Currently Trending Here
by Sinclair Noe
by Sinclair Noe
DOW + 69 = 16,675
SPX + 11 = 1911
NAS + 51 = 4237
10 YR YLD - .02 = 2.52%
OIL - .24 – 104.11
GOLD – 29.20 = 1264.30
SILV - .40 = 19.14
SPX + 11 = 1911
NAS + 51 = 4237
10 YR YLD - .02 = 2.52%
OIL - .24 – 104.11
GOLD – 29.20 = 1264.30
SILV - .40 = 19.14
The S&P 500 Index closed at another record high. The
Dow Industrial Average is just a little below the May 13 record of 16,715. The
Russell 2000 index of small and mid-caps confirmed the uptrend. The Russell had
been lagging and there was a concern that small caps might drag the blue chips
lower. While the Russell is still down about 2% year to date, on Friday it
moved above its 200 day moving average.
Any time the market is trending, it makes sense to look
for divergences, or any indicator that might signal a change in trend, but the
most important thing to watch is still the trend itself; in other words the
market scorecard is measured in price. And right now the trend is up.
Let’s start with some economic news. The
S&P/Case-Shiller Home Price Indices continued to show gains in prices for
existing home sales; the 10-city composite was up 0.8% and the 20-city
composite was up 0.9% month over month; and respective year over year gains of
12.6% and 12.4%. Nineteen of the 20 cities showed positive returns in March;
New York was the only city to decline. As of March 2014, average home prices
across the United States are back to their mid-2004 levels. Measured from the 2006
peaks, home prices are down 19%.
Mortgage rates started rising in May 2013 as the market
speculated about when the Federal Reserve would start pulling back on its large
scale asset purchase program, at the same time inventories of new and existing
homes dropped, pushing prices higher and affordability was pushed down. One
positive for home sales is that mortgage rates have recently dropped with the
average 30 year fixed at 4.14% and the average 15 year fixed mortgage at 3.25%
the lowest levels since last October.
The Conference Board said its consumer-confidence index
rose to 83 in May from a downwardly revised 81.7 in April. The survey shows 20%
of respondents expect their incomes will improve in the next 6 months; that
doesn’t sound like much but it’s the highest reading since 2007. Other key
elements of the survey: A net 18.2% said jobs were hard to get vs. being
plentiful, compared with 19.8% in April and 26.5% in May 2013. Those who plan
to buy a home within six months fell to 4.9% in May, the lowest since July
2012; that compares with a percentage of 5.6% in April. Those who plan to buy
major appliances within six months fell to 45.1%, the lowest since September
2011.
Durable goods orders increased 0.8% in April. Durable
goods are products designed to last 3 years or longer; so this is a broad
category that includes everything from toasters to cars to nuclear submarines. In
April, the Navy inked a $17.6 billion contract for 10 nuclear-powered attack
submarines; and while that will be money that will circulate through the economy
over several years, it skewed the report. Non-defense capital goods orders fell
1.2%. Business are placing fewer orders while working through a stockpile of
goods amassed in the second half of 2013. Last month, durable goods inventories
rose 0.1% after increasing 0.2% in March.
The Memorial Day holiday signals the unofficial start of
summer and the summer driving season, and that usually equates to higher
gasoline prices at the pump. Usually, but not always. According to the Energy
Information Administration, prices at the pump are going to fall from today’s
levels. This forecast is based on increased crude-oil production and declining
global demand. Rising oil production has
boosted US crude-oil inventories to some 398 million barrels. That’s the
highest level since way back in 1931. Demand is down, in large part because of
better fuel efficiency forced by government MPG mandates. Demand has been
declining since 2007. In many areas, gas prices are the lowest since 2011. Each
penny decline in gasoline puts $1 billion back into people’s pockets.
Speaking in Portugal today, European Central Bank
President Mario Draghi warned that prices in the countries in the euro zone's
stressed periphery were falling too sharply, due to the combination of
belt-tightening and a high exchange rate. He also cited evidence of a debt trap
in stressed countries: the cost of finance for many companies has risen since the
crisis, while falling prices mean they can't generate the profits to service
their debts. Draghi said that the share of viable small businesses that can't
get a loan is only around 1% in Germany or Austria, but around 25% in Spain and
33% in Portugal; Draghi called this imbalance a “credit gap” and blames it for
up to a third of the economic slack in the crisis economies and acting as a
brake on economic recovery. And so Draghi says the ECB will take action June
5th to ward off deflation and support economic recovery; what precisely will be
done is still a matter of speculation.
It is widely anticipated the ECB will cut interest rates
combined with an attempt to boost credit to small and medium sized businesses
by providing long-term funding to banks provided they deploy that capital to
expand business credit. The main lending rate will likely be cut from 0.25% to
0.1% or so. Meanwhile, the deposit rate paid to banks on overnight deposits
will likely be cut from zero to a negative 0.1% or so, in effect charging the
banks for funds they leave with the central bank.
The Federal Trade Commission has issued a report on the
data brokerage industry. The nine data brokers examined in the FTC report were
Acxiom, CoreLogic, Datalogix, eBureau, ID Analytics, Intelius, PeekYou, Rapleaf
and Recorded Future. Data brokers analyze data collected about consumers to
make automated assumptions about them. Consumers are placed in data-driven
social and demographic groups for marketing purposes. The commission says that
the same data that identifies a motorcycle enthusiast could both get him a
discount on a biking magazine and make it easier to charge him more for car insurance.
Another way to look at this is that the consumer is not the customer, rather
the consumer is the product.
And yes, the data brokers know whether you drive a
motorcycle, or smoke cigarettes, or if you are overweight, and how many
bathrooms you have in your home, and if you travel or just like to read
magazines about travel; that’s all in addition to the basics like name,
address, social security number, age, and the bluntly termed “ability to afford
products”.
According to the FTC, the firms have done a great job of
finding data to crunch. One firm has information on 1.4 billion consumer
transactions; another one adds 3 billion new records to its databases each
month. While the report doesn’t address credit scores, the framework of the
debate is much the same. What really worries the FTC is the impossibly opaque
way the data is collected and managed. The data brokers gather their data from
other data brokers rather than directly from an original source.
This is where the commission thinks the government should
get involved. It suggests a law that would mandate the creation of a
centralized portal where data brokers explain themselves, disclose their
sources, and give people the opportunity to opt out; or for more sensitive
data, require consumers to opt in before data could be sold. The commission
hints it might call for some version of the idea that people have a right to
have some things be forgotten, but they don’t actually recommend that data
brokers cull their data, even when that data may be very old and inaccurate.
And there is talk, but nothing concrete, about giving consumers access to their
own data, and the ability to call for some of that data to be corrected or
deleted.
President Obama today outlined a plan to withdraw all but
9,800 American troops from Afghanistan by the end of the year and withdraw the
rest by the end of 2016. Under his plan, 9,800 US troops would remain behind
into next year. By the end of 2015, that number would be reduced by roughly
half. By the end of 2016, the U.S. presence would be cut to a normal embassy
presence. The United States now has about 32,000 troops in Afghanistan.
At some point in the next week, President Obama is expected
to announce Environmental Protection Agency mandated cuts intended to reduce
carbon pollution by regulating carbon dioxide emissions from about 600 existing
coal fired power plants. Obama could not get Congress to take action to address
climate change during his first term, so he changed his tack and is using his
executive authority under the 1970 Clean Air Act to issue the EPA regulation.
As currently drafted, the rule would cut greenhouse-gas
emissions from the utility sector by 25%, the individuals said, but the
baseline for that reduction has not been finalized. The EPA plan resembles
proposals made by the Natural Resources Defense Council, which would allow
states and companies to employ a variety of measures, including new renewable-energy
and energy efficiency projects “outside the fence,” or away from the power plant
site, to meet their carbon- reduction target.
Usually when the EPA regulates pollutants under the Clean
Air Act, the agency sets an emission limit for each facility. By contrast,
under a “mass-based system,” which the EPA is poised to adopt, states would
have to meet an overall target for greenhouse-gas emissions and ensure that
power plants either make those reductions at their facilities or finance
efforts to achieve them in other ways, such as conservation or “green”
generation or possibly through some variation of the cap and trade system.
