Wednesday, March 4, 2015

Lower markets following Fed Reserve beige book report

Dow dropped 106, decliners over advancers 3-2 & NAZ was off 12 (back below 5K).  The MLP index lost 2+ to the 442s, continuing its sideways trend, & the REIT index fell 3+ to the 333s.  Junk bond funds were lower as were Treasuries.  Oil went up over 51 & gold slipped below 1200.

AMJ (Alerian MLP Index tracking fund)

stock chart

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CLJ15.NYM....Crude Oil Apr 15....51.53 Up ...1.01 (2.0%)

Live 24 hours gold chart [Kitco Inc.]

The US is pumping oil faster than at any time since 1972, & storage tanks are getting filled to the brim.  Oil production rose for the 4th consecutive week, to a rate of 9.3M barrels a day, even as oil-drilling rigs are being idled at an unprecedented rate.  US inventories also rose, for the 8th consecutive week, jumping 2.4% to 444M barrels, the US Energy Information Administration reported today.  US oil storage is bursting at the seams amid a global glut of supply that has driven prices down by half since last summer while inventories remain at their highest levels in at least 80 years.   Exxon Mobil (XOM), a Dow stock & Dividend Aristocrat, said that it's sticking to its production targets established when oil traded for more than $100 a barrel.  Saudi Arabia's oil minister, Ali Al-Naimi said today that his country won't cut output either.

The U.S. Is Pumping Even More Oil and Storage Tanks Are Getting Filled to the Brim

The US economy continued to expand across most regions & sectors from early Jan thru mid-Feb, the Federal Reserve said, with auto sales & consumer spending rising in most Fed districts.  In its Beige Book report of anecdotal information on business activity collected from contacts across the nation, the central bank said wage pressures were moderate across most districts.  But the report said that some contacts reported increased wages to attract skilled workers for difficult-to-fill positions.  The Fed is watching wage pressure closely for signs that stubbornly low inflation is beginning to tick higher.  Oil & gas producers in certain districts anticipate cuts in capital expenditures this year, in a sign of low energy prices biting the industry.

Economy Expands as Energy Pressures Weigh

A gauge of growth in the US services sector was modestly stronger than expected in Feb, helped as an index on employment rebounded from recent weakness.  The Institute for Supply Management said its services index was 56.9 in Feb, up slightly from 56.7 in Jan.  Analysts were looking for a reading of 56.5.  The survey's employment index jumped to 56.4 from 51.6, moving from its lowest level since Feb 2014 to its highest level since Oct.  One component, prices, rose but stayed under the 50 level that separates expansion from contraction, while 2 other components, order backlogs & imports, returned to expansionary territory after a recent contraction.  The rise in the overall index came despite a deceleration in business activity.  That subindex fell to 59.4 from 61.5.

Service Sector Growth Unexpectedly Ticks Higher

Economic data reported in early Mar has been pretty much more of the same.  Fri is the big jobs report which is likely to show more than 200K jobs were added to the economy.  Even after declining markets in the last 2 days, Dow is up a startling 900 since the end of Jan.

Dow Jones Industrials

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