Friday, March 6, 2015

Triple digit loss for the Dow on rate hike fears

Dow sank 278, decliners over advancers 6-1 & NAZ dropped 55.  The MLP index dropped 7+ to 437 (a little under its recent trend line near 450) & the REIT index plunged 10+ to the 323s.  Junk bond funds dropped & Treasuries sold off big time.  Oil fell into the 49s & gold is in the mid 1100s.

AMJ (Alerian MLP Index tracking fund)

CLJ15.NYM....Crude Oil Apr 15....49.60 Down ...1.16  (2.3%)

Live 24 hours gold chart [Kitco Inc.]

Consumer borrowing in the US increased in Jan at the slowest pace since Nov 2013 as Americans cut back on their credit-card use.  The $11.6B advance followed a $17.9B gain in the previous month that was bigger than previously estimated, according to the Federal Reserve.  Non-revolving credit, which includes loans for education & motor-vehicle purchases, accelerated.  Households may become more willing to borrow & take advantage of low interest rates once they see faster wage growth on the heels of an improving labor market after employers added 295K workers last month.  The forecast called for an increase of $14.8B in consumer credit after an initially reported $14.8B Dec gain.  The report doesn’t track debt secured by real estate, such as mortgages or home-equity lines of credit.  Non-revolving debt, such as that for college tuition & the purchase of vehicles & mobile homes, climbed $12.7B in Jan.  Revolving debt, including credit cards, fell $1.2B following a $6.2B increase.

U.S. Consumer Credit Rises at Slowest Pace Since November 2013

The number of US oil rigs out drilling new wells fell for the 13th straight week as the US sinks deeper in a glut of excess oil.  Drillers idled 64 oil rigs (excluding gas rigs), dropping the number to 922, according to Baker Hughes.  The rig count is down 43% since Oct, an unprecedented retreat.  The forecast was for a decline of 20 rigs. Every week since 1944, oilfield-services company Baker Hughes has released a survey of rigs out drilling for oil.  But it wasn't until oil prices dropped by more than half that "rig counts" became a popular metric for oil watchers.  Rigs are used to explore for new deposits & to drill new wells, but fewer rigs don't always mean less production.  The US is currently pumping oil faster than at any time since 1972.

Oil Rigs Get Slammed for the 13th Week

Cheaper energy prices & lower demand for foreign oil helped narrow the US trade gap in Jan.  The trade deficit shrank to a seasonally adjusted $41.7B, according to the Commerce Dep, as crude imports fell & created the lowest deficit for petroleum products in over a decade.  Dec's deficit was revised to $45.6B from an initially reported $46.56B.  Economists had forecast a trade deficit of $41B in Jan.  Exports decreased 2.9% from Dec to $189.4B, & imports also fell 3.9% to $231.1B.  A steep drop in crude oil prices, a firming dollar & the relative strength of the US economy have had a big impact on trade figures over the past year.  Last month, the trade deficit for petroleum products fell to $10.7B, its lowest level since Nov 2003.  The average price of a barrel of imported crude oil was $58.96 in Jan, down from $73.64 in Dec & $90.21 a year earlier.  Non-petroleum imports registered at $169B on a seasonally adjusted basis, down from December's $172B & the highest level on record.  While a strengthening US dollar makes foreign goods & services relatively more affordable, it also makes US exports more expensive in overseas markets.  Exports of goods fell in Jan to the lowest level since Oct 2012.  Much of the decline was in petroleum-related products.  Exports were an early driver of the economic expansion that began in 2009, but trade now is a drag on overall growth.  Net exports, the difference between exports & imports, subtracted 1.15 percentage point from GDP in Q4 when it expanded at a 2.2% annual pace.

U.S. Trade Gap Narrows in February

Janet has been trying to get the markets prepared for a rate hike.  Those early signals meant little to traders who are addicted to low rates.  Reality sunk in today.  With numerous warnings, reasonably strong economic data suggests that at mid year hikes will begin.  Chances are great they will come in small  increments, 25 basis points at a time.  But they are coming.  Dow is down about 300 in Mar.

Dow Jones Industrials

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