The major market influences were uniformly negative for stocks. The PPI and core index rose more than expected last month, and the pace of housing starts and building permit issuance fell more sharply than expected. The PPI data raises inflation concerns and the housing data indicates that the ailing sector has not turned the corner.Another negative for stocks was a rise in oil futures. The price of a barrel of light, sweet crude oil for next month delivery rose by $1.66 on the New York Mercantile Exchange to settle at $114.53. This followed three session declines totaling $3.13. Rising energy prices act as a brake on the economy since they siphon off monies from businesses and consumers that could have been spent on other things. By the end of stock trading, the Dow had lost 1.14%; the S&P 500, 0.93%; and the Nasdaq, 1.35%. The indices suffered slightly larger losses yesterday as traders are once again focusing on the fragile state of the financial sector. The bleak mood has been brought on by recent downgrades to several financial stocks and speculation that the Treasury may have to bail out the two major secondary marketing agencies, Freddie Mac and Fannie May.Though the decline in stocks makes Treasuries more attractive, today's inflation news provided an obstacle to progress. Nevertheless, despite today's increase in the yield of the benchmark 10-Year Note (prices move inversely to prices), the closing level is still the second lowest in a month. There are no major economic releases slated for tomorrow but there are a couple of minor ones. The Mortgage Bankers Association of America will release its index figures on last week's mortgage application data. Activity has been declining this year with the index down to levels not seen since 2000. The other minor release is the report on oil inventories for last week. In the last thirteen weeks, the level of crude oil supplies has fallen ten times for a net loss of 29.2 million barrels. Inventories of gasoline have been falling also. Distillates, which include diesel fuel, have been on the rise since May but this followed a deep slide beginning last September. As of the week ending August 8th, crude inventories were down by about 11.0% from where they stood a year earlier while both gasoline and distillate levels were nearly unchanged. Demand pressures have fallen since last year, however, due to high prices.10:30 AM EDT : Weak housing news and strong inflation signals are putting pressure on stocks this morning. The situation is currently providing some footing for bonds but the inflation news is weighing there also and Treasuries are narrowly mixed.In today's news, the Labor Department reported that its Producer Price Index (PPI), a gauge of inflation at the wholesale level, rose in July by 1.2% following a 1.8% rise in June. The latest increase was about twice the size of predictions. The volatile category of energy was a major contributor with an increase of 3.1%. Another volatile category, food, saw only a 0.3% increase last month. But even if these volatile categories are excluded, the so-called core index rose by 0.7%, the largest increase since November of 2006.On a year-over-year basis, the PPI was up by 9.8%, the largest Y/Y increase since June of 1981. The energy index was up by 28.0% Y/Y, the largest margin since November of 1989. The core index was up by 3.5% from last July, the largest margin since June of 1991.The headline figures are for finished goods. But price pressures were high further down the production pipeline. At the intermediate stage of production the price index rose by 2.7% in July following a 2.1% rise in June and a 2.9% rise in May. Excluding food and energy, the index was up by 2.0% last month. On a year-over-year basis, the intermediate index was up by 16.6%, the largest jump since April of 1980. The core index was up by 10.2%, the largest Y/Y margin since September of 1980. At the initial or crude stage of production, prices were up by 4.2% in July. On a year-over-year basis, they were up by 52.1%, the largest increase since January of 2001.In the other major news release of the day, the Commerce Department reported that the seasonally adjusted, annualized rate of housing starts fell by 11.0% last month to a seventeen-year low of 965,000. Even though a sizeable decline had been anticipated due to an exceptional situation that caused the rate to spike in June, July's decline exceeded predictions and analysts foresee a further decline to come. June's figure was skewed by a change in building codes in New York that pushed up the starts rate in the Northeast by 103.3%. In July, the rate fell by 30.4% and some more adjustment is expected in upcoming reports.But aside from the Northeast region, the only area that saw an increase last month was the Midwest. The pace rose there by 10.0%. The largest starts areas are the West and South and each saw an 8.2% decline in July. The rate in the West was the lowest since March of 1991 and the rate in the South was the lowest since December of 1991.The rate of building permit issuance, an indicator of near-term starts, also saw a large drop last month. It fell by 17.7% to 937,000 following a 16.4% spike in June. In March, the rate was slightly lower at 932,000 but last month's was the second lowest since April of 1991. The Northeast was again to blame for the gyrations. Its issuance rate rose in June by 115.3% and fell in July by 63.4% . . . . LionMTS
The PPI data raises inflation concerns and the housing data indicates that the ailing sector has not turned the corner.
Another negative for stocks was a rise in oil futures. The price of a barrel of light, sweet crude oil for next month delivery rose by $1.66 on the New York Mercantile Exchange to settle at $114.53. This followed three session declines totaling $3.13.
Rising energy prices act as a brake on the economy since they siphon off monies from businesses and consumers that could have been spent on other things.
By the end of stock trading, the Dow had lost 1.14%; the S&P 500, 0.93%; and the Nasdaq, 1.35%. The indices suffered slightly larger losses yesterday as traders are once again focusing on the fragile state of the financial sector.
The bleak mood has been brought on by recent downgrades to several financial stocks and speculation that the Treasury may have to bail out the two major secondary marketing agencies, Freddie Mac and Fannie May.
Though the decline in stocks makes Treasuries more attractive, today's inflation news provided an obstacle to progress. Nevertheless, despite today's increase in the yield of the benchmark 10-Year Note (prices move inversely to prices), the closing level is still the second lowest in a month.
There are no major economic releases slated for tomorrow but there are a couple of minor ones. The Mortgage Bankers Association of America will release its index figures on last week's mortgage application data. Activity has been declining this year with the index down to levels not seen since 2000.
The other minor release is the report on oil inventories for last week. In the last thirteen weeks, the level of crude oil supplies has fallen ten times for a net loss of 29.2 million barrels. Inventories of gasoline have been falling also. Distillates, which include diesel fuel, have been on the rise since May but this followed a deep slide beginning last September.
As of the week ending August 8th, crude inventories were down by about 11.0% from where they stood a year earlier while both gasoline and distillate levels were nearly unchanged. Demand pressures have fallen since last year, however, due to high prices.
10:30 AM EDT : Weak housing news and strong inflation signals are putting pressure on stocks this morning. The situation is currently providing some footing for bonds but the inflation news is weighing there also and Treasuries are narrowly mixed.
In today's news, the Labor Department reported that its Producer Price Index (PPI), a gauge of inflation at the wholesale level, rose in July by 1.2% following a 1.8% rise in June. The latest increase was about twice the size of predictions.
The volatile category of energy was a major contributor with an increase of 3.1%. Another volatile category, food, saw only a 0.3% increase last month. But even if these volatile categories are excluded, the so-called core index rose by 0.7%, the largest increase since November of 2006.
On a year-over-year basis, the PPI was up by 9.8%, the largest Y/Y increase since June of 1981. The energy index was up by 28.0% Y/Y, the largest margin since November of 1989. The core index was up by 3.5% from last July, the largest margin since June of 1991.
The headline figures are for finished goods. But price pressures were high further down the production pipeline. At the intermediate stage of production the price index rose by 2.7% in July following a 2.1% rise in June and a 2.9% rise in May. Excluding food and energy, the index was up by 2.0% last month.
On a year-over-year basis, the intermediate index was up by 16.6%, the largest jump since April of 1980. The core index was up by 10.2%, the largest Y/Y margin since September of 1980.
At the initial or crude stage of production, prices were up by 4.2% in July. On a year-over-year basis, they were up by 52.1%, the largest increase since January of 2001.
In the other major news release of the day, the Commerce Department reported that the seasonally adjusted, annualized rate of housing starts fell by 11.0% last month to a seventeen-year low of 965,000.
Even though a sizeable decline had been anticipated due to an exceptional situation that caused the rate to spike in June, July's decline exceeded predictions and analysts foresee a further decline to come.
June's figure was skewed by a change in building codes in New York that pushed up the starts rate in the Northeast by 103.3%. In July, the rate fell by 30.4% and some more adjustment is expected in upcoming reports.
But aside from the Northeast region, the only area that saw an increase last month was the Midwest. The pace rose there by 10.0%. The largest starts areas are the West and South and each saw an 8.2% decline in July. The rate in the West was the lowest since March of 1991 and the rate in the South was the lowest since December of 1991.
The rate of building permit issuance, an indicator of near-term starts, also saw a large drop last month. It fell by 17.7% to 937,000 following a 16.4% spike in June. In March, the rate was slightly lower at 932,000 but last month's was the second lowest since April of 1991. The Northeast was again to blame for the gyrations. Its issuance rate rose in June by 115.3% and fell in July by 63.4% . . . .
LionMTS