Friday, March 13, 2015

Markets retreat on lower oil prices

Dow dropped 145 (but off the lows), decliners over advancers better than 2-1 & NAZ fell 21.  The MLP index sold off 2+ to the 417s & the REIT index lost 1+ to 330.  Junk bond funds drifted lower off & Treasuries also declined.  Oil dropped to about 45 while gold went up.

AMJ (Alerian MLP Index tracking fund)

3 Stocks You Should Own Right Now - Click Here!

CLJ15.NYM....Crude Oil Apr 15...45.01 Down ...2.04  (4.3%)

Live 24 hours gold chart [Kitco Inc.]

Ukraine’s bond restructuring may include a reduction in principal, as well as an extension of maturities & lower coupons, Finance Minister Natalie Jaresko said in her first talks with creditors about easing the country’s debt load.  The nation of more than 40M will try to reorganize debt from both the gov & publicly run entities by Jun, Jaresko said.  She called on Russia, which has lent Ukraine $3B in a bond maturing this year, to join the talks.  The price of Ukraine’s dollar debt fell.  The operation “will probably involve the combination of a maturity extension, a coupon reduction and a principal reduction,” Jaresko said. “The proportion of each of these elements will be discussed with creditors.”  Ukraine won approval this week for $17½B of IMF aid, bolstering reserves that have fallen to a more-than-decade low.  The loan is part of a $40B package to rescue the nation’s economy as it buckles under a plunging hryvnia currency & the war, which has devastated its industrial heartland.  Fighting continued in eastern Ukraine, with the gov accusing pro-Russian rebels of breaching a cease-fire agreement signed last month.  The separatists staged artillery attacks on gov positions near the city of Donetsk & in Shyrokyne, a town near the Sea of Azov port city of Mariupol.  While Ukraine’s army has reported dwindling casualties, “the prevailing view” among EU members is that there hasn’t been enough progress to start removing the sanctions the bloc imposed on Russia over the conflict, Slovak Foreign Minister Miroslav Lajcak said.  Any new “aggression” will trigger deliveries of lethal weapons to Ukraine & new sanctions against Russia, Ukrainian pres Poroshenko said.

Ukraine Says Creditors Face Principal Losses on Dollar Bonds

US oil rigs fell for the 14th straight week as the deepening glut of US crude drives prices lower.  Drillers idled 56 oil rigs (excluding gas rigs), dropping the total to 866, Baker Hughes reported.  The oil rig count is down 46% since Oct, an unprecedented retreat.  The forecast was for a decline of 49.  Oil is headed for its biggest weekly decline since Jan as production continues to outpace demand & threatens to max out storage capacity.  Prices of WTI crude have fallen more than 9% this week, to around $45 a barrel, wiping out a rebound in prices that started in late Jan.  The Baker Hughes rig count has been around since 1944, but only since the price crash last year has it has emerged as a popular & controversial signal for US oil watchers.  Oil companies have improved the efficiency of their operations, so raw rig counts are losing some of their predictive power, at least for now.  In fact, despite the tumbling number of active rigs, the US is pumping more oil than any time since 1972.

Oil Rigs Tumble for the 14th Week

United Technologies, a Dow stock, will buy $2.65B of stock in an accelerated share-repurchase agreement with Goldman Sachs (GS) & Morgan Stanley (MS), which comes as the company is cutting costs & considering a spinoff of its helicopter business.  Under the terms of the accelerated share repurchase, UTX will pay $1.325B to both GS & MS & will then receive an initial 9.29M shares from each one.  The final number of shares repurchased will be based on the average price of stock during the term of the transaction, minus a discount.  The settlement is expected to happen before Q4, though it might be accelerated by either GS or MS.  This agreement is part of a plan by UTX to repurchase $3B in shares this year & is within the previously authorized amount of 60M shares.  It has a market value of $106B & has seen numerous shake-ups since CEO Louis Chenevert was ousted last year & replaced by former CFO Greg Hayes.  Both the financial chief & head of its aerospace division have left.  The company has been trying to cut costs, saying that it will leave its historic Hartford headquarters by Q3.  It also is considering spinning off a helicopter unit of its Sikorsky Aircraft business.  The unit has come under pressure amid soft military spending & weakness in demand from oil-field services companies following the steep drop in crude-oil prices.  But it has landed several high-profile new contracts, including the new presidential helicopter program.  UTX stock fell 1.50.  If you would like to learn more about UTX, click on this link:

UTX to Buy Back Stock in Accelerated Plan

United Technologies (UTX)

Oil has returned to be the main driver for stocks.  Oil is essentially at its lows from the plunge which began in the middle of last year & all indications are that this bear market will continue for some time.  The Alerian MLP index is flirting with its recent lows & is down 125 from its record high reached late last Sep.  While the index has an outstanding record of growth, this decline is notable because it rivals the more vicious plunge in late 2008 when MLPs were sold willy nilly.  Dow is down almost 400 in Mar.

Dow Jones Industrials

No comments: