Wednesday, December 7, 2016

Dow soars to a new record as execs think more on investing in the US

Dow shot up 297, at the highs as it approaches 20K, advancers over decliners more than 3-1 & NAZ gained 60.  The MLP index added 1+ to the 299s & the REIT index shot up 6+ to the 336s.  Junk bond funds were bought & Treasuries rose.above depressed levels.  Oil was down almost 1 (more below) & gold went up to 1174.

AMJ (Alerian MLP Index tracking fund)

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Live 24 hours gold chart [Kitco Inc.]

The US Energy Information Administration reported that domestic crude supplies fell, but inventories of gasoline & distillates climbed more than expected.  Crude stockpiles fell 2.4M barrels last week.  The American Petroleum Institute late Tues reported a decline of 2.2M barrels while analysts polled by S&P Global Platts expected a fall of 1.7M barrels.  Gasoline supplies climbed 3.4M barrels & distillate stockpiles rose 2.5M barrels, according to the EIA.  The S&P Global Platts survey forecast much smaller increases of 900K barrels for gasoline & 100K barrels for distillates.  Jan crude was down $1 (2%) to $49.93 a barrel, down from $50.41 right before the data.

EIA Reports Decline In U.S. Crude Supplies, But Product Stocks Up More Than Expected

US employers posted fewer jobs in Oct than the previous month, but job openings are still at a mostly healthy level that points to steady hiring ahead.  The Labor Dept says job openings slipped 1.8% to 5.5M.  Hiring also fell to just under 5.1M, while the number quitting declined to about 3M.  While solid, all the data weakened from Sep, suggesting that hiring is unlikely to accelerate beyond its current moderate pace anytime soon.  Growth has been sluggish for most of this year, though it picked up in Q3.  The data follows last week's jobs report, which showed that employers added 178K jobs, matching this year's average monthly gain.  The unemployment rate fell to a 9-year low of 4.6%.

US employers post fewer jobs, though openings stay healthy

Trump, who once authored a book titled “The Art of the Deal,” has already struck 2 deals to prevent companies from taking their manufacturing jobs to Mexico.  Earlier this month, Ford (F) Chairman Bill Ford notified Trump that Lincoln scrapped a plan to move production of the MKC crossover south of he border, a decision that Ford acknowledged was influenced by the Trump's victory.  Yesterday, another target of criticism during Trump's run announced that an Indianapolis factory will remain open for business.  Carrier, maker of air conditioners & commercial refrigeration products, revealed that it “reached a deal” with Trump & VP-elect Mike Pence to “keep close to 1,000 jobs” in Indiana.

Trump Cuts Another Deal to Keep Jobs in America

Stocks continue to be purchased aggressively.  Some say investors are positioning for an extension of monthly asset purchases of €80B ($86 B) by the ECB past Mar even as uncertainty lingers before the bank concludes 2 days of meetings tomorrow.  At the same time, it's difficult to ignore Trump's presence.  He has been delivering jobs, even if the number is small relative to the size of the economy, & is getting execs to rethink about where to invest money.  Investing in America is being considered more than in the past.  That spells plants & jobs.  However the explosion in stock buying is very vulnerable to a negative reaction.  Stocks are not supposed to go straight up, especially when the rise is fueled by expectations.  When too much comes too fast, it gets scary.

Dow Jones Industrials

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Markets steady while oil continues drifting lower

Dow added 21, advancers over decliners better than 2-1 & NAZ lost 8.  The MLP index was even in the 297s & the REIT index rose 3 to the 332s.  Junk bond funds did little & Treasuries finally found a few buyers.  Oil declined again (more below) & gold rebounded.

AMJ (Alerian MLP Index tracking fund)

Crude Oil Feb 17

Gold Dec 16

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Oil fell on speculation that OPEC production cuts will bolster US shale production & amid signs that the organization won't insist all its partners deliberately reduce output.   Futures dropped 1% after declining 1.7% on yesterday, the first drop in 5 days.  The Energy Information Administration increased its US oil output forecast for this year & next, & domestic explorers last week raised the number of rigs in action to the most since Jan.  OPEC will accept natural output declines as part of the 600K-barrel-a day reduction agreed with non-members, rather than insist they intentionally cut.  West Texas Intermediate for Jan delivery was at $50.40 a barrel, down 53¢ after falling as much as 1.4% earlier.

German industrial production rose less than analysts forecast in Oct, signaling that Europe's largest economy took a slow start toQ4.  Production, adjusted for seasonal swings, gained 0.3% from the previous month, when it declined a revised 1.6%, data from the Economy Ministry showed.  The reading, which is typically volatile, compares with a median estimate for a 0.8% increase.  Output was up 1.2% from a year earlier.  After a slowdown in Q3, the Bundesbank predicted a considerable economic expansion in Q4.  With business confidence in Germany at the highest level in more than 2 years & slightly improving global growth outlook, the Economy Ministry said a “certain revival” of momentum in industrial production can be expected.  Output was bolstered by a 1.7% increase in construction in Oct.  Manufacturing gained 0.1%, with output of investment goods up 0.5%.  Energy & basic-goods production fell.  This data comes on the back of a report yesterday showing factory orders bounced the most in more than 2 years in Oct.  The surge was driven by demand for investment goods & saw both domestic & overseas orders increasing.

German Industrial Production Rose Less Than Forecast in October

Starbucks set an annual revenue growth target of 10% & profit growth target of 15-20% for the next 5 years, & the coffee chain said it planned to open 12K stores globally by 2021.  The company also said it would open an outlet of its high-end coffee chain, Reserve Roastery & Tasting Room, in Europe, bringing the number to 5 globally.  Details of the launch will be announced early next year.  SBUX said last week that CEO Howard Schultz would step down to focus on the company's high-end coffee shops.  The company also said it would have Reserve coffee "bars" selling premium coffee in up to 20% of its 37K stores by 2021, more than it had previously targeted.  The stock was up 45¢.  If you would like to learn more about SBUX, click on this link:

Starbucks Sets 5-Year Growth Targets, to Open 12,000 Stores 


Starbucks (SBUX)

Little is going on in what is another sleepy day.  The Fed rate hike next week is looming over the markets, but optimism about Trump helping business continues to be the main driver for the stock market.  Dow's rise today is good enough for another record high.

Dow Jones Industrials

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