Tuesday, November 12, 2013

Markets waver, looking for direction

Dow fell 27, decliners over advancers 2-1 & NAZ lost 3. The MLP index slipped 1 to 446 & the REIT index was off 1+ to the 268s.  Junk bond funds & Treasuries did little.  Oil & gold hardly budged.

AMJ (Alerian MLP Index tracking fund)

stock chart

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLZ13.NYM....Crude Oil Dec 13...94.59 Down ...0.55  (0.6%)

GCX13.CMX...Gold Nov 13.....1,282.30 Up ...1.30 (0.1%)

Chinese One-Hundred Yuan Banknote

Photo:   Bloomberg

China elevated the role of markets in the nation’s economic strategy after President Xi Jinping oversaw a gathering of Communist Party leaders while stopping short of unveiling detailed policy shifts.  The nation will make markets “decisive” in allocating resources, according to the communique from the 3rd full meeting of the party’s 18th Central Committee.  At the same time, state-owned enterprises will remain “dominant,” indicating limits on rolling back gov involvement.  China’s leaders are under pressure to revamp the nation’s finances as swelling local-gov debt highlights the risk of a buildup of bad loans & state businesses’ access to bank funding crowds out small firms. Today’s document didn’t discuss specific issues such as regional borrowing, interest rates or the one-child policy, while referring generally to giving farmers more property rights.  The communique, published by the official Xinhua News Agency, reiterated the role of state ownership while saying development of the non-public sector will be “encouraged.”  Analysts had mixed views on the communique, with many pointing to an absence of detail.

China Vows Bigger Role for Markets as Party Closes Summit

U.S. to Become Top Oil Producer by 2015 on Shale Boom, IEA Says

Photo:   Bloomberg

The US will surpass Russia as the world’s top oil producer by 2015, & be close to energy self-sufficiency in the next 2 decades, amid booming output from shale formations, the International Energy Agency said.  Crude prices will advance to $128 a barrel by 2035 with a 16% increase in consumption, supporting the development of tight oil in the US & a tripling in output from Brazil, the IEA said today in its annual World Energy Outlook.  The role of the OPEC will recover in the middle of the next decade as other nations struggle to repeat North America’s success with exploiting shale deposits, the agency predicted.  “The United States moves steadily towards meeting all of its energy needs from domestic resources by 2035,” the report said.  “But this does not mean that the world is on the cusp of a new era of oil abundance. Light, tight oil shakes the next 10 years, but leaves the longer term unstirred.”  Soaring shale output in the US is helping it achieve its highest level of energy independence in 2 decades, cushioning it against disruptions in Africa & the Middle East.  The boom threatens revenues for OPEC’s 12 members, whose production is at its lowest in 2 years amid political unrest in Libya & theft in Nigeria.  The US will overtake Russia, currently the biggest oil producer, in 2015 as it taps rock & shale layers in North Dakota & Texas with the use of horizontal drilling & hydraulic fracturing.  The nation’s output will plateau after 2020 & it will lose its top ranking at the beginning of the 2030s, the report said. “  US crude production rose to 7.9M barrels a day in the week ended Oct 18, the most since Mar 1989, according to the Energy Information Administration.  Global oil demand will expand by 14M barrels to 101M a day in 2035, according to the IEA report.  The share of conventional crude will drop to 65M barrels by the end of the period because of growth in unconventional supplies, the IEA said.

U.S. to Become World’s Top Oil Producer by 2015 on Shale Boom, IEA Says

DR Horton, the largest U.S. homebuilder, reported a higher quarterly profit as it increased prices amid a nationwide housing recovery.  EPS was 40¢, for fiscal Q4 ended Sep 30, compared with 30¢ a year earlier.  The average estimate was 40¢.  Homebuilders have increased profit margins by cutting costs & raising prices as a tight supply of existing properties boosts demand.  Purchases of new homes rose 7.9% in Aug from the previous month to a annual rate of 421K according to the Commerce Dept.  Q4 homebuilding revenue rose to $1.8B from $1.3B a year earlier as the company sold 6866 homes, up from 5575.  The average price climbed 15% from a year earlier to $261K.  Most of those sales were completed before mortgage rates rose to a 2 year high in Aug, causing some would-be buyers to hold back.  Orders decreased 2% to 5160 homes from a year earlier.  The stock went up 39¢.

D.R. Horton Profit Climbs on Higher House Prices Amid Recovery

D.R. Horton (DHI)

stock chart

It looks like traders extended their holidays & are slow to return to the markets.  But the politicos in DC have returned & they will bring excitement as they try to figure out what to do with Obamacare.  While Dow is near at or its record highs, the advance has slowed with the threat of tapering that was first felt in May.  From late May, Dow is up only 300.  However, the 2650 YTD gain is impressive by any standard.

Dow Jones Industrials

stock chart

No comments: