Wednesday, August 24, 2016

Lower markets as traders await Janet Yellen's speech

Dow dropped 65, decliners over advancers almost 3-1 & NAZ retreated 42.  The MLP index gave back 2+ to 310 & the REIT index lost 1+ to 361.  Junk bond funds went up & Treasuries inched higher.  Oil was sold again & gold fell to a one month low (see more on both below).

AMJ (Alerian MLP Index tracking fund)

3 Stocks You Should Own Right Now - Click Here!

Crude Oil Oct 16

Live 24 hours gold chart [Kitco Inc.]

Oil dropped to a one-week low after a gov report showed that US crude inventories unexpectedly rose last week.  Crude supplies rose 2.5M barrels according to an Energy Information Administration report.  A survey ahead of the data had forecast an 850K-barrel decline.  Stockpiles are at the highest seasonal level since at least 1986.  Iran's oil ministry said the country hasn’t yet decided whether to join informal OPEC talks next month in Algiers.

Crude entered a bull market last Thurs, less than 3 weeks after it tumbled into a bear market.  Prices surged partly on speculation that informal discussions among members of OPEC may lead to action to stabilize the market.  The Iraqi Oil Minister asked intl companies to increase output to boost national revenue, according to a statement.  West Texas Intermediate for Oct delivery dropped $1.33 (2.8%) to $46.77 a barrel (the lowest settlement since Aug 16).  US crude stockpiles rose to 523M, leaving supplies at the highest seasonal level in decades.  Inventories at Cushing, Oklahoma, advanced 375K.  Crude production in the US fell 49K barrels a day to 8.55M, while imports surged 449K barrels to 8.64M.  Refineries reduced operating rates by 1 percentage point to 92.5% of capacity.  Refiners typically boost their operations in Jul to meet peak gasoline demand before ratcheting back in Aug.  Over the past 5 years, refiners' thirst for oil has dropped an average of 1.2M barrels a day from Jul to Oct.  Gasoline supplies rose 36K barrels last week, the first increase in 4 weeks.  US consumption of the fuel averaged 9.74M barrels a day in the latest 4 weeks, down 0.4% from the prior period & the highest seasonal level in at least a decade.

Gold futures suffered a sharp loss as traders hoped for some clarity on the near-term path for US interest rates from Federal Reserve Chairwoman Janet Yellen's speech later this week.  Gold for Dec delivery lost $16.40 (1.2%) to $1329 an ounce, the lowest settlement for the contract since Jul 26.

Gold Futures Settle At a One-month Low

About a year ago, Intel, a Dow stock, introduced a chip known as the Core i7 6700K.  It is based on the company's newest Skylake processor architecture & is targeted at the PC gaming & enthusiast market, a sub-segment of the PC market that CEO Brian Krzanich says "continues to grow at a double-digit rate."  When the 6700K first arrived, INTC had a lot of trouble building enough of them to meet demand.  Today the company seems to have its 14-nanometer manufacturing yields in good shape & the excitement around a product that's now a year old probably isn't what it was when the product first launched.  As a result, INTC has cut prices on the chip.  INTC is well-positioned to capitalize on the secular growth trends in its markets as its offerings for both platforms are extremely strong.  By more aggressively marketing high-end desktop products, it can potentially drive improved average selling prices.  As far as margins go, the high-end desktop chips are based on the same silicon as chips that go into servers.  This means the chip sizes are larger & more expensive to manufacture.  However, at the current selling prices, it's likely that raw gross margins on these products are much higher than their mainstream counterparts.  The stock was down a quarter.  If you would like to learn more about INTC, click on this link:

Intel Corporation Slashes Price on Gaming Chip

Intel (INTC)

Stock traders are very nervous ahead of Janet Yellen's speech.  Macro economic statistics have been favorable, maybe good enough to give her courage for an interest rate hike.  As stated many times previously, the stock market is addicted to low interest rates.  Any hint about a rate hike next month will bring on selling.  But nobody knows until she gives her speech on Fri.

Dow Jones Industrials


Lower markets on housing data

Dow lost 35, decliners over advancers 3-2 & NAZ was off 4.  The MLP index gave back 1 to the 311s & the REIT index fell 2+ to 360.  Junk bond funds were higher & Treasuries are heading lower.  Oil & & gold both dropped.

AMJ (Alerian MLP Index tracking fund)

Crude Oil Oct 16

Gold Futures,Aug-2016

3 Stocks You Should Own Right Now - Click Here!

Home prices in the US rose 5.6% in Q2 from a year earlier, extending gains that have cut into affordability for many buyers.  Prices climbed 1.2% on a seasonally adjusted basis from the previous 3 months, the Federal Housing Finance Agency said.  In Jun, prices climbed 0.2% on a seasonally adjusted basis from May.  The estimate was for a 0.3% gain.  “Although the appreciation rate for the second quarter was of similar magnitude to what we’ve been seeing for several years now, a close look at the month-over-month price changes during the quarter reveals a potentially significant market shift,” the agency said.  The increase was just 0.2% in each of the 3 months, a more-modest pace of appreciation that “most likely reflects accumulated pressures from significantly reduced home affordability.”  Demand for housing has outstripped supply, pushing prices up.  A total of 5.5M homes, including condos & single-family houses, changed hands in Q2, up 4.2% from a year earlier, according to the National Association of Realtors.  The transactions are from a shrinking pool of available properties, as 2.12M homes were available for sale at the end of the qtr, down 5.8%.  Prices in Q2 rose from a year earlier in every state except Vermont, the FHFA said.  The FHFA index measures transactions for single-family properties financed with mortgages owned or securitized by gov-sponsored Fannie Mae & Freddie Mac but doesn't provide prices.  The national median price of an existing single-family home rose to $240K in Q2, up 4.9% from a year earlier, Realtors data show.

U.S. Home Prices Gained 5.6% in Second Quarter From Prior Year

Saudi Arabia kept its spot as China's biggest oil supplier for the first 7 months this year after pumping record output in Jul, even as Russia threatens to overtake the kingdom in their contest for sales to the world's largest energy consumer.  The biggest crude exporter shipped an average of 1.05M barrels a day to China in the year thru Jul 31, giving it a market share of 14%, according to China's General Administration of Customs.  Russia's share was 13.6% & Russia has gained ground in China this year, exceeding imports from Saudi Arabia in 3 months.

Oil climbed more than 20% to enter a bull market last week amid speculation that supplier talks in Sep in Algiers may lead to action to stabilize the market. The biggest producers are fighting for market share as prices are still at half the level of 2 years ago.  Saudi Arabia pumped 10.67M barrels a day in Jul, while Russia's output was 11.01M, according to OPEC.  China bought more oil from Russia than from Saudi Arabia from Mar-May.  For all of last year, Russia's share was 12.6% against Saudi Arabia's 15.1%.

Saudi Arabia Holds China Market Share Lead on Record Oil Output

US home resales fell more than expected in Jul after 4 straight months of strong gains as a lack of inventory limited choice for buyers, but further gains in prices suggested the housing market remained on solid ground.  The National Association of Realtors said existing home sales declined 3.2% to an annual rate of 5.39M units last month.  Economists had forecast sales slipping 0.4% to a 5.51M.  Home resales were down 1.6% from a year ago.  "Severely restrained inventory and the tightening grip it's putting on affordability is the primary culprit for the considerable sales slump throughout much of the country last month," the NAR said.  Against the backdrop of a tightening labor market that is steadily pushing up wages, & mortgage rates near historically low levels, the drop in sales is likely to be temporary.  The number of unsold homes on the market in Jul inched up 0.9% to 2.13M.  But supply was down 5.8% from a year ago.  At the Jul sales pace, it would take 4.7 months to clear the stock of houses on the market, up from 4.5 months in Jun.  A 6-month supply is viewed as a healthy balance.  With inventory still tight, the median house price rose 5.3% from a year ago to $244K.  The NAR said rising prices were causing problems with appraisals, leading to delays in closing contracts.

Existing Home Sales Fall 3.2% in July

This is another non event day for the stock market.  The big interest is in what Janet has to say in her speech as the popular averages hover near record levels.

Dow Jones Industrials