Friday, January 2, 2015

Markets struggle to climb higher on the year's first trading session

Dow rose 9, advancers ahead of decliners 5-4 but NAZ lost 9.  The MLP index jumped 10+ to the 469s & the REIT index went up 4+ to 332.  Junk bond funds were mixed to lower & Treasuries rallied.  Oil keeps sliding lower & gold inched higher.

AMJ (Alerian MLP Index tracking fund)

CLG15.NYM....Crude Oil Feb 15....52.51 Down ...0.76  (1.4%)

Live 24 hours gold chart [Kitco Inc.]

A Chinese manufacturing gauge slipped to the lowest level in 18 months, adding pressure to do more to support growth in the economy.  The gov Purchasing Managers' Index fell to 50.1 in Dec from 50.3 in Nov, according to the China Federation of Logistics and Purchasing.  That compared with an estimate of 50.  Investors’ expectations for more monetary easing have sent stocks soaring.  Weakness in the housing market is weighing on an economy that probably expanded last year at the slowest pace since 1990.  A separate manufacturing index from HSBC Holdings & Markit Economics also declined.  The Chinese economy probably grew 7.4% last year & the pace may cool to 7% this year.  A services PMI index rose to 54.1 in Dec from the previous month’s 53.9.

China Factory Gauge Slips to Lowest Level Since June 2013

General Motors Cadillac Escalade
Photo:   Bloomberg

Fresh from a 5th year of growth in the US, carmakers are rolling into the new year with yet another sign of good fortune: Cheap fuel is gassing up truck sales.  Consumers bought more pickups, minivans & sport utility vehicles than cars in every month of 2014.  That’s something carmakers haven’t enjoyed since 2004 when a barrel of oil sold for less than $40.  And the industry’s bonanza should continue.  Available credit, cheap gas & good lease deals have given consumers the confidence to buy more of both.  Automakers are projected to report on Mon that sales rose in Dec.  Last month’s annualized sales pace, adjusted for seasonal trends, may have been 16.9M, down slightly from Nov, but still the 3rd fastest of 2014.  Dealers last month may have sold 1.5M cars & light trucks which would bring the full-year total to 16.5M & cap a 58% increase since the low in 2009.  Light-vehicle sales in the US averaged 16.8M from 2000-2007.  The record, set in 2000, was 17.4M.  Buyers of new models have been undeterred by record recalls, mostly of older vehicles.

Trucks Triumph in the Year of Filling Up Cheaply

Oil supplies in Iraq & Russia surged to the highest level in decades, signaling no respite in early 2015 from the glut that has pushed crude prices to their lowest in 5 years.  Russian oil production rose 0.3% in Dec to a post-Soviet record of 10.7M barrels a day, according to preliminary data by CDU-TEK, part of the Energy Ministry.  Iraq exported 2.9M barrels a day in Dec, the most since the 1980s, said the Oil Ministry.  The countries provided 15% of the world’s oil in Nov.  Russian Energy Minister Alexander Novak said the nation will maintain output this year & expects prices to stabilize.  Russian output is increasing even after the US & EU imposed sanctions last year.  Measures included targeting the energy sector by banning exports to Russia of some equipment technology.  Iraq, OPEC’s 2nd-biggest producer, reached a deal with its semi-autonomous Kurdish region last month over the Kurds’ oil exports thru Trukey, after years of disagreement on the territory’s right to independently develop its energy resources.  The agreement allows the shipment of as much as 550K barrels a day of oil from northern Iraq to the port of Ceyhan on the Mediterranean, along a pipeline to the Turkish border operated by the Kurdistan Regional Government.  This includes 300K barrels a day from the Kirkuk oilfields in northern Iraq, under the control of Kurdish forces since they moved to repel an offensive by militants from the Islamic State in Jun.  Iraq exported 5.6M barrels of Kirkuk oil in Dec, equivalent to about 180K barrels a day, the Oil Ministry said, more than a 6X increase from 836K barrels in Nov, according to the Oil Ministry.  The Russian production figure is for crude & condensates.  Production averaged 10.6M barrels a day for 2014, also a post-Soviet record.

Russia and Iraq Supply Most Oil In Decades Amid 2015 Glut

Little went on in the stock market today as the holiday season was extended for one additional day.  Volume was sluggish.  Oil continues to be a key driver in the markets & its outlook is glum.   Overseas economies are struggling &, while strong, the US economic recovery remains uneven.  Now the game will be played about the first day, first week & first month, trying to predict market performance for the balance of the year.  Last year, Jan was a brutal month, but the markets had a good year.  Dow rose almost 8%, extending its gains from early 2009.

Dow Jones Industrials

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