Friday, July 21, 2017

Markets pull back after unexciting earnings

Dow was down 31, decliners over advancers 4-3 & NAZ lost 2.  The MLP index fell 2+ to the 297s & the REIT index was up pocket change in the 352s.  Junk bond funds crawled higher & Treasuries advanced along with gold.  Oil declined on more supply worries & gold jumped up 9 to 1255 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Live 24 hours gold chart [Kitco Inc.]

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In Jun, 14 states experienced a bump in hiring while the unemployment rate fell across 10 states.  According to the Labor Dept, 2 states' unemployment rates fell to record lows last month.  North Dakota's unemployment rate fell to 2.3%, a record low for the state dating back to 1976 & tying for lowest in the nation with Colorado.  Tennessee's rate of 3.6% is also a record low for that state.  In 38 states the unemployment rate was stable, while it rose in only 2.  The figures suggest that Jun's healthy job gains were widely spread across the country.  Nevada, Iowa & Georgia were among the 14 states that reported major hiring increases.

14 US states hired more workers last month

Gold prices settled at their highest level in 4 weeks, with investment demand for the precious metal getting a boost from turmoil in the White House & weakness in the $.  Aug gold added $9.40 (0.8%) to settle at $1254 an ounce.  Prices stretched their streak of gains to a 6th-straight session, tallying a climb of about 2.2% for the week.

Gold Marks Highest Settlement In a Month, Up Over 2% For The Week

Shares of Colgate-Palmolive (CL) earnings matched Q2 profit expectations but missed on sales. EPS dropped to 59¢, from 67¢, in the same period a year ago.  Excluding non-recurring items, EPS came to 72¢, in line with the consensus.   But revenue fell to $3.83B from $3.85B, below the estimate for $3.9B.  Oral, personal & home care revenue slipped to $3.25B from $3.27B, missing the consensus of $3.32B, while pet nutrition revenue was flat at $572M & missed expectations of $577M.  "As we look ahead, uncertainty in global markets and slowing category growth worldwide remain challenging," said CEO Ian Cook.  "Based on current spot rates, we continue to expect a low-single-digit net sales increase for 2017, and given our slower than expected first half, we are now planning for low-single-digit organic sales growth for 2017."  The stock went up 1.23.  If you would like to learn more about CL, click on this link:

Colgate-Palmolive's Stock Drops After Sales Miss Offsets In-line Profit

Oil slid for a 2nd day as a report that OPEC's supply in Jul will be the highest this year fueled further worries that a global glut is persisting.  Futures fell over 2.6%.  Supply from OPEC members is set to exceed 3M barrels a day in Jul as members including Saudi Arabia & Nigeria increase shipments.  The data reinforces skepticism about the effectiveness of OPEC production cuts as officials from the group gather next week in Russia.  Oil has remained below $50 a barrel on concerns that growing output in the US, Libya & Nigeria is offsetting other curbs, slowing the effort to shrink stockpiles.  Earlier in the week, gov data showed US crude production rose to the highest level since Jul 2015 & OPEC member Ecuador said it would increase its production by year-end in order to raise revenue.  West Texas Intermediate for Sep delivery declined $1.12 to $45.80 a barrel (the Aug contract expired yesterday after falling by 33¢ to $46.79.  Meanwhile, gov data earlier in the week showed US crude stockpiles slid for a 3rd week to the lowest level since Jan & gasoline supplies fell by the most since Mar.  US oil rigs dropped by 1 to 764 this week, Baker Hughes data showed.  US crude imports from Saudi Arabia are set to fall to 847K barrels a day in Jul from 968K barrels a day last month

Stocks took a breather after not getting much support from earnings.  DC remains a confusing mess, hard to figure what is really getting accomplished.  But life does go on there & some progress is being made to improve the economy.  Dow fell 60 for the week.  Considering earnings have been mediocre & all the negative stories from DC, that's not too bad.  After all, Dow is just inches from setting another record close.  At the same time other investors are buying more gold.  Hmmm!!  637

Dow Jones Industrials

stock chart 

Lower markets led by disappointing earnings at GE

Dow dropped 56, decliners over advancers better than 3-2 & NAZ gave back 9.  The MLP index lost a fraction taking it to 300 & the REIT index was fractionally lower to the 351s.   Junk bond funds were mixed & Treasuries rose in price.  Oil pulled back (see below) & gold went up to 1250.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil46.48

GC=FGold  1,249.70

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Even in his final days as CEO of General Electric (GE), a Dow stock, Jeffrey Immelt couldn't escape the stench of oil.  Earnings are likely to end the year near the bottom end of the projected range amid hurdles in the oil & gas market, the company said as it reported earnings & shares plunged the most in almost 2 years.  “The resource markets remain challenging,” Immelt said.  The company is seeing “pressure in power and oil and gas.”  The outlook marks a disappointing end to Immelt's tumultuous 16-year tenure as CEO, a period in which GE trailed the broader stock market.  Oil has become a symbol of the company's recent hurdles after Immelt built up the crude business thru multibillion-dollar acquisitions in the years before the market collapsed.  He closed a deal this month to merge those assets with Baker Hughes (BHI), with GE retaining a majority stake in the combined entity.  This year's earnings are likely to be near the bottom of the company forecast for $1.60-1.70, CFOr Jeff Bornstein said.  Industrial operating cash flow will also be toward the low end of the outlook for $12-14B.  John Flannery will take over from Immelt on more about Aug 1.  Q2 adjusted EPS fell to 28¢, exceeding the 25¢ estimate.  Sales declined 12% to $29.6B, compared with $29.2B expected.  The stock dropped 89¢.  If you would like to learn more about GE, click on this link:

GE Tumbles After CFO Says Earnings Are Trending to Low End of Forecast

Schlumberger (SLB), the world's largest oilfield services provider, reported better-than-expected quarterly profit & revenue, as strong demand in North America helped offset weakness in Europe & the Middle East.  Revenue rose 4.2% to $7.46B in Q2, beating the estimate of $7.23B.  Revenue from North America surged nearly 27% to $2.20B.  Excluding items, EPS was 35¢, above expectation of 30¢.  The stock rose 35¢.  If you would like to learn more about SLB, click on this link:

Schlumberger reports 2Q loss

Oil prices fell after a consultancy report forecast a rise in OPEC production for Jul despite the group's pledge to curb output, reigniting concerns the market will stay awash with crude.  OPEC crude production s expected to rise 145K barrels per day (bpd) this month, taking the group's combined output above 33M bpd.  Higher supply from Saudi Arabia, the United Arab Emirates (UAE) & Nigeria would drive this month's gains.  The news weighed on oil prices which had been trading in positive territory for most of the session.  West Texas Intermediate (WTI) crude futures traded at $46.52 a barrel, down 40¢. OPEC & some non-OPEC states, such as Russia, pledged to cut production by 1.8M bpd between Jan this year & the end of Mar 2018.  The UAE minister, whose country's oil output has been rising, said he was committed to the cut & he hoped the deal would have a significant impact in Q3 & Q4.  Oil traders are looking ahead to Mon's meeting of several ministers from OPEC & non-OPEC members in Russia to see if it would address rising production from Nigeria & Libya, which have been exempted from the cuts.  Kuwaiti Oil Minister Essam al-Marzouq, whose country heads the joint ministerial committee, said attendees would discuss steps for continuing implementation of the production cut agreement.  The committee, known as the JMMC, can make recommendations to OPEC & other producers to adjust the deal, if necessary.

Oil falls on report showing OPEC deal compliance falling in July

Earnings continue to be less than robust.  When the stock market is priced to perfection, those flaws hurt.  Meanwhile DC is still spending a lot of time going nowhere fast.  The Dow is up a massive 1.9K since Trump took command 6 months ago & that was from a lofty level.  As said before, that performance will be difficult to match in the next 6 months.

Dow Jones Industrials