Monday, January 26, 2015

Markets attempt to climb as winter storm approaches NY city

Dow lost 6, advancers over decliners 2-1 & NAZ rose 13.  The MLP index inched up a fraction to the 452s & the REIT index rose 2+ to the 355s (essentialy matching its record made 8 years ago).  Junk bond funds slid back & there was selling in Treasuries.  Oil pulled back to 47 & gold dropped to 1279. 

AMJ (Alerian MLP Index tracking fund)

Live 24 hours gold chart [Kitco Inc.]

Federal Reserve (FED) officials will look past low inflation & stay focused on raising interest rates around mid-year when they meet this week.  45% of 53 economists in a survey said the central bank will raise the benchmark lending rate in Jun.  6% said Jul, while 30% said the FED will wait until Sep for the first increase since 2006.  Officials last month said they expect to raise the rate this year.  The FOMC meeting for the first time in 2015 on Tues & Wed, will be challenged by reports contrasting the encouraging performance of the US economy with a global outlook that has darkened since they met in Dec.  The ECB last week announced it would spend €60B a month starting in Mar on purchases of debt to ward off the threat of deflation, a damaging, widespread decline of prices, in the euro area.  The € has weakened almost 3% since the ECB’s decision, creating a potential headwind for US growth by making its exports more expensive.  Economists in the survey said the FED would shrug off the impact of a stronger dollar.  Some 28 survey participants said the rise in the dollar against major currencies makes no difference to the timing of the first rate increase.  Similarly, 66% said the ECB’s decision to start a $1.3T Q3 program makes no difference to the timing of the first rate increase.

Fed to Raise Rates Midyear Even With Low Inflation, Survey Shows

OPEC’s secretary-general said oil prices as high as $200 a barrel are possible if producers fail to invest in new supply.  “If you don’t invest in oil and gas, you will see more than $200,” Abdalla El-Badri said without giving a timeframe.   Crude prices tumbled 46% last year as Saudi Arabia & other members of the OPEC said they wouldn’t curb output in response to a supply glut.  The International Energy Agency said last week that a decline in prices may deter investment in all types of energy.  There’s an oversupply of about 1.5M barrels a day on the oil market & OPEC is open to a meeting with nations outside the group to tackle the glut, El-Badri said.  The market will be brought back into balance by a reduction in supply, rather than an increase in demand, he said.  Investment in oil production will fall by $100B, or 15% this year, compared with 2014, the IEA said.  This means oil at $45 a barrel will be a temporary phenomenon, he said.  US crude productrion rose to 9.19M barrels a day 2 weeks ago, the fastest pace in at least 3 decades, according to the Energy Information Administration.  The boom was driven by a combination of horizontal drilling & hydraulic fracturing (fracking) which has unlocked supplies from shale formations including the Eagle Ford & Permian in Texas & the Bakken in North Dakota.

OPEC’s El-Badri Says $200 Oil Possible With Lack of Spending

Seagate plunged after projecting quarterly revenue that trailed estimates.  Revenue in fiscal Q3 will be “at least” $3.45B, executives said today.  Analysts had forecast $3.59B.  The company has suffered from lessening demand for PC & related components in recent years amid the shift toward mobile devices, such as tablets.  STX reported sales for the fiscal Q2 that also missed estimates.  The stock sank 4.92.  If you would like to learn more about STX, click on this link:

Seagate Plunges 12% After Revenue Forecast Trails Analysts’ Estimates

Seagate Technology (STX)

There was not a lot going on in the markets.  Even for those not affected, the winter storm reaching NYC is getting much ot the attention.  This will give more time to assess election results in Greece & how that will affect the euro area.  The mess in Yemen & uncertainty regarding the change of comand in Saudi Arabia are looming as potential market movers if they affect oil production or what stability there is in the MidEast.  The FOMC meeting will provide market excitement in the next 2 days.

Dow Jones Industrials

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