Monday, December 1, 2014

Market decline led by tech stocks at Nasdaq

Dow fell 51, decliners over advancers 3-1 & NAZ was off 64, hurt by Apple's (AAPL) decline (see below).  The MLP index sank another 22 to the 464s (off nearly 100 from its record high earlier this year) & the REIT index was off 1 to the 323s.  Junk bond funds were weak & Treasuries fell, with 10-year note yields rising for the first time in 7 days, after a gauge of manufacturing was stronger than forecast & as a Federal Reserve (FED) official said the drop in oil prices will boost the economy (see below).  Oil bounced back big time after the plunge on Fri & gold gained ground with all the confusion in various markets.

Dow Jones Industrials

CLG15.NYM....Crude Oil Feb 15....68.97 Up ...2.71 (4.1%)

Live 24 hours gold chart [Kitco Inc.]

The sharp drop in oil prices will help boost consumer spending & underpin an economy that still requires patience before interest rates are increased, Federal Reserve Bank of New York President William C. Dudley said.  “It is still premature to begin to raise interest rates,” Dudley added.  “When interest rates are at the zero lower bound, the risks of tightening a bit too early are likely to be considerably greater than the risks of tightening a bit too late.”  Dudley expressed confidence that, although the US economic recovery has shown signs in recent years of accelerating, only to slow again, “the likelihood of another disappointment has lessened.”  Investors’ expectations for a FED rate increase in mid-2015 are reasonable, he said, & the pace at which the central bank tightens will depend partly on financial-market conditions & the economy’s performance.  Lower energy costs “will lead to a significant rise in real income growth for households and should be a strong spur to consumer spending,” Dudley said.  The drop will especially help lower-income households, who are more likely to spend & not save the extra real income, he said.  Continued price declines for oil would have a negative impact on oil & gas investments in the US, Dudley said.  “I don’t think this risk should be overstated.”  Dudley outlined reasons why he believed the FED should be patient when considering an increase to its benchmark interest rate after the FOMC has held the federal funds rate at zero to 0.25% since Dec 2008.  Unemployment still exceeds the FED goal & inflation remains below its 2% target, he said.  In addition, when interest rates are near zero, the risks of tightening monetary policy too soon “are likely to be considerably greater than the risks of tightening a bit too late.”  The FOMC is next scheduled to meet Dec 16-17.  Dudley said market expectations that the FOMC will begin raising rates “around mid-2015 seem reasonable to me.”

Fed’s Dudley Says Oil Price Decline Will Strengthen U.S. Economic Recovery

Internet holiday shopping rose 9% so far on Cyber Monday, slowing from the same time frame last year as consumers spread their online purchases over more days.  While sales today, typically the busiest day for web shopping as US consumers return to their desks after the Thanksgiving holiday weekend, had increased as of noon, the growth wasn’t as fast as last year when sales had jumped 21% in the same period, according to International Business Machines.  The slowdown took place even as online retailers cut prices on electronics to lure shoppers.  The slower pace of growth on Cyber Monday may reflect an earlier start to the shopping season, with some retailers offering online deals a week before Black Friday.  Online shopping on Sat & Sun was up 17% compared with the same weekend in 2013.  Shopping on smartphones & tablets so far today accounted for 23% of e-commerce sales, up from a total of 17% the previous year.  The broader retail industry had a disappointing holiday kickoff on Black Friday, the day after Thanksgiving.  Total spending fell to $50.9B over the past 4 days, down from $57.4B in 2013.  It was the 2nd year in a row that sales declined during the post-Thanksgiving Black Friday weekend.  This year, many shoppers stayed home. 

Cyber Monday Shopping Rises 9% as Online Sales Slow

AAPL shares plunged almost 5% during a 60-second swoon that started 20 minutes after trading began today, falling the most since Jan before paring half the loss almost as quickly.  About $40B of market value was erased & then mostly restored as shares of the iPhone maker slumped along with other technology stocks.  The decline was fastest between 9:50-9:51AM, when more than 6M shares traded at prices from $117-$111.27 in more than 30K different trades.  The retreat was mirrored in technology stocks & came just before the S&P 500 Index pared a decline of 0.8% after a report showed US manufacturing expanded faster than economists projected in Nov.  AAPL shares have rallied 44% in 2014, the 15th biggest gain in the NAZ 100 Index.  AAPL stock makes up more than 14% of the Nasdaq 100 Index & that gauge fell as much as 1.4% as AAPL declined.  The stock finished the day down 3.90.  The 80M shares traded for AAPL was big but not extraordinary.  If you would like to learn more about AAPL, click on this link:
Apple Stock Tumbles Most in 10 Months Before Rebounding

Apple (AAPL)

The first day of trading in other months has started with big gains.  Not today.  First, the plunge in oil prices has been unsettling for everybody.  MLPs have been punished badly.  On Wed, the Alerian MLP index was at 514.  Today it closed at 464.  That kind of drop for MLPs has never been seen before.  Investors are nervous that an unsettled oil market will lead to lower oil shipments.  This is new territory for MLPs & nobody knows where these low prices & high volatility will lead.  Then disappointing retail sales on the weekend, which starts the important holiday season, brought on more selling today.  Weakness in the tech sector today is a mystery.  Also, hints about raising rates at the FED may have shaken some traders.  Today's decline casts a dark cloud over the month of Dec.

Dow Jones Industrials

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