Friday, January 9, 2015

Lower markets on global economic concerns

Dow dropped 170, decliners over advancers more than 3-2 & NAZ fell 32.  The MLP index rebounded a bit in the PM, slipping pennies in the 444s, & the REIT index inched up pennies in the 342s.  Junk bond funds were mixed & Treasuries were lower.  Gold rose on speculation that the Federal Reserve (FED) won’t soon raise interest rates, as wage gains lagging behind the pace of employment growth signal inflation remains tame, & gold gained.

AMJ (Alerian MLP Index tracking fund)

CLG15.NYM....Crude Oil Feb 15....48.84 Up ...0.05 (0.1%)

Live 24 hours gold chart [Kitco Inc.]

The FED paid a record $99B of its estimated 2014 net income to the Treasury as part of an annual div it remits after covering its own expenses from interest on its balance sheet & other gains.  The FED's 2014 estimated net income of $101.5B comes mostly from $115.9B in interest income on securities it holds, such as Treasuries & mortgage-backed securities, the central bank said.  Operating expenses of the 12 reserve banks were $3.6B.  Policy makers have more than quadrupled the FED balance sheet since 2008 to $4.5T with 3 rounds of large-scale asset purchases.  The last round of bond buying continued for 2 years before winding down in Oct.  Last year’s remittances eclipse the prior record of $88B in 2012 & the 2013 total of $79B.  The FED said the regional reserve banks last year were assessed $711M for producing, issuing, & retiring currency, $590M for expenditures by the Board of Governors in DC, & $563M to fund operating costs for the Consumer Financial Protection Bureau.

Fed Paid U.S. Treasury a Record $98.7 Billion Last Year

China's factory-gate prices extended a record stretch of declines, with the sharpest drop in 2 years in Dec, suggesting room for further monetary easing.  The PPI slumped 3.3% from a year earlier, the National Bureau of Statistics said, compared with projection for a 3.1%.  The slide has yet to be fully reflected in consumer prices, which rose 1.5%, matching the estimate.  Tumbling oil & metal prices have extended the run of producer-price declines to a record 34 months, adding to deflationary pressures worldwide as export prices drop.  Economists anticipate the central bank will follow up a Nov interest-rate cut with further reductions, & with lower reserve requirements for lenders.  Factory-gate prices of oil & gas slumped 19.7% from a year earlier in Dec, while coal tumbled 12.2% & ferrous metals 19%.

China Factory-Gate Deflation Deepens on Commodity Price Fall

The 40-year old ban on most US crude exports is set to be loosened after Mexico’s state-owned oil company asked for an exception.  Petroleos Mexicanos is in talks with the Commerce Dept to import 100K barrels a day of light crude to increase Mexico’s gasoline production & improve refining.  Pemex, as the world’s 9th-largest oil producer is known, would send its heavy oil to Gulf Coast refineries in exchange.  Oil producers have called for the US to end the restrictions, saying booming domestic output reduces the need to keep supplies at home.  US oil supply has increased 66% in the past 5 years, & a majority of that growth is in light oil from shale rock.  Pemex’s request comes a week after the administration opened the door for expanded exports of an ultra-light type of crude oil known as condensate that has gone through minimal processing.  The US bans most exports of unrefined crude, with exceptions such as shipments to Canada.  The US shipped a record 502K barrels a day of crude in Nov.  Mexico’s oil production fell for a 10th consecutive year in 2014, tumbling to the lowest output since at least 1990, when the gov first began releasing data.  The request comes at a time when oversupply has pushed West Texas Intermediate crude below $50 a barrel, the lowest since 2009.  Pemex exported 803K barrels of oil a day to the US last year & will continue to do so regardless of the decision on the light crude import request, the company said.  Heavy crude it would exchange wouldn’t be in addition to what it already sends.

U.S. Crude Oil Export Ban Poised to Loosen With Mexico Request

Stocks were sold on concern grew that Europe’s stimulus plan might not be sufficient & American wages fell before the start of earnings season next week.  Dow is down 86 in Jan.  Alcoa (AA) will report earnings Mon after the close.

Dow Jones Industrials

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