Thursday, December 11, 2014

Early market gains pared as oil falls to $60

Dow rose 63 (160 below the AM highs), advancers over decliners a meager 5-4 & NAZ added 24.  The MLP index lost steam in the AM & finished down a fraction to 441 while the REIT index unched up a fraction in the 326s.  Junk bond funds were mixed & Treasuries declined.  Oil fell below $60 a barrel for the first time since Jul 2009 as Saudi Arabia questioned the need to cut output, bolstering speculation that the kingdom will defend market share.  Gold was also lower

AMJ (Alerian MLP Index tracking fund)

CLF15.NYM....Crude Oil Jan 15....60.06 Down ...0.88  (1.4%)

Live 24 hours gold chart [Kitco Inc.]

Household wealth eased in Q3 as the value of Americans’ holdings of stocks & mutual funds declined.  New worth for households & non-profit groups fell by $141B, or 0.2% from Q2, to $81.3T, the Federal Reserve (FED) said in its financial accounts report (previously known as the flow of funds survey).  The drop may prove temporary as benchmark stock indices this qtr reached a record, building on years of gains that helped some Americans get their finances in order.  Further growth in household wealth will probably provide an added boost to consumer purchases as FED policy makers consider raising interest rates.  Household net worth is $1.3B above its pre-recession peak of $67.9T, reached in 2007.  The value of financial assets, including stocks & pension fund holdings, held by American households decreased by $315B in Q3.  So far in Q4, the S&P 500 is up 2.7% thru yesterday.  While the housing market has shown mixed progress this year, property values have continued to climb, albeit at a slower pace.  The S&P/Case-Shiller national home-price index rose 4.9% in year thru Sep, the slowest pace since the period ended Oct 2012.  Household real-estate assets climbed by $214B.  Owners’ equity as a share of total household real-estate holdings increased to 53.9% last qutr from 53.6% in the previous qtr.  Household debt increased at a 2.7% annual rate in Q3.  Mortgage borrowing climbed at a 0.7% pace, the first increase in a year.  Other forms of consumer credit, including auto & student loans, rose at a 6.4% pace.  Total non-financial debt advanced at a 4.4%.  Federal gov obligations rose by 7.2%, while business borrowing climbed 5.2%.  State & local gov debt fell at a 2.8% pace.

Household Wealth in U.S. Fell in Third Quarter on Stocks

Pro-Russian rebels killed 3 Ukrainian soldiers, jolting a 2-day-old truce in the nation’s east as Prime Minister Yatsenyuk called for an intl donor conference to avoid a possible “default.”  The casualties follow Ukraine's decision on Tues to halt hostilities in an attempt to start new talks with insurgents its it’s fighting in the Donetsk & Luhansk regions.  Ukraine needs to expand a $17B intl bailout program that’s keeping its economy afloat after bonds fell to a record, Economy Minister Abromavicius said, adding it’s too early to say how much more aid Ukraine requires.  “To receive financial aid in order to survive in this difficult time, not to allow default, we need an international donor conference, the approval of Ukraine’s program, and to get support from our western partners,” Premier Yatsenyuk told lawmakers today.  It has been reported that the country may need to almost double its emergency loan “within weeks” to avoid bankruptcy.  Representatives from the IMF arrived in Kiev this week to discuss further payments under the existing program & a possible expansion.  “Part of the mission is assessing the financing needs of Ukraine and how those financing needs will be fulfilled,” an IMF spokesman said.  “It’s really important that the donor community step up and provide financing.”  Yatsenyuk told lawmakers it was the newspaper, not he, saying the country may need the extra $15B in aid.  “It is very difficult for us to get out of this crisis alone, without the support of international partners it is practically impossible,” Yatsenyuk added.  The finance minister, Natalie Jaresko, said Ukraine is “neither in default, nor in a pre-default condition.”  “This question isn’t being discussed at the government at all,” she said.  “Though no one conceals that the situation is very difficult: Ukraine needs urgent stabilization of the financial sector, including the banking sector.”  She added that she has asked ministries to find ways to cut their spending by 25% next year, Focus reported.

Ukraine Truce Stumbles as Premier Warns of ‘Default’ Threat


Photo:   Bloomberg

Wal-Mart, a Dow stock & Dividend Aristocrat, seeking to attract customers after the post-Thanksgiving rush, is selling the iPhone 6 for as little as $129, a reduction of $50 from the usual price.  Starting this week, the company is offering that price when customers buy the 16-GB model & sign up for 2-year contracts from AT&T (T), another Dow stock & Dividend Aristocrat: Verizon (VZ), a Dow stock; or Sprint (S).  It is selling larger-screen iPhone 6 Plus for as little as $229, down from $279.  With the new discounts, WMT aims to drum up traffic 2 weeks before Christmas.  Less than 10% of Americans have completed their shopping for the holiday, the company said.  WMT also is selling the iPhone 5S for $49 with a contract, down from $79, & Samsung Galaxy S5 for $79, compared with $139.  Even before the cuts, the prices were below retail levels.  The fresh wave of discounts reflects the fact that shoppers aren’t as focused on one-time shopping events such as Black Friday, the company said.  Industrywide, the long Black Friday weekend was a disappointment for retailers when the NRF estimated that sales declined 11% during the period.  “Gift buying no longer happens on just one day or in just one way,” Scott McCall, WMT senior VP of toys & seasonal merchandising, said.  The stock went up 85¢.  If you would like to learn more about WMT, click on this link:

Wal-Mart (WMT)

As if the markets didn't have enough troubles, House Minority Leader Nancy Pelosi said Reps lack the votes to pass a $1.1T federal spending bill & is urging Dems not to vote for it.  The short term outlook for the gov is fuzzy, dependent on last minute haggling by both sides.  Oil is driving this market & at 60, it looks frail.  Oil stocks rallied in the AM but finished around break even by the close.

Dow Jones Industrials

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