Daily Market Commentary for February 15, 2012
Excerpts from the January 24-25 meeting of the Federal Open Market Committee (FOMC Minutes)
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Capacity utilization measures how much a factory is being put to use to produce goods with, higher rates of utilization signalizing a rising demand and stronger economy. In January, U.S. industrial production was flat as a 0.7% increase among manufacturers was offset by sharp declines in mining and utilities but, according to the Federal Reserve, the increase in December was much larger than first reported. During December, industrial production was revised higher by 1.0% expansion from an original reading of 0.4%. The latest figures put production 3.4% above year-ago levels, reflecting a steady improvement among the nation’s goods-producing companies. Capacity utilization fell to 78.5% during January, but only because of a sharp upward revision in December. Capacity utilization rate in December was revised up to 78.6% from an initial reading of 78.1%. Over the past 12 months, utilization has risen 1.6 percentage points. During January, manufacturers boosted production, led by automotive output increase by 6.8%. Output at utilities fell 2.5% and production dropped 1.8% in the mining industry. During January, makers of business equipment boosted production by 1.8%; suppliers of non-industrial goods raised production by 0.2%; consumer goods trimmed output by 0.1%; construction companies and producers of materials both reduced their production by 0.4%.
Treasury Department reported for December that foreign investors sold a net $21 billion of long-term U.S. securities strongly much weaker than the $58 billion of net purchases in November. Overseas investors were net sellers of $16.6 billion of Treasurys in December down from net purchasers of $54.0 billion in November. Overseas investors bought a net $27.2 billion of government agency bonds during December compared with $6.2 billion in November. Foreigners were net sellers of $20.7 billion of U.S. corporate bonds in December after net purchasers of $4.8 billion in November. During December, as international demand for corporate bonds remained weak, foreign-based investors sold a net $11.0 billion of U.S. equities. Net foreign purchases of long-term securities was $17.9 billion in December, down from $61.3 billion during November, taking into account purchases by U.S. residents and overseas investors. Sales of Treasury bills, bonds and notes directly attributed to Mainland China were $31.9 billion however, China often trades Treasurys through firms in other countries. During December, Japan was a buyer of $3.5 billion of short and longer-term Treasurys. United Kingdom was a seller of $11.1 billion of Treasurys.
New York Federal Reserve Bank reported Wednesday that the Empire State manufacturing index rose to 19.5 during February, striking its highest level since June 2010 and its fourth straight increase after the index sunk below zero from June through October. New orders index fell to 9.7 in February from 13.7 in January, with mixed underlying conditions. Index for number of employees moved lower to 11.8 during February from 12.1 in January while the average workweek rose to 7.1 from 6.6 in prior month. After hitting its highest level in a year during January, a reading of expected conditions in six-months retreated slightly.
National Association of Home Builders reported Wednesday that home builder confidence in the market for new single-family homes climbed during February to 29 from 25 in January - for the fifth consecutive month to reach the highest level in more than four years. Recent gains have been attributed to record-low mortgage rates, cheaper homes and a slowly improving economy. “This is the longest period of sustained improvement we have seen in the HMI since 2007, which is encouraging,” said NAHB Chief Economist David Crowe in a statement. “However, it is important to remember that the HMI is still very low, and several factors continue to constrain the market. Foreclosures are still competing with new home sales, and many builders are seeing appraisals come in at less than the cost of construction.” “Additionally, prospective home buyers are finding it difficult to qualify for a mortgage.” All three of the index’s components, consisting of traffic of prospective buyers, sales expectations for the next six months, and current sales rose in February. The highest reading came from sales expectations, which rose from 29 to 34.
According to releases by the Federal Reserve and Office of the Comptroller of the Currency Wednesday, borrowers seeking a review of their mortgage foreclosures to see if they are eligible to receive compensation or other remedies because of errors in foreclosure actions on their homes have until July 31 to submit their requests to bank regulators. Foreclosure reviews are required by major banks that were sanctioned by the OCC and other regulators in April due to 'negligence' in residential mortgage loan servicing and foreclosure processes. Borrowers are eligible for a review if their mortgage was active in the foreclosure process between January 1, 2009 and December 31, 2010. Borrowers who believe they were wrongfully foreclosed upon may soon be eligible to apply and receive compensation from a $1.5 billion fund being established as part of a broad $26 billion bank settlement with states and the federal government reached last week.
Euro-zone finance officials are considering ways of delaying parts or even all of the second bailout program for Greece while still avoiding a disorderly default, according to Reuters. The delay could be until after Greece holds elections, expected in April, which is beyond a large bond repayment Greece has coming due. Euro-zone finance ministers expressed confidence that Greece will have all the pieces necessary to receive its next bailout payment by a meeting in Brussels on Monday, according to a statement from the Euro group. The officials had a conference call Wednesday, which downgraded from a face-to-face meeting due to worries about Greek leaders’ commitment to the latest package of austerity measures.
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