Tuesday, December 16, 2014

Markets sink at the close ahead of FOMC announcement tomorrow

Dow fell 111 (closing at the low & a whopping 360 below the midday high), decliners ahead of  advancers 4-3 & NAZ fell 57.  The MLP index recovered 10+ to 431 & the REIT index dropped 1 to the 318s.  Junk bond funds were mixed after having a very bad Dec & Treasuries had a strong rally.  Oil was up pennies & gold capped the longest slump in 5 weeks amid concern that the Federal Reserve is moving closer to raising US interest rates & speculation that Russia will sell reserves of the metal.

AMJ (Alerian MLP Index tracking fund)

CLF15.NYM....Crude Oil Jan 15....56.17 Up ...0.26 (0.5%)

Live 24 hours gold chart [Kitco Inc.]

Manufacturing & services in the 18-nation euro area barely expanded in Dec as sluggish growth in Germany & France & France kept business activity subdued.  Markit Economics said a composite index for manufacturing & services rose to 51.7 from 51.1 in Nov, just above the 51.5 level forecast.  A reading exceeding 50 indicates expansion.  A factory gauge increased to 50.8 from 50.1, while a measure for services rose to 51.9 from 51.1.  With France barely growing this year, Italy in recession & Germany struggling to leave a mid-year weak patch behind, the ECB is readying further stimulus as govs wrangle over economic reforms.  Some support for euro-area consumers may come from oil prices that have fallen more than 40% this year, while exporters may benefit from a weaker €.  “The euro zone saw slightly faster growth of business activity in December but still ended the year on a whimper rather than a roar, with worrying weakness still evident in the core countries of France and Germany,” said Markit.  “The upturn was therefore driven by the rest of the region, where growth hit a five-month high to round off the best year the ‘periphery’ has seen since 2007.”  New orders recorded a marginal increase, while employment growth was the fastest since Jul, Markit said.  Input costs rose at the slowest rate in 8 months in Dec, reflecting the impact of cheaper fuel, according to the report.  Selling prices have contracted for more than 2½ years.  In France, the manufacturing PMI unexpectedly declined to 47.9 from 48.4, adding to evidence the region’s 2nd-largest economy is struggling to grow.  In Germany, private-sector growth slowed to the weakest in 18 months in Dec.  While Draghi seeks consensus among the ECB’s Governing Council for more measures, govs are attempting to force thru economic reforms that will foster growth.  French Prime Minister Manuel Valls unveiled a month-by-month map of measures last week that are designed to aid the nation’s ailing economy.  In Italy, the gov won a key vote on labor reform this month.  Rating companies are not yet convinced.  Fitch cut France’s credit rating on Fri, citing the absence of a material improvement in the nation’s public debt dynamics & slippage in the deficit targets.  S&P lowered Italy’s assessment a week earlier amid sluggish growth prospects & high public debt.

Manufacturing, Services Barely Expand in Europe on Sluggish Germany, Italy

Apple Prevails at $1 Billion Trial Over Digital Music
Photo:   Bloomberg

Apple prevailed in a potential $1B lawsuit by iPod customers who claimed updates to iTunes in 2006 were meant to kill competition, a decisive victory after only 3 hours of jury deliberations.  Firmware & software updates in iTunes 7.0, which were contained in the iPod models at issue, were genuine product improvements, the jury said.  Jurors, by answering yes to that one question, cleared the company of any antitrust liability even if the tweaks hurt rivals.  The verdict followed a 2-week trial that featured Steve Jobs's e-mails & videotaped testimony before he died in 2011.  AAPL told jurors yesterday that updates which enhanced security & guarded against hack attacks were in the works 2 years before competitors started selling digital music after finding a way around AAPL's mechanism for preventing non-iTunes songs from working on the iPod.  “We created iPod and iTunes to give our customers the world’s best way to listen to music,” AAPL said after the verdict.  “Every time we’ve updated those products -- and every Apple product over the years -- we’ve done it to make the user experience even better.”  The stock fell 1+.  If you would like to learn more about AAPL, click on this link:

Apple Prevails at $1 Billion Trial Over Digital Music

Apple (AAPL)

Iran is said to be offering its main crude grade to customers in Asia at the deepest discount in 14 years, taking a cue from Saudi Arabia in trimming price differentials.  National Iranian Oil cut its official selling price for Jan shipments of light crude to Asia to a discount of $1.80 a barrel below the regional benchmark as Middle Eastern producers vie to keep selling in the region, according to 4 leakers.  Iran cut the differential to a discount from a premium of 13¢ a barrel to the average of the Oman & Dubai benchmark crudes for Dec.  The light crude grade hasn’t sold at such a steep discount tracking began in 2000.  Oil prcies have collapsed since OPEC decided to maintain its output target, fanning speculation that Saudi Arabia & other members are determined to make North American shale drillers & other producers share the burden of reducing oversupply.  Saudi Arabia’s state oil company prompted speculation that the kingdom was seeking to preserve market share when it lowered prices for Nov.  Expanding supplies from North American shale deposits coupled with weakening demand growth in China helped push crude into a bear market this year.  Middle Eastern producers are increasingly competing with cargoes from Latin America, North Africa & Russia for buyers in Asia.  Saudi Arabian Oil Co. lowered the official selling price $2 a barrel less than a regional benchmark, marking the biggest discount since 2000.  Saudi Aramco cut all differentials in Jan for buyers in Asia & the US & raised them for customers in Europe.  Fellow OPEC members Iraq & Kuwait also cut selling prices to Asia.

Iran Said to Cut Jan. Light Crude to Asia to $1.80/Bbl Discount

As usual prior to an FOMC announcement, markets are not doing much.  HOWEVER, pre-market trading was sharply lower & then Dow rallied until noon.  After that it was all downhill.  Traders are waiting for Janet Yellen to speak tomorrow & maybe give guidance about raising interest rates next year.  There could also be comments about low priced oil & how that is affecting FOMC thinking.

Dow Jones Industrials

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