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Thursday, October 27, 2016
Mixed markets on mixed economic data
Dow slid back 11, decliners over advancers 2-1 & NAZ fell 13. The MLP index lost 2 to the 307s & the REIT index sank 6+ to 332. Junk bond funds were mixed & Treasuries were sold, taking the yield on the 10 year Treasury up towards 1.9%. Oil rose (but still under 50) & gold inched higher.
Orders for US business equipment fell in Sep by the most in 7 months, indicating corp investment is having trouble gaining
traction. Bookings for non-military capital goods excluding
aircraft dropped 1.2%, erasing a 1.2% Aug gain that was
stronger than previously reported, according to the Commerce Dept. The forecast called
for a 0.1% drop. Demand for all durable goods eased 0.1%. Business
investment remained slow in Q3 as moderating demand and
weakness overseas prompted companies to hold back. Even with stability
in the oil sector, an inventory correction & growth in consumer
spending, manufacturing will probably see little more than a gradual
improvement. Orders declined for fabricated & primary metals, computers & electronics, & communications equipment. The
drop in bookings for all durable goods last month followed a 0.3% Aug advance that was better than previously reported. Orders
for non-defense capital goods excluding aircraft are a proxy for future
business investment in items like computers, engines & communications
gear. Even with the decline, bookings over the 3 months ended in
Sep rose at a 5.2% annualized pace, indicating the worst of
the investment slump is over. Nonetheless,
shipments of those goods, which are used in calculating GDP, fell an annualized 4.4% in Q3. They were up 0.3% from a month earlier after little
change in Aug. Compared with a year earlier, sales of capital
equipment were down 5.2%.
Durable goods orders excluding
transportation equipment, which are often volatile from month to month,
climbed 0.2% after a 0.1% gain.
Filings for US jobless benefits fell for the first time in 3
weeks, staying near a 4-decade low as employers remain unwilling to
part with workers. Jobless claims declined 3K to 258, according to the Labor Dept. The forecast called for
256K. Continuing claims dropped to the lowest level since 2000.
With
the job market improving & the unemployment rate holding at or below 5% this year, fewer skilled candidates are available for openings,
prompting managers to hold onto their staffers. Filings have been below
300K for 86 straight weeks, the longest streak since 1970 & a
level typical for a healthy labor market. The 4-week average of claims increased to 253K from
252K in the prior week. The number continuing to
receive jobless benefits dropped 15K to 2.04M & the unemployment rate among people eligible for benefits
held at 1.5%.
Contracts to buy previously owned US homes rose more than expected
in Sep, another sign of the underlying momentum in the housing
market. The National Association of Realtors (NAR) pending
home sales index, based on contracts signed last month, increased 1.5% to 110.0 following a drop in Aug. The index was 2.4% higher than in Sep 2015. The forecast was for pending home sales to rise 1.2%. The pending home sales index for
Aug was revised slightly lower to 108.4. Across the nation's 4 regions, contracts jumped 4.7% in
the West & also rose in the South. They fell 1.6% in the
Northeast & edged down in the Midwest. Separate data last week showed that home resales surged in
Sep after 2 straight months of declines as first-time buyers
stepped into the market.
Not much going on today. Less than satisfactory earnings reports are dominating the news & the bulls are not able to take stocks higher. The Dow chart below says it all, going nowhere fast. Tomorrow the first estimate for Q3 GDP will be reported & that should be unexciting.
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