Friday, February 17, 2017

Mixed markets on French election fears

Dow inched up 4 (off the lows), decliners over advancers nearly 3-2 & NAZ gained 23.  The MLP index was off 1+ to the 333s & the REIT index was fractionally higher to the 345s.  Junk bond funds slid lower & Treasuries had a modest gained.  Oil was slightly lower & & gold also declined (more on both below).

AMJ (Alerian MLP Index tracking fund)

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Live 24 hours gold chart [Kitco Inc.]

Shale wildcatters pushed ahead on the biggest surge in US oil drilling since 2012 as the explorers take advantage of prices above $50 for more than 2 months.  Rigs targeting crude in the US rose by 6 to 597 this week, the highest total since Oct 2015, according to Baker Hughes.  Drillers have added 72 rigs since 2017 began, the best start in 5 years.  The expansion is spreading in Texas & Oklahoma, with the Granite Wash play leading the increase this time around.  Producers are cashing in on a more stable oil market, with prices swinging between $50 and $55 a barrel as OPEC & 11 other nations cut back production to help reduce global supplies.  Saudi Arabia told OPEC it reduced its oil output by the most in 8 years.  Oil producers have brought 281 rigs back to work since drilling bottomed out in May, the biggest gain since producers added 361 rigs over the 9 months through Jun 2012.  US crude inventories rose to 518M barrels last week, the highest in weekly data going back to 1982.  Drilling is booming in a few shale plays, led by the Permian Basin in West Texas & New Mexico & the Scoop & Stack formations in Oklahoma, as they offer good returns at a $50 oil price.  The Permian remains the most attractive play for investors this year.  The Midland & Delaware basins within the Permian helped the oilfield reach a new high of $26B in merger & acquisition activity last year.  This week other parts of Texas & Oklahoma began to shine, with the Granite Wash Basin's adding 5 rigs & the Barnett Basin adding 2.

Shale Drilling Is o a Roll as OPEC Cuts Keep Oil Above $50

Pres Trump visited Boeing's (a Dow stock) Charleston, SC campus for the reveal of its new 787-10 Dreamliner, the largest in the 787 family.  While addressing a group of BA workers, the pres reiterated his commitment to American workers & to creating more jobs.  “Our goal is to rely less on imports and more on products made in the U.S.A.” he said.  His visit came 2 days after workers at the SC plant voted to reject union representation.  The plant, which opened in Nov 2011, is the final assembly site & delivery facility for the 787 Dreamliner.  The campus sprawls 743 acres & employs 7565 workers.  As of Jan 2017, BA employed more than 120K Americans across 9 states.  The company has invested more than $2B cumulatively in its SC plant, which is the exclusive building site for the 787-10 aircraft.  It also spends $355M each year & uses hundreds of the state's local suppliers & vendors.  The new jetliner can hold 330 passengers; & has 40 more seats more than the 787-9.  Its maximum cruising speed is Mach 0.85, consistent with the 2 previous models.  The maximum range of the 787-10 is 6400 nautical miles & the jetliner is 15% more fuel efficient than its competitors.  The factory is also the aircraft provider's first 100% renewable energy site, with up to 20% of its energy supplied by solar panels. The first delivery of the aircraft is scheduled to take place in 2018 to Singapore Airlines.  Currently there are 149 orders for the newest 787 model.  The stock rose 1.89
.  If you would like ro learn more about BA, click on this link:

Trump Visits Boeing SC: Here’s a Look at the Brand New Dreamliner

Boeing (BA)

Gold prices fell, but tallied a 3rd straight weekly gain with political uncertainty fueling demand for the precious metal.  Apr gold declined $2.50 (0.2%) to settle at $1239 an ounce.  Futures prices, which settled Thurs at a more than 3-month high, gained roughly 0.3% for the week.

Gold Prices Fall The Day, But Post a Third Straight Weekly Gain

The People's Bank of China said that it would crack down on financial crimes like money laundering, tax evasion & terrorist financing.  Over the past month, the central bank has stepped up monitoring of several prominent bitcoin exchanges to try & prevent Chinese citizens from using digital currencies to circumvent the country's stringent capital controls.  The central bank also warned that it sees asset bubbles forming in certain markets & that it will increasingly monitor the country's financial markets for abnormal moves.

PBOC Steps Up Efforts To Increase Financial Stability

The French presidential election outcome was felt in today's stock market.  According to recent polls, Le Pen, France's far-right, anti-EU candidate, is the favorite to win the first round of voting, scheduled for Apr.  However, it is not clear whether she will win the run-off vote in May.  While the stock market has had one of its greatest rallies in recent months, dark clouds are out there (i.e. French election).  But today's decline may have had more to do with the market being vastly overbought.  The bulls will say they can accept today's modest retreat after the Dow inched up 1 for a new record..

Dow Jones Industrials


Markets slide lower as the rally takes a rest

Dow gave back 62, decliners ahead of advancers better than 3-2 & NAZ was off pocket change.  The MLP index lost 2+ to the 332s & the REIT index was up pennies in the 345s.  Junk bond funds were a little lower & Treasuries went up in price.  Oil declined (more below) & gold was off a tad at 1241.

AMJ (Alerian MLP Index tracking fund)

Light Sweet Crude Oil Futures,M

Gold Apr 17

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German Chancellor Angela Merkel will meet the chiefs of 2 of the institutions auditing Greece's bailout next week as questions over the IMF's involvement in aiding the cash-strapped country come to the fore.  Merkel will host IMF Managing Director Christine Lagarde & European Commission pres Jean-Claude Juncker in separate meetings at the Chancellery.  The gov still insists on the IMF making a financial contribution to Greece's bailout, the Finance Ministry said.  The fund will contribute as much as €5B ($5.3B) to the country's third rescue package.  “We have said over and over again that for us the IMF’s participation is indispensable and we are working on this path,” the Finance Ministry said. “We have already said this week -- there are also comments from Brussels on this -- that there is convergence between the institutions.”  Merkel, who faces a federal election on Sep 24 & has fallen behind her Social Democrat challenger Martin Schulz in some opinion polls, needs the IMF on board to make good on a promise to her Christian Democrat-led caucus that the fund will play its role in overseeing Greek compliance with the conditions laid down in the program.

Merkel to Meet Lagarde as IMF's Greece Involvement Comes to Fore

China's main stock indexes fell as investors retreated from brokerage & newly-listed stocks after a recent rally, erasing most of the gains made earlier this week.  The blue-chip CSI300 index dropped 0.6% to 3421, while the Shanghai Composite Index lost 0.9% to 3202.  For the week, CSI and SSEC both added 0.2%.  Brokerage stocks initially rose sharply, after China's securities regulator said it will relax certain rules on stock index futures trading as the gov starts to gradually unwind restrictions imposed during the 2015 market meltdown.  But most of the brokerage gains were pared in the PM, dragging down the overall market.  6 newly listed stocks tumbled by their 10% trade limit, dealing a blow to participants riding the rally of small-cap financial stocks recently, in particular banks & brokerage stocks.

China Indexes Fall, Erasing Most of This Week's Gains

Deere reported a better-than-expected quarterly profit & raised its fiscal 2017 equipment sales forecast as it expects key farm markets to stabilize this year.  Sales have been hit in the past few years as bumper corn & soybeans harvests have driven down prices, leaving farmers with less cash to spend on equipment.  To cope with the slump, the company has cut jobs & lowered production of its trademark green tractors & harvesting combines.  The company said expects fiscal 2017 equipment sales to increase 4%, compared with its previous estimate of a decline of 1%.  The company also raised it full-year forecast for net income attributable to the company to $1.5B from its previous estimate of $1.4B.  EPS was 61¢ compared with 80¢ a year earlier.  Total net sales fell about 1.5 % to $4.7B.  Analysts were expecting earnings of 55¢ on revenue $4.69B.  The stock  rose 87¢.  If you would like to lelarn more about DE, click on this link:

Deere Beats Profit Estimates, Raises Forecast

Deere (DE)

Oil slipped, pressured by growing global stocks, while expectations that an oil output cut by producers might eventually balance the market helped to underpin prices.  US West Texas Intermediate (WTI) crude futures were down 17¢ at $53.19 per barrel & appeared on track for a loss this week.  Prices had moved higher earlier in the session in response to news that producer group OPEC could extend an output cut aimed at reining in a global supply overhang.  OPEC & other producers, including Russia, agreed to cut output by almost 1.8M barrels per day (bpd) during H1-2017 & estimates suggest compliance by OPEC is around 90%.  The cuts are aimed at curbing oversupply that has dogged markets since 2014.  But inventories and supplies remain high, especially in the US.  WTI has traded within a $5 per barrel price range this year, in what has become the longest & most range-bound period since a price slump began in mid-2014.  In the US, rising output has helped push up crude & fuel stocks to record highs.  In Asia, oil flows into the region remain as high as they were before the production cut.  There are also signs of faltering demand growth in core markets China, India & the US.  In India, fuel demand growth fell in Jan, while in China sagging car sales & soaring gasoline & diesel exports also point to a slowdown in growth.  US gasoline cracks slid to a one-year low today on fears of excess supply & weakening demand growth.  Despite the supply glut, analysts expect oil markets to tighten in the longer term.

Oil Prices Slip as High Stocks Overshadow OPEC Cuts

Some traders have begun their weekend holiday already & stocks pull back.  This is routine after the market is vastly overbought. Chances are the next big  move will come a major event in DC.  The way things are going, that could be any day.

Dow Jones Industrials