fargo Housing Market Index (NAHB) – well above expectations & the highest level of the year. It is also 1 point higher than a year earlier. The reading for Aug, meanwhile, was revised upward by a point. Sentiment sank to a recent low of 56 in Dec, when mortgage interest rates spiked. Anything above 50 on the index is considered positive. A sharp drop in mortgage rates in Aug was clearly behind the confidence in Sep. The average rate on the 30-year fixed fell from 3.96% in mid-Jul to 3.46% by the first week in Sep, according to Mortgage News Daily. “Low interest rates & solid demand continue to fuel builders’ sentiments even as they continue to grapple with ongoing supply-side challenges that hinder housing affordability, including a shortage of lots and labor,” said NAHB Chairman Greg Ugalde. Of the survey's 3 components, current sales conditions increased 2 points to 75, buyer traffic was steady at 50 & sales expectations in the next 6 months fell 1 point to 70. The survey came with warning signs, however. Mortgage rates shot back up at the start of Sep & the US trade war with China continues to be a dark cloud for the industry. “Builders are expressing growing concerns regarding uncertainty stemming from the trade dispute with China,” said Robert Dietz, NAHB’s chief economist. “NAHB’s Home Building Geography Index indicates that the slowdown in the manufacturing sector is holding back home construction in some parts of the nation, although there is growth in rural and exurban areas.” Lack of supply is the biggest barrier to a stronger recovery in today's housing market. The vast majority of new construction is still at the mid to high end of the price spectrum, but demand is strongest at the entry level. Young buyers today are also more interested in urban & suburban homes than previous generations at their age (but that is not where the bulk of construction is growing).
Homebuilder sentiment surges to highest level of the year, but there are warning signs
US manufacturing output increased more than
expected in Aug, boosted by a surge in machinery & primary metals
production, but the outlook for factories remains weak against the
backdrop of trade tensions & slowing global economies. The Federal Reserve said manufacturing production rose 0.6% last month after an unrevised 0.4% drop in Jul. The forecast called for manufacturing output to rise 0.2% in
Aug. Production at factories fell 0.4% in Aug on a year-on-year
basis. Manufacturing, which accounts for about 11% of the US
economy, is being hobbled by a year-old trade war between the US & China, & slowing global economic growth. The trade war has
eroded business confidence, leading to a slump in the sector, which
ironically the Trump administration has sought to protect against what
it called unfair foreign competition. A survey early this month
showed a measure of national manufacturing activity contracted in Aug
for the first time in years. Manufacturing has also been hurt
by an inventory overhang, especially in the automotive industry. Fears
that the effects of the trade impasse could spill over to the broader
economy are expected to compel the Fed to cut interest rates again tomorrow to keep the longest expansion in history, now in its 11th
year, on track. Officials from the
central bank are gathering for a 2-day meeting. The
Fed lowered borrowing costs in Jul for the first time since 2008. Motor
vehicles and parts production fell 1.0% last month after increasing
0.5% in Jul. Excluding motor vehicles & parts, manufacturing output
increased 0.6% in Aug after declining 0.5% in the prior month.
Machinery output rebounded 1.6% after dropping 1.7% in Jul. The
jump in manufacturing output in Aug together with a 1.4% rebound in
mining, lead to a 0.6% increase in industrial production last month. That was the largest gain in industrial output since Aug 2018 &
followed a 0.1% dip in Jul. Industrial production rose 0.4% on
year-on-year basis in Aug. Oil & gas well drilling fell 2.5%
last month, declining for a 2nd straight month, & utilities output
increased 0.6% last month. Capacity utilization for the
manufacturing sector, a measure of how fully firms are using their
resources, increased to 75.7% in Aug from 75.4% in Jul. Overall
capacity use for the industrial sector rose to 77.9% from 77.5% in Jul &
is 1.9 percentage points below its 1972-2018 average. Officials at the
Fed tend to look at capacity use measures for signals of how much
“slack” remains in the economy how far growth has room to run before it
becomes inflationary.
US manufacturing production rebounds strongly in August
Investors are waiting with bated breath to hear that the Fed will cut its rate again & hope to get a hint there may be more cuts. The Saudi's know how to run their oil business & will have its facilities up & running sooner than expected. With all the recent commotion in the stock market, the Dow is only 300 (1%) below its recent record high.
Dow Jones Industrials
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