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Wall Street flat as tech gains offset weakness in banks

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Wall Street flat as tech gains offset weakness in banks

By Anya George Tharakan

U.S. stocks were little changed on Friday as bank shares fell on lingering effects of the Federal Reserve’s less aggressive stance on future rate hikes, while a jump in Adobe lifted the technology sector.

The S&P 500 financial sector .SPSY was off 0.82 percent, led by losses in big banks including Wells Fargo (WFC.N) and Bank of America (BAC.N).

The index has outperformed in a post-election rally on bets of simpler regulations and on heightened expectations of higher interest rates.

The rally lost some steam after the Fed on Wednesday stuck to its outlook for a gradual tightening in policy following a widely expected quarter point rate hike.

“We got the rate increase that the market was looking for, albeit some of the future expectations were a little bit more muted then investors had been bracing for,” said Eric Wiegand, senior portfolio manager at the Private Client Reserve at U.S. Bank.

However, the S&P 500 is on track to score gains for the week, helped by the technology sector.

The S&P tech index .SPLRCT was supported on Friday by Adobe’s (ADBE.O) surge to a record high of $130.30 after the Photoshop software maker reported strong earnings.

At 12:33 p.m. ET the Dow Jones Industrial Average .DJI was down 0.74 points, at 20,933.81 and the S&P 500 .SPX was up 0.17 points, or 0.01 percent, at 2,381.55.

The Nasdaq Composite .IXIC was up 2.44 points, or 0.04 percent, at 5,903.20.

Eight of the 11 major S&P sectors marked slight gains, topped by a 0.54 percent rise in utilities .SPLRCU.

Amgen (AMGN.O) dropped 6.7 percent, weighing down the healthcare sector .SPXHC after analysts were unimpressed by results of a study on its cholesterol drug.

Amgen was also the biggest drag on the broader S&P 500 index and the Nasdaq.

Tiffany’s (TIF.N) shares rose 2.8 percent to $92.48, after the high-end jeweler’s fourth-quarter profit topped estimates.

Advancing issues outnumbered decliners on the NYSE by 1,696 to 1,181. On the Nasdaq, 1,437 issues rose and 1,315 fell.

The S&P 500 index showed fifty one 52-week highs and three lows, while the Nasdaq recorded 110 highs and 38 lows.

(Reporting by Anya George Tharakan and Yashaswini Swamynathan in Bengaluru; Editing by Anil D’Silva)
Published at Fri, 17 Mar 2017 16:59:13 +0000

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Market may stall if Trump can’t live up to the hype

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NY Fed president: Market sentiment improved under Trump
NY Fed president: Market sentiment improved under Trump

 Market may stall if Trump can’t live up to the hype

Has the easy money in the Trump bump rally already been made?

The stock market has cooled off a bit lately following its euphoric post-election run from November through the end of February.

Yes, the Dow, S&P 500 and Nasdaq are all still at or near record highs.

But it’s worth noting that CNNMoney’s Fear & Greed Index, a measure of seven different gauges of market sentiment, is now in Neutral mode. It had been showing signs of Greed — and even Extreme Greed — earlier this year.

One important indicator in the index, safe haven demand, is flashing Fear levels. Essentially, more investors are starting to flock to bonds over stocks. Bonds are perceived to be less risky, so this could be a sign that the market is growing a little more worried.

Two other measures in the index, that look at options trading and market volume, have even dipped into Extreme Fear territory.

That could be a worrisome sign.

Experts think that for the market to continue rising, Trump needs to prove that his economic policies can kick GDP growth into a higher gear as promised.

And there are some doubts.

Jeffrey Cleveland, chief economist at Payden & Rygel, said investors may be just a little too bullish on Trump.

He’s not suggesting that the markets are going to crash or that the economy is going to suddenly slow. But he does think it will be difficult for the president to fulfill his promise of getting the economy growing at 4% annual rate anytime soon.

The main reasons? There is just simply so much to do, and it’s not yet clear that Trump will be able to quickly reach a consensus with even Congressional leaders in his own party — let alone Democrats.

Tax reform. Unwinding Obamacare. Tweaking Dodd-Frank. Getting an infrastructure bill that could cost $1 trillion or more. All of this will require a lot of compromises, patience and time.

“The post-Trump optimism may not translate into real growth that quickly,” Cleveland said. “I’m not bearish, but I can’t make the 4% GDP math work. Wall Street could be disappointed.”

Frances Hudson, global thematic strategist at Standard Life Investments, is also a little wary of how bullish the market has become.

She argues that investors may be underestimating how tough it will be for Trump to convince hardline, deficit-hating fiscal conservative Republicans to buy into his plans for stimulus.

“There could be opposition to stimulus from some in the GOP. The Trump administration is more fiscally liberal than a lot of Republicans in Congress,” she said.

Of course, if Trump is able to get many, if not all, of his economic proposals approved in a somewhat speedy fashion, then stocks could wind up going off to the races again.

Ed Campbell, a managing director and portfolio manager with Prudential subsidiary QMA, noted that earnings for the fourth quarter were pretty solid.

He added that Corporate America’s profits should continue to improve thanks to some of Trump’s plans and the boost to consumer and corporate sentiment that has occurred since the election.

But he concedes that the market may be just a little too giddy and that there is still “risk and uncertainty in the U.S. political environment.”

The good news is that you’d be hard-pressed to find a strategist or economist predicting outright doom and gloom.

The so-called animal spirits that have been unleashed since Trump’s win do seem to be real — and maybe even spectacular for any Seinfeld fans out there.

The problem is that nobody seems to be worried about anything. And that’s often a recipe for a letdown.

“The economic expansion is still intact. It may last another 2 to 3 years if we get capital investment and productivity improvement,” said Atul Lele, chief investment officer of Deltec International Group. “But the rate of growth and momentum may slow.”

Published at Fri, 17 Mar 2017 15:01:03 +0000

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Fed raises rates as job gains, firming inflation stoke confidence

 

Fed raises rates as job gains, firming inflation stoke confidence

By Howard Schneider and Jason Lange| WASHINGTON

The U.S. Federal Reserve raised interest rates on Wednesday for the second time in three months, a move spurred by steady economic growth, strong job gains and confidence that inflation is rising to the central bank’s target.

The decision to lift the target overnight interest rate by 25 basis points to a range of 0.75 percent to 1.00 percent marked one of the Fed’s most convincing steps yet in the effort to return monetary policy to a more normal footing.

However, the Fed’s policy-setting committee did not flag any plan to accelerate the pace of monetary tightening. Although inflation is “close” to the Fed’s 2 percent target, it noted that goal was “symmetric,” indicating a possible willingness to allow prices to rise at a slightly faster pace.

Further rate increases would only be “gradual,” the Fed said in its policy statement, with officials sticking to their outlook for two more rate hikes this year and three more in 2018. The Fed lifted rates once in 2016.

Business investment “appears to have firmed somewhat,” the Fed said in language that reflected a stronger sense of the economy’s momentum.

Fresh economic forecasts released with the statement showed little change from those of the December policy meeting and gave little indication the Fed has a clear view of how the policies of Donald Trump’s administration may impact the economy in 2017 and beyond.

“With gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace,” the Fed said, maintaining language it has used in previous statements.

Stock markets extended their gains .SPX and bond yields fell on the benign economic outlook and the continued steady path of interest rate rises signaled by the central bank.

“It relieves some of the fears we’ve had that perhaps the Fed was going to raise rates faster in the future. They’ve chosen not to signal that,” said Brad McMillan, Chief Investment Officer at Commonwealth Financial.

The Fed’s projections showed the economy growing by 2.1 percent in 2017, unchanged from the December forecast. The median estimate of the long-run interest rate, where monetary policy would be judged as having a neutral effect on the economy, held steady at 3.0 percent.

The unemployment rate Fed officials expect by the end of the year was unchanged at 4.5 percent, while core inflation was seen as slightly higher at 1.9 percent versus the previous 1.8 percent forecast.

Fed Chair Janet Yellen is scheduled to hold a press conference at 2:30 p.m. ET to discuss the policy statement.

The rate increase comes amid a broad improvement in the world economic outlook and a sense among Fed policymakers that the U.S. economy is close to the central bank’s employment and inflation goals.

According to the policy statement, risks to the outlook remained “roughly balanced,” the Fed said.

Minneapolis Fed President Neel Kashkari was the only official to dissent in Wednesday’s decision, saying he preferred to leave rates unchanged.

(Reporting by Howard Schneider and Jason Lange; Editing by Paul Simao and David Chance)

 

 
Published at Wed, 15 Mar 2017 19:46:04 +0000

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Wall Street dips as drug stocks drag; Fed meeting in focus

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 Wall Street dips as drug stocks drag; Fed meeting in focus

By Yashaswini Swamynathan

The S&P 500 and the Dow trended lower in afternoon trading on Monday as drug stocks fell, while investors awaited a widely expected interest rate hike later this week.

The 11 major S&P 500 sectors were all trading within small ranges, with the healthcare sector .SPXHC slipping 0.34 percent and on track to snap a three-day winning streak.

The index, which has been the second-best performer year-to-date, was dragged down by Merck (MRK.N) and Bristol-Myers (BMY.N).

A report by the Congressional Budget Office on costs associated with the Republican plan to replace Obamacare could harden opposition to the proposal, adding to the obstacles facing President Donald Trump’s first major legislative effort. The report is due as soon as Monday.

“There is a lot of uncertainty in the healthcare sector,” said Brant Houston, managing director at CIBC Atlantic Trust Private Wealth Management in Colarado.

“Until this whole debate plays out, investors are going to be a little bit concerned about how these stocks will perform.”

At 12:38 p.m. ET (1638 GMT), the Dow Jones Industrial Average .DJI was down 41.76 points, or 0.2 percent, at 20,861.22, the S&P 500 .SPX was down 2.34 points, or 0.09 percent, at 2,370.26.

The Nasdaq Composite .IXIC was up 5.93 points, or 0.1 percent, at 5,867.66, helped by Facebook (FB.O).

Investors also took on a wait-and-see stance ahead of the Federal Reserve’s two-day meeting that starts on Tuesday, where the central bank is widely expected to lift interest rates for the first time this year.

Traders have placed a 94 percent bet that Fed Chair Janet Yellen will announce an increase on Wednesday.

Her comments will closely tracked for clues on whether the central bank could become more aggressive on rates as the U.S. economy shows signs of improvement.

“I think all eyes will be on what the Fed does and, more importantly, what they say in their comments,” Houston said.

Shares of Mobileye (MBLY.N) jumped nearly 30 percent to $61.11 after chipmaker Intel (INTC.O) agreed to buy the driverless technology maker for $15.3 billion. Intel’s shares were off 1.9 percent.

Chipmaker Nvidia (NVDA.O), also involved in developing driverless technology, rose 2.2 percent.

Wynn Resorts (WYNN.O) was the top stock on the S&P, up 4 percent at $103.58 after Morgan Stanley reiterated its “buy” rating and said the company could gain a meaningful market share in Macau.

Advancing issues outnumbered decliners on the NYSE by 1,717 to 1,132. On the Nasdaq, 1,741 issues rose and 1,023 fell.

The S&P 500 index showed 31 new 52-week highs and three new lows, while the Nasdaq recorded 81 new highs and 34 new lows.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Sriraj Kalluvila)
Published at Mon, 13 Mar 2017 17:11:45 +0000

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Goldman sees U.S. rate hike in June after one in March

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 Goldman sees U.S. rate hike in June after one in March

Goldman Sachs economists said on Friday they stuck with their call that the Federal Reserve will increase interest rates next week but now see its next hike in June rather than September in the wake of a stronger-than-forecast jobs report for February.

 

They also revised their forecast on the timing for the Fed to begin balance sheet normalization, or a shrinkage of its bond holdings, to the fourth quarter from an earlier view of mid-2018, they wrote in a research note published on Friday.

 

(Reporting by Richard Leong and Jennifer Ablan; Editing by Chizu Nomiyama)
Published at Fri, 10 Mar 2017 15:32:39 +0000

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Schedule for Week of Mar 12, 2017

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By SideHustleCoach from Pixabay

Schedule for Week of Mar 12, 2017

by Bill McBride on 3/11/2017 08:11:00 AM

The key economic reports this week are Retail Sales, Housing Starts, and the Consumer Price Index (CPI).

For manufacturing, February industrial production, and the March New York, and Philly Fed manufacturing surveys, will be released this week.

The FOMC meets on Tuesday and Wednesday, and the FOMC is expected to raise rates at this meeting.

—– Monday, Mar 13th —–

10:00 AM ET: The Fed will release the monthly Labor Market Conditions Index (LMCI).10:00 AM: Regional and State Employment and Unemployment (Monthly) for January 2017

—– Tuesday, Mar 14th—–

6:00 AM ET: NFIB Small Business Optimism Index for February.8:30 AM: The Producer Price Index for February from the BLS. The consensus is for 0.1% increase in PPI, and a 0.2% increase in core PPI.

—– Wednesday, Mar 15th —–

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.Retail Sales8:30 AM ET: Retail sales for February will be released.  The consensus is for 0.2% increase in retail sales in February.

This graph shows retail sales since 1992 through January 2017.

8:30 AM: The Consumer Price Index for February from the BLS. The consensus is for 0.1% increase in CPI, and a 0.2% increase in core CPI.

8:30 AM ET: The New York Fed Empire State manufacturing survey for March. The consensus is for a reading of 15.7, down from 18.7.

10:00 AM: The March NAHB homebuilder survey. The consensus is for a reading of  66, up from 65 in February. Any number above 50 indicates that more builders view sales conditions as good than poor.

10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for January.  The consensus is for a 0.3% increase in inventories.

2:00 PM: FOMC Meeting Announcement. The FOMC is expected to increase the Fed Funds rate 25 bps at this meeting.

2:00 PM: FOMC Forecasts This will include the Federal Open Market Committee (FOMC) participants’ projections of the appropriate target federal funds rate along with the quarterly economic projections.

2:30 PM: Fed Chair Janet Yellen holds a press briefing following the FOMC announcement.

—– Thursday, Mar 16th —–

Total Housing Starts and Single Family Housing Starts8:30 AM: Housing Starts for February.The consensus is for 1.266 million, up from the January rate of 1.246 million.

8:30 AM ET: The initial weekly unemployment claims report will be released.  The consensus is for 242 thousand initial claims, down from 243 thousand the previous week.

8:30 AM: the Philly Fed manufacturing survey for March. The consensus is for a reading of 32.5, down from 43.3.

Job Openings and Labor Turnover Survey10:00 AM: Job Openings and Labor Turnover Survey for January from the BLS.

This graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings were mostly unchanged in December at 5.501 million compared to 5.505 million in November.

The number of job openings (yellow) were up 4% year-over-year, and Quits were down 3% year-over-year.

—– Friday, Mar 17th —–

Industrial Production9:15 AM: The Fed will release Industrial Production and Capacity Utilization for February.This graph shows industrial production since 1967.

The consensus is for a 0.2% increase in Industrial Production, and for Capacity Utilization to increase to 75.4%.

10:00 AM: University of Michigan’s Consumer sentiment index (preliminary for March). The consensus is for a reading of 97.0, up from 96.3 in February.

Published at Sat, 11 Mar 2017 13:11:00 +0000

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Fresh evidence women are better investors than men

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State Street: Why we commissioned the Wall St. 'Fearless Girl'
State Street: Why we commissioned the Wall St. ‘Fearless Girl’

  @byHeatherLong

Have you seen the statue of the “fearless girl” facing the Wall Street bull?

State Street Global Advisors put up the statue to mark International Women’s Day and it’s getting a lot of attention.

Here’s one more reason to sit up and take notice: Women are better investors than men, according to a growing body of evidence.

The big investment firm Fidelity says that female investors outperformed males last year by 0.3%. In fact, Fidelity found that females outdid men in the past decade.

Data from Openfolio, an investment tracking app, also found the same trend. Women have topped men every year for the past three years since Openfolio began tracking results.

“Women are doing better than men and with a lot less risk,” says Kathy Murphy, president of personal investing at Fidelity.

Men have a bad tendency to buy and sell stocks too often. Very few people have mastered the art of timing the market. So too much trading eats into the guys’ returns.

2017: The year of ‘financial feminism’

Terrance Odean, a professor at Berkeley’s Haas School of Business, who has spent his career studying investor trends, found that men traded 45% more than women in the 1990s. He blamed it on male overconfidence.

Women, in contrast, tend to be “buy and hold” investors. It’s exactly the advice famous money gurus like Warren Buffett and Jack Bogle give people: Put your money into cheap index funds and then don’t touch it for years — or decades.

“Women have long-term goals, and they stick with the plan,” says Murphy. They focus on saving and investing for retirement or a kid’s college fund, not on outsmarting the market.

But here’s where women still mess up: They tend to be great savers, but they are often fearful of the stock market. They lack confidence about investing, despite a growing body of evidence that women are gifted at it.

Former Wall Street power woman Sallie Krawcheck is on a mission to empower women to be financially savvy. She’s declared 2017 the “year of financial feminism.”

“We women will not be fully equal with men until we are financially equal with men,” Krawcheck told CNN’s Maggie Lake at the New York Stock Exchange. Krawcheck recently launched Ellevest, a financial firm geared entirely toward women. Ellevest’s tagline is “Invest like a woman, because money is power.”

Why women can’t rely on men to handle money

Nearly 90% of women are going to have to take sole control over their finances at some point in their lives, notes Kate Warne an investment strategist at Edward Jones. Women are getting married later, divorcing more and frequently outliving their spouses. They can’t rely on men to handle the money.

“Whether you’re afraid or not, investing is something you need to learn how to do,” says Warne.

She started reading investment advice books after college when she landed her first job. She realized she liked it so much, she changed careers and became an investment adviser.

Women don’t beat men by a huge amount — Openfolio found women outperformed men by about 0.2% last year — but that’s still a “win,” and can really add up over time if women keep their money in the market for decades.

Published at Wed, 08 Mar 2017 20:45:37 +0000

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Trump adviser is betting against the Trump stock rally

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Trump speech sends Dow above 21,000
Trump speech sends Dow above 21,000

Carl Icahn is such a fan of President Trump that on election night he literally left the victory party early to buy stocks that were crashing in the overnight markets.

Icahn was one of Trump’s earliest backers on Wall Street and the billionaire investor even agreed to serve as the president’s special adviser on regulatory reform.

Despite all that Trump enthusiasm, Icahn’s hedge fund seems to be positioning for the end of the Trump party.

Icahn Enterprises(IEP), which Icahn controls and serves as chairman of, quietly disclosed last week that it had a net short position in its investment portfolio of 128% as of the end of last year. That’s a fivefold increase from the end of 2015.

The net short position means Icahn’s firm is betting against 1.3 shares for every one share it’s betting on. In other words, Icahn’s investment portfolio will generally gain value when prices decline, and vice versa.

“I am concerned at this point that the market has run ahead of itself,” Icahn told CNNMoney in a phone interview on Tuesday.

Icahn said one “worrisome thing is that so much money has run into ETFs.” Icahn voiced concern that the flood of retail money into passive investments like ETFs will create a stampede when markets turn south.

However, Icahn explained that his firm isn’t as negative as suggested by the net short figure, which only covers its investment segment and not its various other holdings.

He noted that Icahn Enterprises has a lot of control positions that are not counted in the investment segment. For instance, Icahn Enterprises owns Pep Boys and manufacturer Federal-Mogul.

But Icahn Enterprises’ top executives sounded very cautious during last week’s conference call.

“We continue to have a fairly bearish view,” Icahn Enterprises CEO Keith Cozza said during the call.

“The market does seem to be priced for perfection,” he said.

Besides the short position, Icahn’s firm is also taking some defensive maneuvers. In December, it sold American Railcar Leasing for up to $3.4 billion and last week it unloaded the shuttered Trump Taj Mahal casino in Atlantic City to the company behind the Hard Rock Café for an undisclosed sum.

The investment company also refinanced $1.2 billion of debt and raised $600 million in cash through a stock offering. The firm’s balance sheet has slashed its total debt to the lowest level in nearly three years.

“It’s not the greatest time for large, long investments,” Icahn’s CEO said during the call.

Icahn executives voiced concern about “very high market multiples.”

The S&P 500 is trading at 17.9 times forward earnings, the highest P/E ratio since 2004, according to FactSet.

Valuation levels have climbed to high levels because the big Trump rally — the S&P 500 is up 11% since November 8 — has been fueled by expectations of tax cuts and other stimulus, not fundamental improvement in corporate profits.

Icahn Enterprises declined to explain which specific industries the firm is betting against. However, Cozza seemed worried about Trump’s trade plans, saying that “certain industries” are “especially susceptible to potential border adjusted tax plans.”

House Republicans have proposed a border adjustment tax that aims to encourage more companies to make things in the U.S. by imposing a tax on imported goods. Retailers are strongly opposed to a BAT because it could make the imported goods they sell a lot more expensive.

Icahn’s cautious positioning stands in contrast to his opportunistic stance back in early November. As global markets panicked over Trump’s victory, Icahn literally left the victory party in Manhattan early to buy “a lot of stock” in overnight markets.

“I’m sad I didn’t buy a lot more,” Icahn told CNN’s Poppy Harlow in early December.

But Icahn also signaled uneasiness over the rally in that interview, which was conducted as the Dow was fast approaching the 20,000 milestone. The billionaire said the rally had “gone too far.”

Of course, the markets have only gotten higher since then. Last week, the Dow zoomed past the 21,000 level following Trump’s well-received speech to Congress. CNNMoney’s Fear and Greed Index is flashing “greed” and last week it even tipped over into “extreme greed” mode.

This is hardly the first time Icahn has gone negative on the market. He emerged as a vocal bear in 2015, warning of a “catastrophe” in a September 2015 video dubbed “Danger Ahead.”

Icahn’s firm was 149% net short as of last June amid worries about a bubble in risky junk bonds.

But the numbers put out last week show that Icahn’s firm remains very cautious despite Trump’s victory.

Published at Tue, 07 Mar 2017 17:14:49 +0000

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Arizona Challenges the Fed’s Money Monopoly

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A police officer keeps watch in front of the U.S. Federal Reserve building in Washington, DC, U.S. on October 12, 2016. REUTERS/Kevin Lamarque/File Photo

Arizona Challenges the Fed’s Money Monopoly

By: Ron Paul | Sun, Mar 5, 2017


History shows that, if individuals have the freedom to choose what to use
as money, they will likely opt for gold or silver.

Of course, modern politicians and their Keynesian enablers despise the gold
or silver standard. This is because linking a currency to a precious metal
limits the ability of central banks to finance the growth of the welfare-warfare
state via the inflation tax. This forces politicians to finance big government
much more with direct means of taxation.

Despite the hostility toward gold from modern politicians, gold played a role
in US monetary policy for sixty years after the creation of the Federal Reserve.
Then, in 1971, as concerns over the US government’s increasing deficits led
many foreign governments to convert their holdings of US dollars to gold, President
Nixon closed the gold window, creating America’s first purely fiat currency.

America’s 46-year experiment in fiat currency has gone exactly as followers
of the Austrian school predicted: a continuing decline in the dollar’s purchasing
power accompanied by a decline in the standard of living of middle- and working-class
Americans, a series of Federal Reserve-created booms followed by increasingly
severe busts, and an explosive growth in government spending. Federal Reserve
policies are also behind much of the increase in income inequality.

Since the 2008 Fed-created economic meltdown, more Americans have become aware
of the Federal Reserve’s responsibility for America’s economic problems. This
growing anti-Fed sentiment is one of the key factors behind the liberty movement’s
growth and represents the most serious challenge to the Fed’s legitimacy in
its history. This movement has made “Audit the Fed” into a major national issue
that is now closer than ever to being signed into law.

Audit the Fed is not the only focus of the growing anti-Fed movement. For
example, this Wednesday the Arizona Senate Finance and Rules Committees will
consider legislation (HB 2014) officially defining gold, silver, and other
precious metals as legal tender. The bill also exempts transactions in precious
metals from state capital gains taxes, thus ensuring that people are not punished
by the taxman for rejecting Federal Reserve notes in favor of gold or silver.
Since inflation increases the value of precious metals, these taxes give the
government one more way to profit from the Federal Reserve’s currency debasement.

HB 2014 is a very important and timely piece of legislation. The Federal Reserve’s
failure to reignite the economy with record-low interest rates since the last
crash is a sign that we may soon see the dollar’s collapse. It is therefore
imperative that the law protect people’s right to use alternatives to what
may soon be virtually worthless Federal Reserve notes.

Passage of HB 2014 would also send a message to Congress and the Trump administration
that the anti-Fed movement is growing in influence. Thus, passage of this bill
will not just strengthen movements in other states to pass similar legislation;
it will also help build support for the Audit the Fed bill and legislation
repealing federal legal tender laws.

This Wednesday I will be in Arizona to help rally support for HB 2014, speaking
on behalf of the bill before the Arizona Senate Finance Committee at 9:00 a.m.
I will also be speaking at a rally at noon at the Arizona state capitol. I
hope every supporter of sound money in the Phoenix area joins me to show their
support for ending the Fed’s money monopoly.


Buy Ron Paul’s latest book, Swords into Plowshares, here.


Ron Paul

Dr. Ron Paul
The Foundation for Rational Economics & Education

Ron Paul

Congressman Ron Paul of Texas enjoys a national reputation as the premier
advocate for liberty in politics today. Dr. Paul is the leading spokesman
in Washington for limited constitutional government, low taxes, free markets,
and a return to sound monetary policies based on commodity-backed currency.
He is known among both his colleagues in Congress and his constituents for
his consistent voting record in the House of Representatives: Dr. Paul never
votes for legislation unless the proposed measure is expressly authorized
by the Constitution. In the words of former Treasury Secretary William Simon,
Dr. Paul is the “one exception to the Gang of 535” on Capitol Hill.

Copyright © 2006-2017 Dr. Ron Paul

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Published at Sun, 05 Mar 2017 15:11:10 +0000

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What Is Fueling This Rally

What Is Fueling This Rally

No matter where you stand politically and what you may think of President Donald Trump, you’ve got to admit that he’s a pure breed optimist. And just maybe, despite all the media poison and the political infighting, it is that very sense of good old fashioned American can-do optimism that continues to fuel the flames of the Saturn V mega rocket that has propelled equity markets to all time highs with apparently no end in sight.

2017-03-01_spoos_update

I wonder how many participants had a chance to enter before the rocket launch. Perhaps 2 or 3 percent tops? Now ask yourself this: How many are now still riding this campaign? A fraction of a percent maybe? So if you’re a loyal reader here and traded along your humble host then consider yourself part of a very small and exclusive group of traders.

I’m not saying that to pad our own backs or reel in momentary glory. First of all this is not the first time we’ve caught a trend (although this one thwarts almost everything I have witnessed) and secondly you’re only as good as your last trade. But the take away message for all of us once again is that you do not need to be a genius, that you don’t need to attend expensive seminars or buy dozens of trading books, to become a consistent trader. That’s the good news. The bad news for many however is that there are no shortcuts.

What is required most of all are the qualitative aspects of trading: determination, diligence, consistency, and discipline. Trading is an acquired skill and not a academic one. As such it’s much more comparable to playing the piano than studying for an exam. The educational aspects are of course an essential part of it, but just like studying the law doesn’t make you a good lawyer, reading books on how to trade doesn’t make you a good trader. You simply become a good trader by trading, and by making many small mistakes. By following a simple set of rules which we post here on a daily basis and have been doing so over the past eight years.

2017-03-01_gold_update

Gold was unfortunately taken to the woodshed overnight and our campaign ended before it managed to get out of the gate. We raked in 1.5R plus minus here which ain’t bad but not what we had hoped for.

2017-03-01_silver_update

Silver on the other hand is still in the running and I’ve advanced my trailing stop to < 18.275. It either gets going now or most likely we’ll see another visit of those daily NLSL near the 18 mark. Where I incidentally may enter again if conditions favor it.

2017-03-01_corn

Corn is a potential long here but not just yet. I’m waiting for a pronounced spike low preferably followed by a retest. Reason for my interest in a long position is the daily panel which requires little explanation.

2017-03-01_AUDUSD

AUD/USD joined gold in the woodshed and I’m actually re-entering here, which is something I very rarely do. My justification is technical of course and based on the daily panel which shows us a touch of two Net-Line Sell Levels (NLSLs) as well as the still rising 25-day SMA. If that won’t hold then the Ozzie Dollar is most likely going to slide to 0.76 or lower.

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Published at Wed, 01 Mar 2017 14:00:52 +0000

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The Trader’s Wire Market Update for Friday, March 3, 2017

The SPX declined 14.04 points yesterday to close at 2381.92, giving back 43% of Wednesday’s gain.

TOT daily traders, who had been 200% long for Wednesday’s big rally, were on the sidelines  yesterday and gave back none of Wednesday’s gains.

Short-Term

The daily model is bearish again today.  TOT daily traders are advised to go 200% short at SPX 2380 stop; 2377 limit.  If and when you go short, use a protective buy stop at SPX 2404.

Intermediate-Term

The Intermediate Term Model is bearish.  This signal was wrong for a surprising amount of time, but at the present time, it seems more likely than the more commonly held bullish perspective.

Long-Term

The super long term perspective (a prediction, not a forecast!) for the stock market remains bearish (as it has been since January 2000 after having been bullish for over 25 years, from December 1974 until then).  I believe that, adjusted for REAL inflation (not the funny numbers the Social Security Administration uses) the stock market will be lower in real dollars in 2020 than it was in 2000.  For a long time, I’ve been saying, “I also expect that our new 2016-elected President will have some very serious problems during his/her single term in office.”  That belief stands.

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Schedule for Week of Mar 5, 2017

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Schedule for Week of Mar 5, 2017

by Bill McBride on 3/04/2017 08:09:00 AM

The key report this week is the February employment report on Friday.

Also the January Trade Deficit, and the Q4 Quarterly Services and the Fed’s Q4 Flow of Funds reports, will be released this week.

—– Monday, Mar 6th —–

10:00 AM: Manufacturers’ Shipments, Inventories and Orders (Factory Orders) for January. The consensus is a 1.1% increase in orders.
—– Tuesday, Mar 7th—–

U.S. Trade Deficit8:30 AM: Trade Balance report for January from the Census Bureau.This graph shows the U.S. trade deficit, with and without petroleum, through December. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The consensus is for the U.S. trade deficit to be at $48.5 billion in January from $44.3 billion in December.

3:00 PM: Consumer credit from the Federal Reserve.  The consensus is for a $18.3 billion increase in credit.

—– Wednesday, Mar 8th —–

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.8:15 AM: The ADP Employment Report for February. This report is for private payrolls only (no government). The consensus is for 183,000 payroll jobs added in February, down from 246,000 added in January.

10:00 AM: Monthly Wholesale Trade: Sales and Inventories for January.

—– Thursday, Mar 9th —–

8:30 AM ET: The initial weekly unemployment claims report will be released.  The consensus is for 238 thousand initial claims, up from 223 thousand the previous week.10:00 AM: The Q4 Quarterly Services Report from the Census Bureau.

12:00 PM: Q4 Flow of Funds Accounts of the United States from the Federal Reserve.

—– Friday, Mar 10th —–

8:30 AM: Employment Report for February. The consensus is for an increase of 195,000 non-farm payroll jobs added in February, down from the 227,000 non-farm payroll jobs added in January.The consensus is for the unemployment rate to decline to 4.7%.

Year-over-year change employmentThis graph shows the year-over-year change in total non-farm employment since 1968.

In January, the year-over-year change was 2.34 million jobs.

A key will be the change in wages.

Published at Sat, 04 Mar 2017 13:09:00 +0000

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History In The Making

 

History In The Making

Ludwig van Beethoven’s Symphony No. 7 in A major, consists of four incredible movements and was composed between the years 1811 and 1812, at which time the poor man had already turned almost completely deaf. I must admit that listening to this symphony in particular often brings tears to my eyes. First as a visceral response to its unparalleled beauty and technical perfection, but even more so knowing that Beethoven never had been able to actually listen to his own creation.

The story almost seems like a cruel punishment of the Gods portrayed in ancient Greek or Roman mythology. To be handed such a divine talent or gift, but at the same time losing your own ability to enjoy it the more you actually use it. I can only imagine the mental anguish and emotional torment Beethoven was forced to endure over the course of about 20 years up until his death. He died pretty poor as most of his income was dependent on live performances (Spotify wasn’t available until about 180 years later), which obviously turns into a tough act to pull off if you’re as deaf as rock wrapped into a blanket.

I sometimes wonder if the knowledge of his future fame would have offered him much solace. Knowing the mentality of the Germans quite well as I sprung from that same gene pool I can assure you that we are quite a narcissistic bunch underneath the cold exterior. So my hunch would be that it would probably offered him at least some comfort. What impresses me the most however is that his torment did not detract him from his mission to do what he was born to do and he continued writing two more symphonies of which the 9th is the one he most definitely never heard a single tone.

Now think about that next time when you’re having a tough day or when you find yourself blaming others or your circumstances for not being able to pursue your dreams. Beethoven was a giant and unfortunately they don’t make them like this anymore.

2017-03-02_spoos_update

Now what inspired this intro was the concept of perfection, to which LVB’s 7th symphony is without doubt a timeless example. When it comes to trading of course we sometimes refer to charts or campaigns in an emotional fashion, but rarely do they entail the concept of perfection and beauty. But if I look at our entry three weeks ago and consider the ensuing rally then I cannot help but feel awe and joy. For one we were able to jump on board and that’s on us, we should be proud. But this rally stands on its own in that it is almost historical in its relentless propagation.

If someone would ask me to point toward one of the best campaigns in my life then this one would probably be among the top three. I remember riding gold and crude a year or two ago but although those rallies were impressive I believe they are thwarted by this one. Could we be looking at perfection here? A rally that future traders will point toward and say – “heck grandpa/grandma, I wish I had been around to jump on that one.” And you’ll say “well, as a matter of fact…”

Anyway, this campaign is now bordering the ridiculous and I’m now advancing my stop to below the 2380 mark. There’s really nothing left to be said here – technically we are in uncharted territory and it’ll end when it will end. We don’t ask questions and ride it until that moment arrives.

2017-03-02_silver_update

Silver hasn’t gone anywhere and my trailing stop remains where it is. Could we be painting a little pennant here? If so then we’re in good shape but we could fall prey to a fake out spike lower. I’m comfortable trailing where I’m at however.

2017-03-02_gold_setup

Gold has lost much of its luster in the past few days but I think we’ve got a possible long candidate here again once the short term panel paints something resembling a spike low preferably followed by a retest. I very much like the context on the daily panel. Although gold has been pounded lately I think this may be the big shake out before a jump higher. We’ve accumulated a ton of support context here just a few handles away and the potential for a continuation of the current daily trend is pretty good.

2017-03-03_events

Yellen is scheduled to deliver a speech tomorrow and perhaps that’s why equities are in a rush to paint a bit more green before she says something stupid. I for one won’t add any more exposure until then. Ms. Market has been good to me/us and there’s no reason to test my luck.
Published at Thu, 02 Mar 2017 14:26:07 +0000

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Merrill on Possible March Fed Hike

 

Merrill on Possible March Fed Hike

by Bill McBride on 3/02/2017 10:43:00 AM

Expectations of a March rate hike have increased significantly over the last few days. Some market based measures now show an 80%+ chance of a rate hike.

A few excerpts from Merrill Lynch research:

The market has moved dramatically in the past two days to price in a hike at the March meeting. This was partly triggered by hawkish commentary from regional Fed presidents, including NY Fed President Dudley yesterday. While we agree that the chances of a hike in March have increased, given the Fed commentary, we are sticking with our baseline forecast for the Fed to stay on hold at the next meeting and hike in June. That said, it is a very close call …

What to watch:
1. Fed speeches, with particular focus on Yellen and Fischer on Friday. Will they push back at all against market pricing for March? Or will they make comments similar to Dudley …

2. Employment report on March 10th: While the Fed does not respond to just one report, they would like to see something trend-like to support a hike. This means close to 175K on NFP, a 0.2/0.3% mom rebound in wages and the unemployment rate slipping/holding steady.

The FOMC meeting will be on March 14th and 15th.

Published at Thu, 02 Mar 2017 15:43:00 +0000

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Weekly Initial Unemployment Claims decrease to 223,000

 

Weekly Initial Unemployment Claims decrease to 223,000

by Bill McBride on 3/02/2017 09:18:00 AM

The DOL reported:

In the week ending February 25, the advance figure for seasonally adjusted initial claims was 223,000, a decrease of 19,000 from the previous week’s revised level. This is the lowest level for initial claims since March 31, 1973 when it was 222,000. The previous week’s level was revised down by 2,000 from 244,000 to 242,000. The 4-week moving average was 234,250, a decrease of 6,250 from the previous week’s revised average. This is the lowest level for this average since April 14, 1973 when it was 232,750. The previous week’s average was revised down by 500 from 241,000 to 240,500.
emphasis added

The previous week was revised down.

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 234,250.

This was lower then the consensus forecast.

The low level of claims suggests relatively few layoffs.

Published at Thu, 02 Mar 2017 14:18:00 +0000

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U.S. jobless claims near 44-year-low as labor market tightens

Photo

 U.S. jobless claims near 44-year-low as labor market tightens

By Lucia Mutikani| WASHINGTON

The number of Americans filing for unemployment benefits fell to near a 44-year-low last week, pointing to further tightening of the labor market even as economic growth appears to have remained moderate in the first quarter.

The stronger labor market combined with rising inflation could push the Federal Reserve to raise interest rates this month.

Initial claims for state unemployment benefits dropped 19,000 to a seasonally adjusted 223,000 for the week ended Feb. 25, the lowest level since March 1973, the Labor Department said on Thursday. Data for the prior week was revised to show 2,000 fewer applications received than previously reported.

It was the 104th straight week that claims remained below 300,000, a threshold associated with a healthy labor market. That is the longest stretch since 1970, when the labor market was much smaller. It is now at or close to full employment, with an unemployment rate of 4.8 percent.

Economists polled by Reuters had forecast new claims for unemployment benefits dipping to 243,000 in the latest week. Financial markets are already pricing in a rate hike at the Fed’s March 14-15 policy meeting.

U.S. stock index futures rose after the data on Thursday. The U.S. dollar .DXY also firmed against a basket of currencies, while prices for U.S. government debt fell.

A survey from the U.S. central bank on Wednesday showed the labor market remained tight in early 2017, with some of the Fed’s districts reporting “widening” labor shortages.

The government reported on Wednesday that the personal consumption expenditures (PCE) price index jumped 1.9 percent in the 12 months through January, the biggest gain since October 2012. The PCE price index increased 1.6 percent in December.

The core PCE, the Fed’s preferred inflation measure, increased 1.7 percent, still below its 2 percent target.

 

TEPID GROWTH

A Labor Department analyst said there were no special factors influencing last week’s claims data. Only claims for Oklahoma were estimated.

The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 6,250 to 234,250 last week, the lowest reading since April 1973.

Data this week showed tepid growth in consumer spending in January, weak equipment and construction spending, and a wider goods trade deficit, suggesting the economy struggled to gain momentum early in the first quarter after slowing in the final three months of 2016.

The Atlanta Fed is forecasting first-quarter gross domestic product rising at a 1.8 percent annualized rate. The economy grew at a 1.9 percent pace in the fourth quarter.

Thursday’s claims report also showed the number of people still receiving benefits after an initial week of aid increased 3,000 to 2.07 million in the week ended Feb. 18. The four-week average of the so-called continuing claims edged up 750 to 2.07 million.

The continuing claims data covered the survey week for February’s unemployment rate. The four-week moving average of claims fell 21,500 between the January and February survey periods, suggesting an improvement in the jobless rate.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

 
Published at Thu, 02 Mar 2017 14:03:09 +0000

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This Indicator Points to a Top-Heavy Stock Market

 

This Indicator Points to a Top-Heavy Stock Market

The S&P 500 index reached new highs following President Trump’s speech to Congress that promised increased infrastructure spending, lower corporate taxes, and less red tape for the financial industry. At the same time, billionaire investor Warren Buffett suggested that stocks are comparatively cheap based on where interest rates are in an interview with CNBC, and FactSet’s Earnings Insights showed two-thirds of S&P 500 companies beating Q4’16 estimates.

Despite these positive developments, the CME Group’s FedWatch points to a 68.6% chance of a March interest rate hike and FactSet’s data shows that two-thirds of companies issued negative earnings guidance for Q1’17. The combination of rising interest rates and slower earnings growth could force valuations to move lower, especially with the index’s price-earnings ratio standing at 26.9x – significantly higher than its 14.65x mean.

Technical indicators seem to confirm that equity valuations have become frothy and a downturn could be a possibility over the coming weeks. In particular, more than 400 S&P 500 components are trading above their 200-day moving average, which is the highest level in at least a year. The last time these levels were reached in early-2015 and late-2015, equities moved significantly lower to more rational price points from a technical perspective.

The S&P 500 index’s relative strength index (RSI) of 81.86 is a further sign of an overextended market with 70.0 being the upper bound for the indicator. However, the moving average convergence-divergence (MACD) remains in a bullish uptrend dating back to early-February. The key levels to watch at this point are R1 resistance at 2,399.57 and R2 resistance at 2,435.50, which could prove to be near-term resistance to the rally.

Traders and investors may want to take a conservative approach to the market after the recent rally given both fundamental and technical factors pointing to overbought conditions.
Published at Wed, 01 Mar 2017 20:11:00 +0000

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U.S. Light Vehicle Sales at 17.5 million annual rate in February

 

By qimono from Pixabay

U.S. Light Vehicle Sales at 17.5 million annual rate in February

by Bill McBride on 3/01/2017 03:10:00 PM

Based on a preliminary estimate from WardsAuto, light vehicle sales were at a 17.47 million SAAR in February.

That is down about 1% from February 2016, and unchanged from last month.

Vehicle Sales
Click on graph for larger image.

This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for February (red, light vehicle sales of 17.47 million SAAR from WardsAuto).

This was below the consensus forecast of 17.7 million for February.

After two consecutive years of record sales, it looks like sales will mostly move sideways in 2017.

Vehicle Sales

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Note: dashed line is current estimated sales rate.

Published at Wed, 01 Mar 2017 20:10:00 +0000

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What Wall Street wants to hear from Trump

What Wall Street wants to hear from Trump

  @mattmegan5

 President Trump’s pro-business promises have helped lift the Dow an incredible 2,500 points since the election.

Now Wall Street wants him to deliver.

Investors will be watching very closely when Trump addresses Congress on Tuesday night. They crave details about the timing and specifics of Trump’s plans to slash taxes, rip up regulations and unleash infrastructure spending.

On the other hand, signs that the Trump platform is being delayed or scaled back could leave Wall Street bummed.

The stock market has made the stakes clear: The Dow has closed at a record high 12 days in a row and is going for a 13th on Tuesday, a feat that has never happened before.

“Expectations are phenomenally high,” Peter Boockvar, chief market analyst at The Lindsey Group, wrote in a note to investors.

Here’s a guide to what investors want to hear from Trump.

Taxes, taxes, taxes, taxes…

A CNNMoney survey of economists on Monday found that what they want most is details on Trump’s tax plan: When will it happen? How big will it be?

Hopes for big tax cuts have been at the heart of the post-election rally. Wall Street is betting that enormous tax savings will translate to juicier profits.

“Unfortunately I’m going to have to torture myself and watch Tuesday night in search of some comments on tax reform,” Boockvar said, adding that he normally skips these types of speeches.

Border adjustment tax?

A big key will be whether Trump throws his weight behind an idea from House Republicans called the border adjustment tax as a way to bring jobs back to the United States.

The complex proposal would give tax breaks to American companies that ship products to other countries and strip tax breaks from American companies that import goods.

“What I hope to hear from Trump is some well-reasoned policy proposals, and not just more … babble about ‘winning’ or making ‘better deals,'” said Bernard Baumohl, chief global economist at The Economic Outlook Group.

dow trump rally election

 

Obamacare timing

The overhaul of the health care system is extremely important to many Americans, but investors are paying particular attention because of its implications for the rest of the Trump agenda.

Trump has said repealing and replacing the Affordable Care Act must come before taxes.

“This is a giant obstacle blocking the path to the rest of the president’s agenda,” Jaret Seiberg, analyst at Cowen & Co., wrote in a research report.

Fair trade, not trade wars

Economists and market strategists surveyed by CNNMoney say their biggest fear is that Trump will erect barriers to trade.

The new president has already withdrawn the United States from the Trans-Pacific Partnership and started renegotiating the NAFTA trade deal with Mexico and Canada. Economists’ concern is that Trumps will impose high tariffs that slow the economy and provoke a tit-for-tat response from trading partners.

“Wall Street is not opposed to reviewing trade deals, but Wall Street doesn’t want to see that turn into a trade war,” said David Joy, chief market strategist at Ameriprise Financial.

What happened to infrastructure spending?

Since he took office, Trump hasn’t focused much on his promise to spend $1 trillion on infrastructure. Investors hope Trump will follow through by releasing a plan to build or rebuild roads, bridges and airports. Infrastructure stocks like U.S. Steel(X) and U.S. Concrete(USCR) have soared since the election.

Will Trump give clues about the timing and structure of an infrastructure plan and how it can be paid for without blowing up the U.S. deficit?

Ripping up bank regulation

Big bank stocks like Goldman Sachs(GS) have skyrocketed, partly because of Trump’s promise to “do a big number” on the Wall Street reforms known as Dodd-Frank. But few specifics are known here, either.

Seiberg, the Cowen analyst, said one risk is that Trump will repeat a call for a 21st century version of the Glass-Steagall Act, which would force a separation between commercial banking and trading. That could be a signal that Trump wants to break up big banks.

Investors would probably react better if Trump said his focus is on allowing banks to lend more — even though they are already lending a ton.

What Wall Street doesn’t want to hear

Markets took a brief tumble in late January as investors grew concerned that controversy over Trump’s immigration order could derail the rest of his agenda.

Look for a similar reaction if Trump’s speech veers off course.

“If he focuses on the evil press or some other nonsense, markets may get impatient,” Michael Block, chief market strategist at Rhino Trading, wrote in a research note.

–CNNMoney’s Heather Long contributed to this report.
Published at Tue, 28 Feb 2017 18:44:48 +0000

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U.S. economy slowed in fourth quarter despite robust consumer spending

 

By Lucia Mutikani| WASHINGTON

The U.S. economy expanded at a slower pace in the fourth quarter, as previously reported, and appeared to remain on a moderate growth path as President Donald Trump took office with a promise to reinvigorate manufacturing and protect jobs.

Trump has pledged to boost annual economic growth to 4 percent through a mix of infrastructure spending, sweeping tax cuts and deregulation. He is expected to outline part of his program in a speech to Congress on Tuesday night.

Gross domestic product rose at a 1.9 percent annual rate in the fourth quarter, the Commerce Department said in its second estimate, as downward revisions to business and government investment offset robust consumer spending.

The estimate matched what was published last month. Output increased at a 3.5 percent rate in the third quarter.

The economy grew 1.6 percent for all of 2016, its worstperformance since 2011, after expanding 2.6 percent in 2015.

“The overall size and composition of the Trump economic stimulus is yet unknown. However, it is likely to contribute to further economic strength for the balance of this year and beyond,” said Sung Won Sohn, an economics professor at California State University Channel Islands in Camarillo.

Trump, who made his 4 percent GDP growth pledge during last year’s election campaign, has promised a “phenomenal” tax plan that the White House said would include tax cuts for businesses and individuals.

Details on the proposal remain vague, though Treasury Secretary Steven Mnuchin said on Sunday that Trump would use his speech to Congress to preview some aspects of his tax reform plans.

Economists polled by Reuters had expected fourth-quarter GDP would be revised up to a 2.1 percent rate on Tuesday.

In another report, the Commerce Department said the goods trade deficit jumped 7.6 percent to $69.2 billion in January. Inventories at wholesalers fell 0.1 percent last month, while stocks at retailers increased 0.8 percent.

However, retail inventories excluding automobiles, which go into the GDP calculation, were unchanged after increasing 0.3 percent in December. Economists said the wider goods deficit and weak inventories posed a downside risk to first-quarter GDP growth estimates, which are currently around a 2 percent rate.

“It now looks like trade will subtract over a half point from growth in the first quarter and inventories will be close to a neutral factor,” said Daniel Silver, an economist at JPMorgan in New York.

The trade deficit sliced off 1.70 percentage points from GDP growth in the fourth quarter, while inventories contributed 0.94 percentage point.

Expectations of moderate growth in the first quarter suggest the Federal Reserve is likely to maintain its gradual pace of interest rate increases.

U.S. government bond prices were trading higher on Tuesday, while the dollar .DXY fell against a basket of currencies. U.S. stocks were trading lower.

STRONG DOMESTIC DEMAND

Consumer spending, which accounts for more than two-thirdsof U.S. economic activity, was revised sharply higher to a 3.0 percent rate of growth in the fourth quarter. It was previously reported to have risen at a 2.5 percent rate. That left private domestic demand increasing at a brisk 3.0 percent rate.

Some of the rise in demand was met with imports, which subtracted from GDP growth. There is scope for consumer spending to rise further against the backdrop of a tightening labor market and surging confidence among households.

In a third report on Tuesday, the Conference Board said its consumer confidence index jumped 3.2 percent to 114.8, the highest reading since July 2001. Consumers remained upbeat about the labor market amid expectations of income gains.

Business investment was not as strong as initially thought in the fourth quarter. Spending on equipment increased at a 1.9 percent rate instead of the previously estimated 3.1 percent pace. Business investment contributed 0.17 percentage point to GDP growth, less than the 0.30 percentage reported last month.

Business spending has been partly hobbled by lower oil prices, which have crimped demand for machinery, but an acceleration is likely.

A fourth report on Tuesday from the Institute for Supply Management-Chicago showed its business index surged 7.1 points to a reading of 57.4 in February, the strongest level since January 2015. Companies in the Chicago area reported robust new order growth and production.

The ISM-Chicago report mirrored other regional surveys that have offered an upbeat assessment of the manufacturing sector, which had been stuck in a rut for more than a year.

The improvement has mostly been driven by rising oil prices, which have translated into a strong rebound in investment on mining exploration, wells and shafts. Spending on mining exploration, wells and shafts rose at a 23.6 percent rate in the fourth quarter after declining at a 30.0 percent pace in the prior period.

The increase in residential construction spending was lowered to a 9.6 percent rate from the 10.2 percent pace reported last month. A fifth report on Tuesday showed house prices surged 5.6 percent in December from a year ago after advancing 5.2 percent in November.

House prices are being driven by a shortage of properties for sale.

Government spending increased at a 0.4 percent rate in the fourth quarter, rather than the previously reported 1.2 percent pace of growth. There was no contribution to growth from government investment in the last quarter.

(Reporting by Lucia Mutikani; Editing by Paul Simao)
Published at Tue, 28 Feb 2017 17:51:57 +0000

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