Monday, December 29, 2014

Markets fluctuate as oil remains near 5 years lows

Dow slid back 15 (not good enough for another record), advancers over decliners 4-3 & NAZ inched up pennies.  The MLP index jumped 4+ to the 463s while the REIT index was up 1+ to the 333s.  Junk bond funds rose & Treasuries also had a good day.  Oil slid to a 5-year low amid speculation a supply glut will continue.  Gold fell for the 4th time in 5 sessions as the dollar touched a 5-year high, damping investor demand for the metal as a store of value.

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CLG15.NYM....Crude Oil Feb 15....53.56 Down ...1.17  (2.1%)

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Talks between separatist officials & representatives of Ukraine's military ended in Donetsk without an agreement as the Ukrainian authorities accused rebels of reinforcing their positions in the country’s east.  The negotiations will continue Wed at another rebel-held stronghold in eastern Ukraine.  The talks focused on a cease-fire, a prisoner swap, pulling back heavy weapons & implementing peace agreements.  “All sides, including Moscow, remain called upon to use their influence on the parties constructively and by doing so make an important contribution to the stabilization of the situation,” German Foreign Minister Frank-Walter Steinmeier said.  The exchange of prisoners is “an encouraging and important signal,” he said.  The belligerents are coming under increasing pressure to implement agreements reached in Sep to stop the monthslong conflict.  Pro-Russian rebels are using the cease-fire to regroup & reinforce their positions, a military spokesman said.  It has been reported that several columns of trucks delivered ammunition to separatists in last 3 days.  Germany wants Russia to exert more pressure on rebels in Ukraine to honor the Sep truce accord a spokeswoman for the gov in Berlin said.  Russian Foreign Minister Lavrov said that the “internal Ukrainian crisis” will continue until the people of Ukraine reach an agreement among themselves without cues from Brussels & Washington.

Ukraine’s Talks With Separatists Yield No Deal as Clashes Flare

US oil drillers, facing the lowest crude prices in 5 years & rising competition from suppliers abroad, idled the most rigs since 2012.  Rigs targeting oil declined by 37 to 1499 in the latest week, the lowest since Apr, extending the 3-week decline to 76.  The total rig count, which includes one miscellaneous rig, dropped 35 to 1840, also an 8-month low.  The number of rigs targeting US oil is down from a record 1609 following a $55-a-barrel drop in global prices since Jun, threatening to slow the shale-drilling boom that’s propelled domestic production to the highest in 3 decades as OPEC resists calls to cut output.  While the rig count has dropped, domestic production continues to surge, with the yield from new wells in shale formations including North Dakota's Bakken & Texas’s Eagle Ford projected to reach records next month, according to the Energy Information Administration.  Domestic oil output climbed to 9.14M barrels a day in latest week, the highest going back to 1983.

Oil Rigs in U.S. Drop by 37 to Lowest Level Since April

Get ready for a disastrous year for US gov bonds according to analysts on the bond market.  With the Federal Reserve (FED) is poised to raise interest rates in 2015 for the first time in almost a decade, prognosticators are convinced Treasury yields have nowhere to go except up.  Their calls for higher yields next year are the most aggressive since 2009, when US debt securities suffered record losses.  But getting it right hasn’t been easy.  Almost everyone who foresaw a selloff this year as the FED ended its bond buying was caught off-guard as lackluster US wage growth & turmoil in emerging markets propelled Treasuries to the biggest returns in 3 years.  Now, even as the bond market’s inflation outlook tumbles, forecasters are sticking to the view that Treasuries are a losing proposition as the economy strengthens.  The current forecast from the "smart guys" calls for yields to reach 3.01% next year.  A roughly 0.75 percentage point increase would be almost twice as much as forecast for 2014.  Prognosticators are more bearish than any time since heading into 2009 when they predicted yields on every debt maturity would rise more than a percentage point as the US, helped by easy-money policies, started to recover from its worst economic crisis in decades.  Treasuries lost 3.7% that year in the biggest slide dating back to 1978.

U.S. Bond Sentiment Worst Since Disastrous ’09 as Fed Shifts

The unrest in Libya, an important petroleum supplier, only had a limited effect on oil trading.  Then oil prices dropped.  Oil continues to bob around the low-mid 50s & that is creating recession conditions for its industry.  Next week, reported retail data for the holiday season will show how much cheaper gas at the pumps is affecting retail sales.  Trading volume has been slow & will remain that way for the rest of the week.  Wed & Fri will have regular trading hours.

Dow Jones Industrials

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