Friday, September 23, 2016

Markets decline led by selling in Apple shares

Dow retreated 130 (150 below the highs early in the day), decliners over advancers almost 2-1 & NAZ fell 33.  The MLP lost 1+ to the 313s & the REIT index rose 1+ to the 362s (near its recent record highs).  Junk bond funds were a little higher & Treasures also went up.  Oil tumbled to the 44s (more below) & gold had a modest decliner.

AMJ (Alerin MLP Index tracking fund)

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Crude Oil Nov 16

Live 24 hours gold chart [Kitco Inc.]

Oil tumbled after Saudi Arabia was said to dismiss the prospects for an output agreement to stabilize the market in talks in Algiers next week.  Futures dropped as much as 4.4%.  The kingdom doesn't anticipate any decision to be made about supply.  Prices climbed earlier after Saudi official were said to have made a proposal to their Iranian counterparts to lower the kingdom's production in exchange for Tehran agreeing to freeze its own output at its current level of 3.6M barrels a day.

Riyadh will work with other member countries to stabilize the oil market in the run up to the group’s next official gathering in Vienna in Nov.  West Texas Intermediate for Nov fell $1.87 (4%), to $44.45 a barrel.  The contract touched $46.55 earlier, the highest since Sep 9.  Oil has fluctuated since the Aug rally on speculation OPEC & Russia will agree on ways to stabilize the market when they meet next Wed.  While Venezuelan President Maduro said members are close to a deal, almost all analysts surveyed said an agreement to limit production is unlikely.  There have been meetings from Vienna & Paris to Moscow as oil producers attempt to reach a consensus.  Saudi & Iranian oil officials discussed a proposal at the OPEC headquarters in 2-day talks that ended yesterday without a deal.

In a speech announcing a new initiative to study poverty by his bank, Federal Reserve Bank of Philadelphia pres Patrick Harker also underscored that monetary policy is limited in what it can do for the economy.  The official didn't address the monetary policy or economic outlook.  The speech was due to be delivered in a joint appearance with the chiefs of the Cleveland & Atlanta Fed banks, held in the wake of this week's FOMC gathering, which opened the door to a rate rise before the year ends.  "Despite what many people think, the Fed actually has a fairly limited set of tools, and the only policy we set is monetary policy," Harker said.  "We don't deal with taxes or spending or debts or deficits -- except to the extent that they affect the overall economy," he added.   But the Fed can help address underlying economic challenges in the American economy in other ways.   "The goal of the Fed is to create the conditions in which economic growth can thrive," Harker said, explaining "one way to encourage that growth is by ensuring every part of the country -- every community, every individual -- has a chance to become economically self-sustaining."  To that end, he said the Philadelphia Fed is launching an "intensive research initiative to better understand how poverty affects the economy, to inform policy makers, and to use our findings to promote economic mobility."  He said over the next 3 years his bank will host a series of forums to highlight that research & to bring interested participants together.

Fed's Harker Says Fed Has Limited Tools to Affect Economy's Performance

Shares of Apple, a Dow stock, took a nosedive in the PM after a report that Japanese regulators are considering taking antitrust action against the tech giant.  The stock was trading little changed at 1:30 PM, then tumbled 2.3% over the next 30 mins before bouncing slightly.  Japan's antitrust regulators are considering charging AAPL for possible violations that may have helped it dominate smartphone sales in the country.  Japan isn't the only country going after the company.  Last last month, the EU ordered Ireland to recover about $14.5B in taxers from AAPL as it ruled that AAPL's tax arrangement with Ireland breached state-aid rules.  Its stock has gained 7.2% YTD.  The stock closed trading down 1.91.  If you would like to learn more about AAPL, click on this link:

Apple's Stock Sinks After Report Japanese Antitrust Regulators Are Considering Action

Apple (AAPL)

AAPL stock has a lot of fans, but it has been under fire this year.  Chances are more people will taker shots at the company.  Meanwhile the oil rally is over once again as different countries with varied agendas find they are having a difficult time agreeing on anything. let alone how to limit production.  Somebody has to be willing to accept pain.  There are no volunteers.  While Dow held above the important 18K floor, once again it was unable to make an assault reaching a new record high.  Q3 earnings season is around the corner.

Dow Jones Industrials


Lower markets after 3 day rally

Dow gave back 49, decliners over advancers 3-2 & NAZ fell 17.  The MLP index was up a fraction to the 315s & the REIT index fell a fraction to 361.  Junk bond funds were mixed & Treasuries fluctuated.  Oil & gold were each a little lower.

Dow Jones Industrials

Crude Oil Nov 16

100 oz Gold Futures - ICUS - De

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Russia plans to join discussions on limiting oil production only after OPEC members reach an agreement between themselves, meaning talks aimed at stabilizing the market could extend beyond Algiers next week.  The Russian delegation, set to include Energy Minister Alexander Novak, will participate in the International Energy Forum in the Algerian capital & hold bilateral meetings with other producers, but may leave before members of OPEC hold informal talks on Sep 28.  The decision by OPEC to hold informal talks in Algiers has fanned speculation that the group might be about to deviate from a 2-year-old policy of pumping without limits & instead move to curb output to boost prices.  A previous attempt to agree on an output cap, which included Russia, collapsed in Doha in Apr when Saudi Arabia walked away because Iran refused to participate.  The delegation from Moscow may leave the Algerian venue before Sep 28 & wait for an invitation to continue talks.  It is expected that they would join comprehensive output-freeze discussions only after OPEC members decide on the issue at their own meeting. There has been a flurry of meetings from Vienna and Paris to Moscow as oil producers attempt to reach a consensus.  While the former OPEC pres, Chakib Khelil, who steered the group the last time it cut supply, said he's confident there will be an accord, although most analysts are predicting there won't be a deal.  A failure to agree curbs on output could mean the global surplus will continue swelling thru 2017.

Russia Said to Plan Joining Oil Talks Provided OPEC Reaches Deal

Federal Reserve Bank of Boston pres Eric Rosengren said the central bank's failure to get back to a strategy of gradual rate increases may threaten the ongoing economic recovery.  “I am arguing for modest, gradual tightening now, out of concern that not doing so today will put the recovery’s duration and sustainability at greater risk,” he said.  He was explaining his dissent from his colleagues' decision Wed to keep interest rates on hold for a 6th straight meeting.  Rosengren, who long favored keeping rates ultra-low in order to boost employment, said failing to tighten policy could generate “the sorts of significant imbalances that historically have led to a recession.”  Rosengren was the most notable among 3 voters on the FOMC who called for a rate increase.  The rest of the 10 voters elected to keep rates unchanged “to wait for further evidence of continued progress” in the economy.  Rosengren has swung in favor of rate increases in recent months as unemployment declined to 4.9%, at or very close to most estimates of its lowest sustainable level.  “By 2019, I expect the unemployment rate to have declined below 4.5 percent,” Rosengren said.  “While I have a long track record of advocating for policy that supports robust labor market conditions, that is below the rate that I believe is sustainable in the long run.”

Fed’s Rosengren Says Delaying Rate Hike Could Derail Recovery

China stocks slipped in quiet trading, led down by property shares hit by profit-taking after their significant gains the previous day.  The blue-chip CSI300 index fell 0.5%, to 3275, while the Shanghai Composite Index lost 0.3% to 3033.  For the week, CSI300 was up 1.1%, while SSEC rose 1%.  Market sentiment was checked by a sharp pull-back in property shares following the previous session's surge.  Analysts said today's low volume reflected the coming of a long holiday break for China's National Day.  The market will be shut until Mon, Oct 10.

China Shares Fall For the Day, Up For the Week

Stocks are digesting gains after the Yellen rally.  Longer term investors may be looking at the Dec meeting when there is a significant chance there will (finally) be a rate hike.  Oil is sloshing around in the mid 40s, awaiting developments from the big production meeting in Algiers.  Some stock traders have already left to begin their weekend holiday.

Dow Jones Industrials