Monday, May 22, 2017

Higher markets led by defense stocks

Dow gained 84, advancers over decliners 5-2 & NAZ went up 32.  The MLP index added 3+ to 311 & the REIT index rose 1+ to the 345s.  Junk bond funds were purchased & Treasuries inched higher.  Oil climbed higher above 50 & gold is near recent highs at 1259.

AMJ (Alerian MLP Index tracking fund)


Crude Oil50.69



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Pres Trump opened his first visit to Israel, saying he sees growing recognition among Muslim nations that they share a "common cause" with Israel in their determination to counter the threats posed by Iran.  Arriving directly from Riyadh, Saudi Arabia, Trump expressed his hope for cooperation among US allies in the Middle East.  His 2nd stop on the 9-day tour aimed to test the waters for reviving the dormant Israeli-Palestinian peace process.  Trump, who had previously suggested that it would be easier than anticipated to solve the conflict that has vexed his predecessors for decades, said that conditions were right in both Israel & the Arab world to strike what he has called "the ultimate deal."  "We have before us a rare opportunity to bring security and stability and peace to this region and to its people," Trump said upon arrival in Tel Aviv.  Israeli Prime Minister Netanyahu called Trump "a true friend" to Israel & expressed optimism about Trump's role in the Middle East peace process.

Trump: Israelis and Arabs share 'common cause' against Iran

While is thousands of miles away, his policy agenda faces tests back home this week as he looks to shift the focus from Russia investigations to his plans for boosting American military power & revamping the tax code.  The White House tomorrow will roll out a budget proposal crystallizing the priorities in a blueprint that calls for large cuts to social safety-net programs such as Medicaid & food assistance while increasing Pentagon & border-security spending.   While Trump visits Pope Francis in Rome on Wed, Treasury Sec Steve Mnuchin in DC will testify about the 2018 budget plan before the House Ways & Means Committee.  The same panel will hold a separate hearing devoted to a tax overhaul aimed at reducing rates & speeding job growth, a centerpiece of Trump's campaign message.   Following revelations about Trump & Russia over the past 2 weeks, the White House & congressional Rep leaders are eager to show that they can deliver on policy promises.  "People in the country need to know that we are busy at work trying to solve their problems," House Speaker Paul Ryan said.  "So I realize that there's a lot in the media these days. That doesn't seize up Congress. That doesn't stop us from doing our jobs, to work on people's problems."  A potential land mine for the administration is a report coming out this week from the Congressional Budget Office.  The CBO will release its evaluation of the health-care bill that narrowly passed the House on May 4 following an intensive lobbying push by the White House.   The analysis could influence the bill's fate in the Senate by giving lawmakers a fuller picture of how much the measure will cost & how many people might lose insurance coverage.  Meantime, the congressional machinery devoted to the Russia probe continues.

Taxes, budget are focus for Trump despite probes

Oil prices rose, bolstered by confidence that top exporters will this week agree to extend supply curbs, with suggestions the cuts could even be deepened.  US light crude up 47¢ at $50.80, up more than 10% from lows earlier this month.  Prices have risen on expectations that OPEC & other producers, including Russia, will extend for another 6 or 9 months a deal to cut supplies by 1.8M barrels per day (bpd).  The possibility of deepening the cuts was also being discussed ahead of a meeting of OPEC & other producers May 25.  Some analysts argue that deeper cuts are required to balance the market, pointing to a slight rise in OPEC exports this year.  The US Energy Information Administration (EIA) expects OPEC net oil export revenues to rise in 2017, partly because of "slightly higher" OPEC output.  US oil production has already climbed 10% (almost 900K bpd) since mid-2016 to 9.3M bpd.  Iraqi oil minister Jabar al-Luaibi said today that OPEC's #2 producer had met its share of production cuts, but added that the country remains ready to meet any global demand growth that may arise.

Oil rises on expectation of extended, possibly deepened output cut

Trump is going to be the focus of attention by traders this week.  Already whopper size arms deals from Mideast countries are encouraging for stock buyers (especially for defense stocks).  His visit to Saudi Arabia was well received, traders like to see that.  Meanwhile DC will be active with more about administration proposals for spending, which may dampen some the partisan questions about the Russia story.  If Trump's trip goes well, stock should rise this week.

Dow Jones Industrials


Friday, May 19, 2017

Higher markets on earnings and added investments in the US

Dow soared 141, advancers over decliners nearly 3-1 & NAZ rose 28.  The MLP index shot up 4+ to the 309s & the REIT index gained 2+ to the 344s.  Junk bond funds remained mixed & Treasuries were a little lower.  Oil headed higher again & gold was flattish (more on both below).

AMJ (Alerian MLP Index tracking fund)

Live 24 hours gold chart [Kitco Inc.]

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US stocks rallied as a set of strong corp earnings lifted investor spirits in a week dominated by uncertainty surrounding Trump's presidency.  However, the major indices were on track for their worst weekly declines since mid-Apr following reports that Trump had tried to interfere in a federal investigation.  Investors were concerned that the uncertainty in DC could hinder Trump's promise of fiscal stimulus, a bet on which stock averages have rallied to record highs.  Of the 452 S&P 500 companies that have released results so far, about 75% have topped earnings expectations.  In a typical qtr, about 64% beat estimates.

Strong Earnings Lift Investor Spirits After Trump Slump

While Trump takes off on his first foreign trip, a week-long tour of the Middle East & Europe, he will meet first with the greatest regional ally of the US in the fight against terror, Saudi Arabia, which has shown increasing confidence in the US economy under Trump.  Saudi investment in US bonds reached a one-year high of $114.4B at the end of Mar, up significantly from a low in Sep of $89.4B.  As a top oil producer, Saudi Arabia has been financially pressed thanks to falling oil prices, the global supply glut&  a nearly $80B budget deficit.  While OPEC attempts to stabilize prices, which plummeted in 2014 & have more recently fallen under $56 per barrel, Saudi Arabia has trimmed its positions in foreign assets in order to account for the oil-related financial losses.  The Kingdom held $737B worth of foreign assets in Aug 2014 & by Mar the country had trimmed those positions to just $501B, making its reinvestment in the US throughout recent months, noteworthy.  The country has also released a plan, called Vision 2030, that aims to make its economy more diversified & less energy dependent.   Recent investments in not just bonds, but other areas of the American economy like technology, indicate Saudi Arabia has confidence in the future of economic growth under the current US leadership.  Pres Trump is expected to detail a brand new $100B arms deal with Saudi Arabia today.  The deal reportedly includes an advanced anti-ballistic missile system & combat ships.  Saudi Arabia is the US' largest trading partner in the Middle East.  The trip to the Middle East & Europe will last 9 days, including stops in Israel, Rome & Italy, with the purpose of strengthening alliances & reasserting US global leadership.

Saudi Arabia Bets on Trump Economy

Gold futures edged higher to end the week with a gain of roughly 2.1%.  The $ & equities were trading lower than a week ago, helping to boost investment demand for the precious metal.  Jun gold rose 80¢ (under 0.1%) to settle at $1253 an ounce.

Gold Prices Climb More Than 2% For The Week

Baker Hughes reported that the number of active US rigs drilling for oil climbed by 8 to 720 rigs this week.  The latest data marked an 18th weekly rise in a row.  The total active US rig count, which includes oil & natural-gas rigs, jumped 16 to 901.  Jun West Texas Intermediate crude was up 88¢ (1.8%) to $50.23 a barrel.

Baker Hughes Reports 18th Straight Weekly Rise In The U.S. Oil-rig Count

Ford is pumping $350M into a plant outside of Detroit where a new transmission for fuel-efficient vehicles will be built.  The automaker said that the investment in the Livonia Transmission Plant is expected to create or keep 800 jobs.  Some jobs are expected to be added this year, but most will be filled over the next 2 years.  Upgrades to the Livonia facility are part of more than $2.25B  in investments in the state announced this year by Ford.  The stock  went up 12¢.  If you would like to learn more about Ford, click on this link:

Ford to invest $350 million in Michigan plant

Ford (F)

The chart below shows this has been a tough week for the stock market, due to one ugly day on Wed.  But stocks have rebounded & it looks like bulls want to take them higher.  Trump's trip has the makings of bringing some calm to chaotic DC, giving news people a new focus.  Market averages manage to hang in there, despite all the negative stories coming from DC.  If the trip goes well, the bulls should be able to take the averages to new heights.  Best wishes for a successful trip!!

Dow Jones Industrials