Friday, November 28, 2014

Stock markets did little while oil plunged 10%

Dow rose pocket change, good enough to set a new record, decliners ahead of advancers 3-2 & NAZ added 4.  The MLP sank 27 to 487, a new record for a decline in one day, & the REIT index went up fractionally to 225.  Junk bond funds were down a few pennies & Treasuries rallied with all the confusion about lower oil prices.  Oil had one of its worst days in history, dropping to the 66s, & gold also had a steep decline.

AMJ (Alerian MLP Index tracking fund)

CLG15.NYMCrude Oil Feb 1566.26 Down 7.50 (10.2%)

Live 24 hours gold chart [Kitco Inc.]

Photo:    Bloomberg

US holiday shopping kicked off earlier than ever this year, leaving some customers who didn’t want to skip out on their Thanksgiving celebrations without the bargains they were seeking.  140M Americans, according to the National Retail Federation (NRF), are expected to hit the stores or shop online by Sun.  The shopping rush kicks off a holiday season that the NRF forecasts will be the best in 3 years, helped by falling unemployment, rising wages & lower gas prices.  Many consumers already may have begun shopping earlier this week as retailers experimented with spreading their deals over a longer period.  While about the same number of people as last year were expected to shop yesterday through Sun, they are projected to spend more, according to the NRF.  Retail sales in Nov & Dec may rise 4.1% this year, beating last year’s 3.1% gain.  More of those purchases may take place online instead of in brick-and-mortar stores.  Shoppers plan to do 44% of their gift buying online, the highest percentage ever, the NRF said last month.  Thanksgiving Day online sales gained 14% from a year earlier, International Business Machines (IBM) said.

Holiday Deal Hunt Draws Millions to Stores Across U.S.

Procter & Gamble, a Dow stock & Dividend Aristocrat, rose after it was reported that the company was exploring a sale of its Wella hair-care business.  A potential sale of the Wella unit may be worth $7B.  Wella includes a professional business in addition to consumer products.  PG announced a plan in Aug to divest 80-100 product lines, accounting for about 10% of its revenue, & already has sold its pet-food businesses to Mars & Spectrum Brands (SPB).  The company earlier this month said it would sell the Duracell battery brand to Berkshire Hathaway (BRK.A) for $4.7B in stock.  The stock rose 1.55.  If you would like to learn more about PG, click on this link:

P&G Rises After Report It’s Exploring Sale of Wella Unit

Procter & Gamble (PB)

There was little movement today except for oil related issues.  Airlines benefit from lower oil prices so they soared.  But energy stocks dropped big time.  The 2 energy stocks in the Dow, which are also Dividend Aristocrats, Exxon (XOM) & Chevron (CVX), were down $4 & $6 respectively.  While lower energy prices are generally welcomed by many businesses, they are unsettling for the business world.  These issues will see more selling next week.

Dow Jones Industrials

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Markets fluctuate as oil sinks to lowest levels in years

Dow rose 47, decliners barely ahead of advancers & NAZ went up 19.  The MLP index PLUNGED 24 to the 489 (its biggest drop in history) while the REIT index rose 3+ to the 327s (a new multi year high).  Junk bond funds fell & Treasuries gained as commodities declined.  Oil dropped like a rock after OPEC triggered the biggest one-day plunge yesterday in 3 years by failing to cut its output in response to a glut.  Gold also saw selling.

AMJ (Alerian MLP Index tracking fund)

CLG15.NYM...Crude Oil Feb 15...69.39 Down ....4.37  (5.9%)

GCF15.CMX...Gold Jan 15......1,181.60 Down ...15.50  (1.3%)

3 Stocks You Should Own Right Now - Click Here!

Photo:    Bloomberg

OPEC’s decision to cede no ground to rival producers underscored the price war in the crude market & the challenge to US shale drillers.  The 12-nation OPEC kept its output target unchanged even after the steepest slump in oil prices since the global recession, prompting speculation it has abandoned its role as a swing producer.  Yesterday’s decision propelled futures to the lowest since 2010, a level that means some shale projects may lose money.  The fracking boom has driven US output to the highest in 3 decades, contributing to a global surplus that Venezuela yesterday estimated at 2M barrels a day, more than the production of 5 OPEC members.  Demand for the group’s crude will fall every year until 2017 as US supply expands, eroding its share of the global market to the lowest in more than a quarter century, according to the group’s own estimates.  “We will produce 30 million barrels a day for the next 6 months, and we will watch to see how the market behaves,” OPEC Secretary-General Abdalla El-Badri said.  “We are not sending any signals to anybody, we just try to have a fair price.”  OPEC pumped almost 31M barrels a day in Oct & has exceeded its current output ceiling in all but 4 of the 34 months since it was implemented.  OPEC’s own analysts estimate production was 30.25M last month.  Members will abide by the 30M barrel-a-day target, El-Badri said yesterday.

Oil Enters New Era as OPEC Faces Off Against Shale; Who Blinks as Price Slides Toward $70?

China has about the same number of licensed drivers as there are people in the US, even though 2 out of 3 adults aren’t qualified to operate a motor vehicle.  There are now more than 300M motorists in China, compared with the US population of 319M, according to Chinese public security ministry & US census data.  It took just 4 years to add 100M new drivers in China, & 35 of its cities now have more than 1M vehicles, with major urban centers like Beijing & Shenzhen having twice that number.  The rising number of motorists will boost vehicle demand while increasing the burden on cities already struggling to cope with pollution & congestion.  The public security ministry said separately this week that it is looking at making it easier to get a license by removing the need for mandatory driver’s education classes.  Automakers are expected to sell about 23M new vehicles this year, according to a forecast by the state-backed China Association of Automobile Manufacturers.  Cities including Beijing, Shanghai & Hangzhou have implemented caps on the number of new autos as part of measures to control tailpipe emissions.  Even as the number of drivers has risen, cases of major traffic accidents have fallen, the ministry said.  Deaths caused by speeding accidents dropped 36% in the past 2 years, while those due to drunk driving decreased 39%.

China Motorists Exceed 300 Million as Cities Struggle to Cope

This is a quiet day for the market except for oil related issues.  MLPs are taking the drop in oil prices hard & this may be just the beginning of selling.  Fracking  is important for getting marginal petroleum from the ground & this is a high cost business.  Low oil prices will impact most MLPs.  Of course, US crude production is still expected to rise next year.  But this is new territory & nobody how it will play out for MLPs.

Dow Jones Industrials