Wednesday, December 24, 2014

Markets advance cautiously ahead of holiday break

Dow rose 43 to a new record, advancers slightly over decliners & NAZ rose 15.  The MLP index fell 2  to the 457s & the REIT index went up 1 to the 333s.  Junk bond funds slipped lower & Treasuries retreated.  Oil slid from the highest close in more than a week amid concern that the strengthening US economy won’t boost demand enough to clear a global glut.  Gold declined for the 3rd straight day as gains in the US economy bolstered the case for higher interest rates.

AMJ (Alerian MLP Index tracking fund)

CLG15.NYM...Crude Oil Feb 15...55.94 Down ...1.18  (2.1%)

GCZ14.CMX...Gold Dec 14.....1,174.00 Down ...3.90  (0.3%)

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Fewer Americans than forecast filed applications for unemployment benefits last week, a sign the job market is making progress as the year ends.  Jobless claims dropped 9K to 280K, the fewest since early Nov, from 289K in the prior week, according to the Labor Dept.  The forecast called for 290K.  Rising demand is encouraging businesses to hold the line on dismissals & take on more workers.  Better job prospects & cheaper fuel costs signal consumer spending, the biggest part of the economy, will provide another boost to the expansion in Q4 following growth in Q3 that was the strongest in more than a decade.  The 4-week moving average, a less volatile measure than the weekly figures, declined to 290K last week from 298K.  The number continuing to receive jobless benefits climbed 25K to 2.4M in the latest week.  The unemployment rate among people eligible for benefits held at 1.8%.

Fewest Americans in Seven Weeks File Jobless-Benefit Claims

Caterpillar, a Dow stock, is looking at potential acquisitions for next year.  “We’ve got lots of capital to deploy, which I would rather use growing the business if we possible can,” CEO Doug Oberhelm said.  “We’ve got a number of very small growth opportunities that we are looking at,” he said.  In 2015, “we’ll probably do a couple of those but in terms of anything big it’s a pretty small chance.”   CAT has “stayed away” from acquisitions of companies serving the energy industry in the last few years because valuations were high, Oberhelman said.  Those kind of deals may now come into play more in the next 2 years after the recent drop in oil prices.  CAT doesn’t have a specific target or deal in mind, he added.  The company’s sales have dropped by about $10B since 2012, largely because of lower sales to miners, which are suffering from a decline in commodity prices.  It’s forecasting revenue will be flat to slightly higher next year.  The stock lost 14¢.  If you would like to learn more about CAT, click on this link:

Caterpillar Looking at Acquisitions for 2015

Caterpillar (CAT)

Russia's central bank is trying to make it easier for banks to get foreign-currency refinancing as debt payments loom after the ruble collapsed.  Bank of Russia will offer 28-day & 365-day loans in foreign currency, collateralized by loans to large exporters denominated in US dollars & €s, according to its website.  The instrument will be available to banks with equity of at least 100B rubles ($1.8B) & will be available until 2018.  Russian companies have struggled to raise foreign currency financing after US & EU sanctions over the Ukrainian crisis curbed access to intl capital markets as the economy heads toward a recession next year.  Russia may lose its investment-grade credit rating for the first time in a decade, S&P said yesterday.  The new facility will help the ruble to return to “fundamentally justified levels and reach a supply-demand balance in the foreign-currency market with lower volatility in the exchange rate,” the central bank said.  The decision followed steps the regulator took last week to ease concerns of Russian lenders & companies, which have at about $120B of foreign currency debt coming due next year.  The measures also include allowing banks to use a Q3 exchange-rate to value risk-weighted assets.  While the central bank is keeping the total foreign-currency refinancing limit available to banks at $50, it’s ready to increase the level as necessary.

Russia Offers Dollar Loans to Aid Ruble as Debt Payments Loom

Not much is going on in the markets ahead before the 1PM (EST) early close today.  This has generally been a good year for stocks, while oil has pulled back to multiyear lows.  A disconnect for such an important sector may be pointing to a troubled time next year.

Dow Jones Industrials

stock chart

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