Tuesday, December 2, 2014

Higher markets as oil tumbles again

Dow rose 102, advancers over decliners 2-1 & NAZ advanced 28.  The MLP index rebounded 11+ to the 477s & the REIT index was up 1 to 325.  Junk bond funds were mixed & Treasuries fell, bringing higher interest rates.  Oil sank back to the 67s & gold fell as the dollar’s rebound & a slump in energy costs eroded demand for the precious metals as a store of value.

AMJ (Alerian MLP Index tracking fund)

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CLF15.NYM....Crude Oil Jan 15....66.93 Down ...2.07  (3.0%)

Live 24 hours gold chart [Kitco Inc.]

Retail sales over the long weekend following Thanksgiving fell 2.1% to $21.8B, ShopperTrak estimated, offering a less-bleak view on the start of holiday shopping than the National Retail Federation (NRF).  While spending dropped 6.8% on Black Friday, a large increase on Thurs & steady performance on Sat helped blunt the decrease, the firm said today.  The NRF, in contrast, said yesterday that sales declined 11% during the 4-day weekend.  ShopperTrak’s findings still signal that shopping events like Black Friday are losing their grip on consumers. The slow start to the holiday season also puts pressure on retailers to boost their performance in the last few weeks before Christmas.  ShopperTrak maintained its forecast that purchases will rise 3.8% in Nov & Dec, the biggest gain since 2010.  “The weekend is not necessarily indicative of how the season is going to end up -- it’s a small wedge in the seasonal pie,” Bill Martin, ShopperTrak’s founder, said.  “Historically, we know a larger percentage of the revenue for the holiday season falls into December. There are seven of the 10 largest shopping days left to go.”  ShopperTrak’s brighter outlook may give some investors hope for the season, Martin said.  “The NRF missed the mark Sunday,” Martin said. “Some people are angry about it.”  The NRF said today that critics were overreacting to the sales decline figure, rather than recognizing that Black Friday weekend is no longer as important in predicting the season’s sales.  “We present this consumer survey for exactly what it is: a snapshot of a moment in time that reflects what the consumer is doing during that time, not the entire holiday season,” a spokesman for the NRF said.  “Thanksgiving weekend will always be important to the consumer and our retailers, but as a predictor of overall holiday sales, it is diminished due to the now-extended length of the holiday buying season, online competition, more ubiquitous use of mobile, and the heavily discounted promotional nature of holiday sales.”

Holiday Shopping Tracker Offers Brighter Take on Sales

General Motors (GM), Toyota (TM), Honda & Fiat Chrysler (FCAU) said US auto sales rose more than estimated last month as Black Friday specials attracted flocks of consumers.  GM said it was the industry’s best Nov in 11 years.  FCAU sales jumped 20% to 170K for a 56th straight monthly increase amid gains in deliveries of Jeep sport-utility vehicles, Ram pickups & the Chrysler 200 sedan.  The estimate was for a 16% jump.  Ford (F) & Nissan sales declined less than estimated.  “By any measure, households are reaping significant disposable income gains each week at current gas prices,” Emily Kolinski Morris, Ford’s chief economist, said.  “With U.S. gasoline consumption of over 360 million gallons a day, that represents a total savings of about $180 million per day now versus September.”  Sales of pickups & SUVs have benefited from that cheaper fuel.  Automakers have also offered deals to get a piece of consumers’ holiday spending. Black Friday, once associated with big-box retailers & shopping malls, marked an important day on the automotive sales calendar.  GM estimated that the annualized sales pace, adjusted for seasonal trends, was 17.1M, the fastest Nov rate since 2003.  FCAU said the industry’s annualized sales pace for Nov may have reached 17.5M, including medium- and heavy-duty trucks that typically account for at least 200K deliveries a year.  It would be only the 2nd month with a faster than 17M pace since 2006 after the 17.5M in Aug.  GM sales rose 6.5%, beating the estimate for a 2.6% increase.  Strong SUV sales powered Ford’s Nov sales, as Escape deliveries jumped 22% to the best Nov ever & Explorer sales rose 13%.  TM sales rose 3%, beating the estimates for a 2.1% gain.  Nissan sales declined 3.1%, smaller than the 5% drop predicted.  Thru 11 months, the company’s US deliveries have risen 11% to 1.27M, more than the automaker has ever sold in the country in a full year.  Honda sales rose 4.6%, better than the 4.3% increase predicted.

GM and Chrysler Lead Best November in 11 Years, Early Data Show

Fewer CEOs in the US said they plan to boost capital spending in the next 6 months as the sales outlook was little changed, a survey showed.  The Business Roundtable's economic outlook index, which measures expectations of sales, investment & employment, fell to 85.1 in Q4, the lowest in a year, from 86.4.  Figures greater than 50 are consistent with economic expansion, & the index is still above its long-term average level of 80.3.  Corp leaders project the economy will expand 2.4% next year, unchanged from their 2014 expectation.  The forecast underscores the need for lawmakers to take up tax & regulatory reform, the group said.  “The economy ended the year essentially where it started - - performing below its potential,” Randall L. Stephenson, chairman of Business Roundtable said.  36% of respondents expect an increase in business investment in the next 6 months, down from the 39% who said so in Q3.  The share projecting an increase in sales over the same period was little changed at 74%, held back in part by slower overseas economies.  “What you’re seeing happen in Europe and Asia is suppressing people’s views of their sales over the coming six months,” Stephenson said.  “Asia has really slowed considerably, and so that is obviously weighing on people’s sales forecasts.”  Hiring plans were a bright spot.  40% of respondents said they will add to payrolls in the next 6 months, up from 34% in Q3.  About 4 of 10 execs said regulatory costs were the biggest burden on companies, the same as last year, followed by labor.  The share saying health care was a major expense dropped to 11% this year from 21% in Q4-2013, the last time the question was asked.  The survey, completed between Oct 22 & Nov 12, before much of the plunge in oil prices took place.

CEO Expectations for U.S. Economy Declined in Fourth Quarter

Dow reached another new record high & is closing in on 18K, nearly triple the low in Mar 2009.  By another measure, it's up only 26% from the record reached in Oct 2007.  That's equivalent to an annual growth rate of 3+%, not all that impressive when the sell-off from the recession is factored in.  During this rally the economic data behind the advance is bland.  But the bulls are looking for an extension of the rally next year.  That optimism has worked out well in recent years.  However it raises the question, "How long can this kind of rally go on?"

Dow Jones Industrials

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