Dow surged 194 to a new record, advancers over decliners 3-1 & NAZ rose 64. The MLP index inched higher to 502 & the REIT index was up 2+ to the 318s, a new yearly high. Junk bond funds did little & Treasuries retreated as stocks rose. Oil fell but was able to close above the key 80 support level (see more below). Gold sold off again & is well under the 1200.
AMJ (Alerian MLP Index tracking fund)
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Business activity in the Chicago area expanded in Oct at the fastest pace in a year, a sign manufacturing is overcoming a global slowdown & is contributing to growth in economy. The Institute for Supply Management-Chicago Inc.’s business barometer rose to 66.2, the highest in a year, from 60.5 in the prior month. A reading greater than 50 signals growth. The forecast was for 60. Demand for long-lasting goods such as automobiles & the need to replace aging equipment is lifting manufacturing, which makes up about 12% of the economy. A strengthening job market, lower gasoline costs & improving consumer sentiment will help households to boost their spending, further strengthening orders at American factories. A report next week may show the Tempe, Arizona-based Institute for Supply Management’s national factory index continued to indicate expansion, with a 56.4 reading in Oct following 56.6 the prior month. Today's report showed orders, production & employment all grew at a faster pace in Oct than in the prior month.
Manufacturing in Chicago Area Expands at Fastest Rate in a Year
Chinese bank deposits dropped following a crackdown on lenders manipulating their numbers & “illicit” means of attracting money, threatening to weigh on credit growth & hinder efforts to reignite the economy. 4 of the 5 biggest banks posted a drop in deposits as they reported Q3 earnings this week. Central bank data showed it was the first quarterly decline for the nation’s banking industry since at least 1999. The lower deposit levels are likely to curtail credit as banks are prohibited from lending more than 75% of their qtr-end holdings, while a sustained drop could hamper gov efforts to rejuvenate an economy forecast to expand this year at the weakest pace since 1990. The lenders may also come under pressure to tap more expensive financing. ICBC, the world’s largest lender by assets, posted the biggest decline in funds during Q3, with its deposits dropping by 388B yuan ($63B) from Jun to 15.3T yuan. Only China Construction Bank Corp., the 2nd-largest, had an increase. As a housing-market slump drags on the nation’s growth, bad loans are piling up. ICBC reported its biggest jump in soured credit since at least 2006 in Q3. Smaller rival Bank of China more than doubled its provisions for bad loans, while the combined profit growth of the 5 biggest banks slowed to 6% from 10% a year earlier. In Sep, the China Banking Regulatory Commission introduced rules to curb volatility in deposits & eliminate the use of what it termed as “illicit” means such as kickbacks & higher-than-regulation interest rates to attract money. Previously, lenders reported surging deposits at the end of each qtr, with a slump typically in the next month. Industrywide data show it’s unusual for yuan-denominated deposits to decline on a quarterly basis. A 950M yuan fall in Q3 to 112.7T yuan was the first since at least 1999, according to data from the People’s Bank of China.
Shrinking Chinese Bank Deposits Add to Warning Signs for Economy
Brent crude, the price used by the rest of the world headed for a 6th weekly loss, the longest losing streak since 2002, as OPEC boosted production to a 14-month high amid a global surplus. West Texas Intermediate (the US price) was on track for its biggest monthly decline in more than two years. October’s drop has been about 10%. Brent & WTI had their biggest monthly declines since 2012 after US crude production climbed to the highest level in at least 3 decades. Traders are split on whether Saudi Arabia will deepen the crude price cuts that propelled oil into a bear market this month. Brent is $85 & WTI for Dec declined to a low of $79.98. US crude output rose to a record 8.97M barrels a day last week, according to EIA estimates. The EIA’s monthly data shows production at the highest since 1986. Crude inventories have increased by 23M barrels in the past 4 weeks, according to the EIA. The combination of horizontal drilling & hydraulic fracturing has unlocked supplies from shale formations in the central US. WTI & Brent are down more than 20% from their Jun peak as leading OPEC members resisted calls to reduce supply. Iraq’s oil minister told parliament yesterday that there is a “price war” among OPEC members because the market’s fundamentals have changed. Output from OPEC increased by 53K barrels a day to 31M, a 3rd monthly gain. Production from OPEC is responsible for about 40% of the world’s oil supply. Saudi Arabia, Iraq, Iran & Kuwait have cut their export prices this month, fueling speculation that they’ll compete for market share. OPEC ministers are scheduled to meet on Nov 27 to discuss their output target of 30M barrels a day.
Brent Oil Set for Longest Run of Weekly Losses Since 2002 on Supply Glut
Stocks had nothing short of one spectacular week. Dow finished up more than 580, one of its best weeks ever. It also gained 340 in an unusually volatile month & rose a stunning almost 1.3K from the Oct 16 low. Also of note, volatility was wild in Oct when triple digit daily swings were common. The VIX, volatility index, spiked at mid month but settled back to 14, not far above the sub 12 area where it has been for much the year. Record stock prices feel good but wild times in the stock market not welcomed by all investors, & intl economic & military problems will be troubling for the balance of the year.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CLZ14.NYM | ....Crude Oil Dec 14 | ....80.56 |  ...0.56 | (0.7%) |
Business activity in the Chicago area expanded in Oct at the fastest pace in a year, a sign manufacturing is overcoming a global slowdown & is contributing to growth in economy. The Institute for Supply Management-Chicago Inc.’s business barometer rose to 66.2, the highest in a year, from 60.5 in the prior month. A reading greater than 50 signals growth. The forecast was for 60. Demand for long-lasting goods such as automobiles & the need to replace aging equipment is lifting manufacturing, which makes up about 12% of the economy. A strengthening job market, lower gasoline costs & improving consumer sentiment will help households to boost their spending, further strengthening orders at American factories. A report next week may show the Tempe, Arizona-based Institute for Supply Management’s national factory index continued to indicate expansion, with a 56.4 reading in Oct following 56.6 the prior month. Today's report showed orders, production & employment all grew at a faster pace in Oct than in the prior month.
Manufacturing in Chicago Area Expands at Fastest Rate in a Year
Chinese bank deposits dropped following a crackdown on lenders manipulating their numbers & “illicit” means of attracting money, threatening to weigh on credit growth & hinder efforts to reignite the economy. 4 of the 5 biggest banks posted a drop in deposits as they reported Q3 earnings this week. Central bank data showed it was the first quarterly decline for the nation’s banking industry since at least 1999. The lower deposit levels are likely to curtail credit as banks are prohibited from lending more than 75% of their qtr-end holdings, while a sustained drop could hamper gov efforts to rejuvenate an economy forecast to expand this year at the weakest pace since 1990. The lenders may also come under pressure to tap more expensive financing. ICBC, the world’s largest lender by assets, posted the biggest decline in funds during Q3, with its deposits dropping by 388B yuan ($63B) from Jun to 15.3T yuan. Only China Construction Bank Corp., the 2nd-largest, had an increase. As a housing-market slump drags on the nation’s growth, bad loans are piling up. ICBC reported its biggest jump in soured credit since at least 2006 in Q3. Smaller rival Bank of China more than doubled its provisions for bad loans, while the combined profit growth of the 5 biggest banks slowed to 6% from 10% a year earlier. In Sep, the China Banking Regulatory Commission introduced rules to curb volatility in deposits & eliminate the use of what it termed as “illicit” means such as kickbacks & higher-than-regulation interest rates to attract money. Previously, lenders reported surging deposits at the end of each qtr, with a slump typically in the next month. Industrywide data show it’s unusual for yuan-denominated deposits to decline on a quarterly basis. A 950M yuan fall in Q3 to 112.7T yuan was the first since at least 1999, according to data from the People’s Bank of China.
Shrinking Chinese Bank Deposits Add to Warning Signs for Economy
Brent crude, the price used by the rest of the world headed for a 6th weekly loss, the longest losing streak since 2002, as OPEC boosted production to a 14-month high amid a global surplus. West Texas Intermediate (the US price) was on track for its biggest monthly decline in more than two years. October’s drop has been about 10%. Brent & WTI had their biggest monthly declines since 2012 after US crude production climbed to the highest level in at least 3 decades. Traders are split on whether Saudi Arabia will deepen the crude price cuts that propelled oil into a bear market this month. Brent is $85 & WTI for Dec declined to a low of $79.98. US crude output rose to a record 8.97M barrels a day last week, according to EIA estimates. The EIA’s monthly data shows production at the highest since 1986. Crude inventories have increased by 23M barrels in the past 4 weeks, according to the EIA. The combination of horizontal drilling & hydraulic fracturing has unlocked supplies from shale formations in the central US. WTI & Brent are down more than 20% from their Jun peak as leading OPEC members resisted calls to reduce supply. Iraq’s oil minister told parliament yesterday that there is a “price war” among OPEC members because the market’s fundamentals have changed. Output from OPEC increased by 53K barrels a day to 31M, a 3rd monthly gain. Production from OPEC is responsible for about 40% of the world’s oil supply. Saudi Arabia, Iraq, Iran & Kuwait have cut their export prices this month, fueling speculation that they’ll compete for market share. OPEC ministers are scheduled to meet on Nov 27 to discuss their output target of 30M barrels a day.
Brent Oil Set for Longest Run of Weekly Losses Since 2002 on Supply Glut
Stocks had nothing short of one spectacular week. Dow finished up more than 580, one of its best weeks ever. It also gained 340 in an unusually volatile month & rose a stunning almost 1.3K from the Oct 16 low. Also of note, volatility was wild in Oct when triple digit daily swings were common. The VIX, volatility index, spiked at mid month but settled back to 14, not far above the sub 12 area where it has been for much the year. Record stock prices feel good but wild times in the stock market not welcomed by all investors, & intl economic & military problems will be troubling for the balance of the year.
Dow Jones Industrials
