Wednesday, November 12, 2014

Market averages struggle to reach new records

Dow lost 2 (NOT good enough for another record), advancers over decliners 5-4 & NAZ added 18.  The MLP index was fractionally higher, taking it over 500, & the REIT index was off 2+ to the 316s.  Junk bond funds were mixed to higher & Treasuries saw buying.  Oil is now below 77 & gold also lost ground.

AMJ (Alerian MLP Index tracking fund)

CLZ14.NYMCrude Oil Dec 1477.25 Down 0.69 (0.9%)

Live 24 hours gold chart [Kitco Inc.]

The US Energey Information Administration (EIA) cut 2014 & 2015 crude price forecasts amid rising global output & sluggish demand.  The agency reduced its 2015 US oil production outlook for the first time this year.   West Texas Intermediate will average $77.75 a barrel in 2015 versus the Oct projection of $94.58, the EIA said.  The agency trimmed its Brent crude estimate for next year to $83.42 from $101.67.  “Continued growth in global oil supply in the face of weak oil demand will push crude prices lower in the near term,” the EIA said.  “The average price for Brent oil is expected to be about $18 a barrel lower next year than previously forecast.”  The Energy Dept statistical arm said US production will rise to 8.57M barrels a day this year & 9.42M in 2015, the most since 1970, up from 7.46M last year.  The 2015 forecast was reduced from 9.5M in last month’s report.  Horizontal drilling & hydraulic fracturing (fracking) have unlocked supplies in shale formations in North Dakota, Texas & other states.  The increase in global production & slower demand growth has pushed prices for both WTI & Brent down more than 20% from their June highs.  “Lower crude prices may curb drilling activity in some lower-producing U.S. basins, but total domestic oil production should continue to increase through next year as crude prices will be high enough to support most drilling in the major shale oil producing areas of Texas, North Dakota, New Mexico and Colorado,” the EIA said.  Gasoline at US pumps will average $2.94 a gallon in 2015, down 44¢ from last month’s estimate of $3.38.  The EIA cut its forecast for global oil consumption this year to 91.3M barrels a day from 91.4M last month.  The forecast for 2015 demand was cut to 92.5M from 92.7M.  Oil production outside of OPEC will rise 3.5% from 2013 to 56.M barrels a day this year, up 50K barrels from the Sep estimate.  Non-OPEC output will climb an additional 1.7% to 56.9M barrels in 2015.  OPEC will produce 35.9M barrels a day this year, the EIA said.  Last month’s forecast was 35.8M.

EIA Reduces Crude, Gasoline Price Forecasts Through 2015

Ukraine Tells Army to Prepare for Battle as East Tensions Rise
Photo:   Bloomberg

Russia is planning to extend its long-range bomber patrols as far as the Gulf of Mexico & the eastern Pacific Ocean, it said, as NATO accused Putin’s gov of sending more troops into eastern Ukraine.  With Ukraine warning its conflict is close to returning to open war, Russian Defense Minister Shoigu said his country’s military will start conducting regular long-range bomber patrols along Russia’s borders & over the Arctic Ocean.  A Defense Ministry spokesman rejected an assertion from the NATO’s top general that it was moving combat troops & heavy weapons into Ukraine’s rebel-held east, news service RIA Novosti said.  “In this situation, we have to maintain a military presence in the western part of the Atlantic and the eastern part of the Arctic Ocean, in the Caribbean and in the Gulf of Mexico,” the Mininstry said.  Pressure has been building for days in Ukraine, with the gov in Kiev & pro-Russian rebels accusing each other of gearing up for a renewed military push that risks swelling the death toll of more than 4K.  The UN Security Council is scheduled to hold an emergency session today over the intensifying conflict.  The separatists & their Russian backers are amassing troops in the areas of the Donetsk & Luhansk regions they’ve seized, a Ukrainian Defense Minister said.  “We have seen columns of Russian equipment, primarily Russian tanks, Russian artillery, Russian air-defense systems and Russian combat troops entering into Ukraine,” US Air Force General Philip Breedlove, NATO’s top military commander, told reporters today.  “We do not have a good picture at this time of how many. We agree that there are multiple columns that we have seen.”

Russia to Fly Bombers to U.S. Gulf as Ukraine Escalates

Bank of America, which paid more in legal settlements tied to the US housing collapse than any other company, will avoid easing mortgage standards even as regulators seek to expand lending, CEO Brian T Moynihan said.  “You won’t see us start to expand our criteria much past what we’ve done today,” Moynihan said today.  “I don’t think there’s a big incentive for us start to try to create more mortgage availability where the customers are susceptible to default.”  He was responding to a question about recent gov efforts to improve access to credit in a market so tight that even former Federal Reserve Chairman Ben Bernanke couldn’t refinance his mortgage.  Last month, the Federal Housing Finance Agency said that Fannie Mae & Freddie Mac will better define when those US-backed companies would force banks to repurchase loans.  It’s part of a broader push by the administration to unlock credit after banks had to repurchase $B of mortgages that were issued during the housing bubble.  Many seeking to buy their first home, & others deemed too risky have been shut out of the real estate market.  JPMorgan Chase (JPM), a Dow stock, CEO Jamie Dimon has complained that credit was needlessly tight.  “I know that that doesn’t sound good for an instant housing recovery and faster housing markets, but it’s actually good because in the long term it keeps housing more fundamentally based,” Moynihan said.  BAC has paid more than $70B to settle disputes after the financial crisis, most of it tied to the 2008 takeover of subprime lender Countrywide Financial.  Moynihan has shuttered several businesses inherited from that takeover to focus on creditworthy customers who have checking accounts or other relationships with the firm.  “Having watched this play out over the last several years, watched the underlying consumer difficulties created by people borrowing more than they could pay back,” the company’s priority is underwriting loans to people who can repay them, he said.  A customer without the means to make a down payment of at least 10% should consider renting rather than trying to buy a home, Moynihan added.  The stock was off pennies.  If you would like to learn more about JPM, click on this link:

BofA Reeling From Losses to Avoid Standards Drop Amid U.S. Mortgage Push

Bank of America (BAC)

Once again, stocks just marked time today.  Fundamentals behind the recent run are lacking.  Intl tensions are rising with Russia flexing its military muscles, there is more unrest in Israel & ISIL has not gone away.  The US economy is report improving numbers but consumer support is shaky.  However, Dow is up a staggering 1.5K since mid Oct.  That's one of its best advances ever!  Tomorrow, Wal-Mart (WMT), a Dow stock & Dividend Aristocrat, reports.  That will give clues about the health of US consumers.

Dow Jones Industrials

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