Monday, March 16, 2015

Markets rise ahead of FOMC meeting

Dow shot up 228 (closing near the highs), advancers over decliners 2-1 (unimpressive) & NAZ went up 57.  The MLP index rallied a bit in the PM & cut its loss to 1+, finishing in the 415s (still near its multi year lows), & the REIT index rose 3+ to the 333s.  Junk bond funds were mixed & Treasuries edged higher.  Oil is below 44, a 6 year low, & gold inched higher.

AMJ (Alerian MLP Index tracking fund)

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Oil bulls got another piece of bad news today from an unlikely source: the Federal Reserve (FED).  US crude production has continued to rise in spite of the collapse in oil prices.  The FED oil extraction index clocked in at a seasonally adjusted 179.8 in Feb, up 0.4% from Jan & 14.4% from a year ago.  That means the supply/demand imbalance in the oil market isn't being addressed by lower supplies.  The nosedive in oil prices has had an impact on oil & gas drilling.  The FED index for that activity fell 17.4% in Feb from the month before & was down 21.4% from a year ago.  Oil analysts say the cutback in drilling eventually will lead to lower production as fewer new wells are developed.  It's just not happening yet, based on the latest data.  For a market where prices already are under pressure from a glut of oil, that's not a pretty picture.

Fed Data Suggest Oil Prices May Have Further to Fall

Procter & Gamble, a Dow stock & Dividend Aristocrat, is exploring a sale or an IPO of some of its beauty brands in a single deal, according to leakers, in a move to accelerate its exit from up to 100 product lines.  PG hasn’t finalized the details, including which products will be separated.  And the company may still decide not to follow thru with the separation.  The beauty unit includes an array of brands such as Covergirl makeup, SKII skin cream & Herbal Essence shampoo, along with fragrances.  It has been reviewing the brands, as the company looks to exit those where it doesn’t command a market-leading position.  Among those likely to be sold are some fragrances, make-up & hair salon products.  PG is also exploring the sale of its Wella hair-care business.  Last year, it agreed to sell Duracell, its battery-making business, to investor Warren Buffett.  The beauty unit generated $19.5B in sales in the year thru Jun, or about 23% of $83B in total sales.  In Jan, PG said fiscal Q2 profit fell 31% as the stronger dollar ate away at sales & earnings from intl units.  The stock rose 1.73.  If you would like to learn more about PG, click on this link:

Procter & Gamble to Explore Sale or IPO of Beauty Brands

Procter & Gamble (PG)

Manufacturing activity growth in New York state slowed in Mar for a 2nd month in a row as the pace of new orders contracted to its weakest level since Nov 2013, a New York Federal Reserve survey showed.  The New York Fed's Empire State general business conditions index fell to 6.90 from 7.78 in Feb.  Economists had expected a reading of 8.0 this month.  A reading above zero indicates expansion.  The new orders index dropped to -2.39 in Mar from 1.22 in Feb, while prices paid fell to 12.37 from prior month's 14.61 (the highest since Sep).  The pace of growth in employment rebounded, with the index for the number of employees rising to 18.56, the strongest since May 2014, from 10.11 in Feb.  The index of business conditions 6 months ahead bounced up to 30.72 from 25.58 in Feb.

NY Manufacturing Growth Unexpectedly Falls

Trading was a bit strange today.  Economic news was not encouraging, but stocks roared ahead anyway.  There were financial deals which traders always like to see.  The FED meeting approaches which brings hopes Janet will send more signals that she is VERY PATIENT.  But old fashioned economic news was not pretty.  Harsh winter weather contributed to weaker numbers.  However substandard overseas business, inconsistent consumer spending & a bear market for oil also hurt.  That could continue in springtime.  Dow is back to flirting with 18K which it first reached more than a month ago.  This rally looks suspicious!

Dow Jones Industrials

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