Friday, August 9, 2013

Markets drift lower on bets about continuing stimulus

Dow was off 72, advancers just over decliners & NAZ fell 9.  The MLP index rose 2 to 447s & the REIT index recovered 2+ to the 277s.  Junk bond funds were mixed & Treasuries hardly budged.  Oil rose more than 2% as positive economic news from China outweighed expectations that the Federal Reserve would soon start withdrawing its bond-buying program.  Gold rose for the 3rd straight day on speculation that the demand will increase amid signs of a pickup in the economy in China.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLU13.NYM...Crude Oil Sep 13...106.06 Up ...2.66 (2.6%)

Live 24 hours gold chart [Kitco Inc.]

In Oct, China will surpass the US to become the world’s biggest net oil importer, the Energy Information Administration said.  Imports will reach 6.45M barrels a day, surpassing the 6.23M by the US.  On a yearly basis, China’s overseas purchases will surpass the US next year.  “The imminent emergence of China as the world’s largest net oil importer has been driven by steady growth in Chinese demand, increased oil production in the United States and a flat level of demand for oil in the U.S. market,” the agency said.  China will use 11M barrels a day of oil in Oct, the outlook showed. The US will use 18.6M.  Oil production will rise to 12.4M barrels a day in the US by Oct while. China’s will be 4.57M.  Net Chinese imports will be 6.57M barrels a day next year, higher than5.71M by the US.  US oil production will rise 28% between 2011 & 2014 to nearly 13M barrels a day, primarily from shale oil, tight oil & Gulf of Mexico deepwater fields.  China’s production will grow 6% over the period to be 1/3 of US levels in 2014.  China’s liquid-fuels use will grow by 13% between 2011 and 2014 to more than 11M barrels a day.  US demand is forecast to stay around 18.7M barrels during the period, below the peak consumption level of 20.8M in 2005, the EIA said.  The heath of China's economy is a major mover of oil prices.

China to Become World’s Biggest Net Oil Importer by October, EIA Says

Apple told the federal judge to consider antitrust remedies because she erred during a trial in which she found the iPad maker conspired to fix e-book prices.  US District Judge Denise Cote ruled in Jul that AAPL violated US antitrust law & has said it will face a trial to set damages.  The federal gov & 33 states submitted a proposal asking Cote to order the company to cancel AAPL agreements with 5 publishers.  The proposal also called for the court to appoint someone to monitor antitrust compliance for 10 years.  Relief sought by the US “would halt Apple’s anticompetitive conduct, restore lost competition and prevent a recurrence of the illegal conduct,” the Justice Dept said.  In a letter to Cote yesterday, AAPL said she erred in excluding some evidence from the trial.  “These evidentiary issues demonstrate that Apple has a substantial possibility of prevailing on appeal,” its lawyer said.  This case may be less exciting that Samsung disputes, but it is worth plenty to AAPL.  The stock dropped 6+ after having a good run in the last 6 weeks.

Apple Judge Weighs Pricing Remedy as E-Book Trial Errors Alleged

Apple (AAPL)

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China July Inflation Rate Unchanged, Producer Prices Extend Drop

Photo:   Bloomberg

China's industrial output rose more than estimated in Jul, adding to signs the economy is stabilizing after unexpectedly strong trade figures yesterday.  Factory production increased 9.7% from a year earlier, the National Bureau of Statistics said.  Retail sales advanced 13.2% while fixed-asset investment excluding rural households grew 20.1% in the first 7 months of the year.  Consumer prices rose 2.7% in Jul.  The acceleration in factory output may bolster confidence that China will avoid a deeper economic slowdown after larger-than-forecast rebounds in exports & imports, & improvement in gauges of manufacturing and service industries.  Stronger production will help China meet this year’s 7.5% expansion target after growth moderated for 2 qtrs.  The gain in factory output was the most since Dec excluding distortions from the Chinese New Year holiday in Jan-Feb.  The estimate was for growth of 8.9% was unchanged from the Jun rate.

China Factory Output Tops Forecasts in Stabilizing Sign

Dow fell 233 this week in lackluster trading.  There has been nothing special driving the markets.  But if this continues, Aug could be a bad month for stocks.  Hate to repeat myself, but yield related stocks have already sold off from their peaks.  The REIT index is down almost 40 from its highs & the MLP index is 20 below its record highs.  The message this selling is sending is not encouraging for the rest of the market.

Dow Jones Industrials

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