Friday, February 13, 2015

Dow climbs over 18,000 on higher energy shares

Dow gained 46, advancers over decliners more than 3-2 & NAZ rose 36.  The MLP index went up 3+, going over 450, & the REIT index fell 2 to the 341s.  Junk bond funds climbed higher & Treasuries pulled back.  Oil slipped a little from early gains but still closed in the high 52s & gold saw gains.

AMJ (Alerian MLP Index tracking fund)

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CLH15.NYM....Crude Oil Mar 15....52.69 Up ...1.48 (2.9%)

Live 24 hours gold chart [Kitco Inc.]

Microsoft, a Dow stock, CEO Satya Nadella has a new strategy to make the company a purveyor of popular mobile applications: Acquire them.  The software company is planning over the next few months to buy mobile-productivity applications that work on Apple (AAPL) & Google (GOOG) operating systems.  The plans follow its 2 deals for app makers over the past 3 months, the acquisition on Wed of calendar-apps company Sunrise Atelier & the purchase of e-mail software startup Acompli in Dec.  Now MSFT is trying to complete more such transactions, with categories under consideration including note-taking & project management.  It is looking largely at deals valued from the $10Ms to as much as a few 100M dollars.  The deal-making for apps marks a departure for the company.  It previously focused first on apps that ran on its flagship Windows operating system, sometimes converting those programs to run on AAPL & GOOG software.  Now Nadella, who has made it a priority to bolster the company’s stable of software for all mobile devices, is buying app makers that work on AAPL iOS & GOOG Android platforms & letting their expertise flow back into the Windows versions.  Besides looking for apps that are popular on rival products, MSFT wants targets where the people or technology at the startup can also be used to bolster its offerings for Windows.  Acompli CEO Javier Soltero is now playing a big role in determining its plans for mobile e-mail software overall.  MSFT is looking particularly for productivity apps to bolster its share in the mobile market.  While its Office software dominates the productivity category on PCs, the company is faced with many individual apps for collaboration, file-sharing & e-mail, as well as things like spreadsheets & slides, which are designed for mobile devices like phones & tablets.  The small slice that Windows has in mobile has allowed an opening for other apps to gain users on smartphones & tablets.  The stock rose 78¢.  If you would like to learn more about MSFT, click on this link:

Microsoft on the Lookout for More Mobile-Productivity App Acquisitions

Microsoft (MSFT)

The US drilling frenzy is over.  What’s not is the boom in oil production.  While companies have idled 151 rigs in 5 shale formations since reaching a peak of 1157 in Oct, they’ll need to park another 200 for growth to stall, according to data from the US Energy Information Administration.  Output there will reach a record 5.47M barrels a day in Mar even though the number of rigs exploring for oil is the lowest since 2013.  The spending cuts led to speculation that US gains would slow, eroding a global supply glut that sent prices tumbling.  Oil has jumped 18% since closing at a 6-year low, below $45 a barrel.  Improving technology & a focus on the most promising acreage has made the rig count, a closely watched barometer of drilling activity, a less reliable indicator of future output.  The industry has become better at blasting crude out of deep underground layers of rock, according to productivity data tracked by the EIA in the major shale prospects including the Bakken, Eagle Ford, Niobrara, Permian & Utica.  Improvements have helped overcome the natural depletion of existing wells.  Shale wells decline sharply at first & then trail off at a slower rate until they run dry.  It’s a phenomenon known as The Red Queen, after the character in Lewis Carroll’s “Through the Looking-Glass,” who tells Alice, “It takes all the running you can do, to keep in the same place.”  As drillers cut costs, the less efficient equipment is idled first while the best machinery is dispatched to the most promising acreage, which boosts the amount of crude produced for every rig in the field.  At the same time, the existing pool of wells grows older, meaning the decline rate, the Red Queen, slows down.  In North Dakota’s Bakken formation, 551 barrels a day were produced in Jan for each drilling rig in the field.  That’s more than double the amount pumped per rig 3 years earlier.  The same is true in other fields.  The Bakken illustrates how producers are doing more with less.  As of Jan, the number of rigs in the region declined to 161, 33 lower than a 2014 peak of 194 in Sep.  Yet the amount of oil pumped per rig increased 8.9%, & the EIA forecasts that output from the region will reach a record 1.32M barrels a day in Mar.  The US has added 1M barrels a day to production in each of the past 3 years, contributing to a worldwide glut. 

U.S. rigs are being idled, but the oil boom is not ending

Sometime late Wed night or early Thurs morning, as talks meant to end the fighting in eastern Ukraine were being finalized, Ukrainian army officials reported observing the movement of heavy weapons across the country’s border with Russia.  They said they had identified 50 tanks, 40 missile batteries & numerous armored personnel carriers.  This might have been good news.  One of the key elements the Ukrainian gov was looking for in any deal to end the conflict with separatists in the east was the removal of heavy weapons from the front lines, & the withdrawal of all “foreign” military elements from Ukraine.  The word “foreign” was, of course, code for “Russian.”  But virtually nobody believes continued Russian claims that it has supplied neither weapons nor soldiers to the separatists in eastern Ukraine.  The report that Russia might be reinforcing its proxy army in eastern Ukraine is exactly why the level of confidence in the durability of the new agreement is quite low.  German Chancellor Merkel, in many respects the main driver of the agreement, was herself cautious about drawing conclusions about its success.  “I have no illusions – we have no illusions,” she said, admitting that much work remained to be done.  On the whole, the deal appears to favor Putin & the Ukrainian separatists, whom virtually everyone except Putin recognizes as the Kremlin’s client.  Under the deal announced Thurs, there appears to be no provision requiring the rebels to relinquish any territory they currently control.  Additionally, Ukraine will not have control of its own border with Russia anytime before the end of the year, & even then, only after granting significant autonomy to the rebellious east, something that must be enshrined in an amendment to the Ukrainian constitution.

Putin Sent Weapons to Ukraine Rebels Amid Peace Talks

Stocks closed the week with a solid advance.  Dow rose 300 (near its record) & the S&P 500 reached a new record.  NAZ just needs another 200 to top its record made 15 years ago.  The euphoria over the so called truce in Ukraine & hope for a Greek bailout brought out buyers.  However, rising oil prices may have had the biggest influence although the fundamental cause of the bear market in oil remains, oversupply around the world.  Traders have a long weekend to take another look at the oil situation & see if Greece is given another new lease on life next week.

Dow Jones Industrials

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