Wednesday, October 8, 2014

Markets fluctuate ahead of Fed minutes

Dow inched up 17, decliners just ahead of advancers & NAZ slid chump change.  The MLP index plunged a huge 7+ to the 507s (see more below) & the REIT index rose 1+ to the 294s.  Junk bond funds & Treasuriues continued in their rally mode.  Oil fell & gold was up on bargain hunting.

AMJ (Alerian MLP Index tracking fund)

CLX14.NYM...Crude Oil Nov 14...87.73 Down ...1.12  (1.3%)

GCX14.CMX...Gold Nov 14.....1,218.60 Up ...6.70 (0.6%)

Unemployment in the US remains too high & a stronger dollar could hurt the country’s exports while preventing inflation from rising to the Federal Reserve goal, Chicago Fed pres Charles Evans said.  “We still aren’t back to full labor-market health,” Evans continued.  “At 5.9 percent, the uemployment rate remains above what most people think of as its long-run neutral level.”  The long-run neutral rate of unemployment refers to the lowest sustainable jobless rate seen as consistent with stable prices.  Fed policy makers estimate it lies between 5.2-5.5%.  Evans, a voting member of the FOMC next year, repeated that officials should be “exceptionally patient” before they start to raise rates & said a stronger dollar could sap growth.  “Weakness abroad could translate into a higher exchange value for the dollar against other currencies, further reducing net exports,” he added.  “A higher dollar also would result in lower prices for imports, which, in turn would hold down inflation and delay progress toward our 2 percent inflation target.”

Fed’s Evans Says Unemployment Remains Too High at 5.9%

Costco Q4 profit that topped estimates after sales at its established stores increased.  EPS rose to $1.58 from $1.40 a year earlier.  The projection was for $1.52.  Sales at Costco stores open more than a year increased 7%, excluding changes in gasoline prices & foreign-currency exchange rates.  The results mark the first time in 5 qtrs that EPS topped the estimate.  Q4 sales rose 9.3% to $35.5B, near the $35.6B estimate.  Revenue from membership fees advanced 7.3% to $768M.  The company’s growth contrasts with sluggish sales at other large discount chains.  The stock jumped 2.07.  If you would like to learn more about COST, click on this link:

Costco Profit Tops Estimates as Same-Store Sales Increase

Costco (COST)

The US shale boom is producing record amounts of new oil as demand weakens, pushing prices down toward levels that threaten to reduce future drilling.  Domestic fields will add an unprecedented 1.1M barrels a day of output this year & another 963K in 2015, raising production to the most since 1970, according to the US Energy Information Administration.  The Energy Dept’s statistical arm forecasts consumption will shrink 0.2% to 18.9M barrels a day this year, the lowest since 2012.  More supply from hydraulic fracturing & horizontal drilling, & less demand, are contributing to the tumble in WTI crude prices.  The US benchmark is down 18% since Jun 20 & fell below $90 a barrel last week, the first time in 17 months.  Prices in domestic fields such as North Dakota's Bakken shale are several dollars lower because transportation bottlenecks raise the cost of reaching refiners.  The EIA cut 2014 & 2015 crude price forecasts yesterday because of rising production & falling consumption.  WTI will average $94.58 next year, down from a Sep projection of $94.67.  US output reached 8.7M barrels a day in Sep, the most since Jul 1986.  US demand is down because Americans are driving less & using more fuel-efficient cars, according to the EIA.  US output is rising as companies are now getting more wells out of each rig & more oil out of each well.  This explains why energy stocks & MLPs have been selling off recently. 

Shale Boom Tested as Sub-$90 Oil Threatens U.S. Drillers

Stocks are stumbling around again.  Weakness in the energy sector (including MLPs) is not helping matters.  The Fed minutes will probably not give a lot of new information.  The next major event is earnings from Alcoa (AA) this evening.  While it is no longer a Dow stock, it gives the first major indication of what to expect in earnings season.  Next come the big banks.  Dow is looking sad, down 500 from its recent record highs.

Dow Jones Industrials

3 Stocks You Should Own Right Now - Click Here!

No comments: