Friday, May 29, 2015

Markets reduce May gains after GDP data

Dow went down 115, decliners over advancers 2-1 & NAZ fell 27.  The MLP index slid 1+ to the 432s & the REIT index was off 3+ to the 317s.  Junk bond funds were mixed to higher & Treasuries rallied as stocks retreated.  Oil rebounded, going over 60, & gold inched higher but remains under 1200.

AMJ (Alerian MLP Index tracking fund)

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CLQ15.NYM....Crude Oil Aug 15....60.80 Up ...2.78 (4.8%)

Live 24 hours gold chart [Kitco Inc.]

Oil explorers idled rigs in US fields for the 25th straight week, drawing out an unprecedented retreat in drilling that has curbed the country’s shale oil boom & helped crude prices rally.  Rigs targeting oil declined 13 to 646, Baker Hughes said.  The count is the lowest since Aug 2010.  US energy producers sidelined more than half of the rigs drilling for oil after crude prices collapsed in H2-2014.  The retreat brought production growth from some the biggest shale formations to a halt, suspending a boom that turned the country into the world’s biggest fuel exporter.  The US pumped 9.57M barrels a day in the latest week, the most going back to 1983.  Output jumped 3.3%, the biggest single-week increase since Oct 2013.  US oil drilling subsided as OPEC, which accounts for about 40% of the world’s oil, resists calls to curb its own output.  OPEC will maintain its production target when ministers meet on Jun 5, according to Libya, which joined Kuwait in predicting no change in policy.

U.S. Oil Drillers Idle Rigs for 25th Consecutive Week

A economic yardstick for the manufacturing-heavy US Midwest saw growth slip into contraction in May, casting doubt on a widely expected bounceback for the US economy in Q2.  The Chicago Business Barometer, the Chicago PMI, shrank to 46.2 this month from 52.3 in the prior one.  By moving below the 50-point threshhold, the indicator signals that the economy shrank for the region.  This month's result erased all of last month's gain, when the gauge jumped to 52.3 from 46.3.  All 5 subindices lost ground in May, with 3 falling more than 10% & all below the 50-point break-even mark.  A 13.8% swoon in new orders paced the declines.  The 3-month moving average, designed to smooth out volatility, was little changed at 48.3 & remains far short of the 61.3 registered in Q4.

Midwest Manufacturing Contracts in May

Intel, a Dow stock, is reported to be close to a deal to buy smaller chip maker Altera for about $15B.  The deal price could be as much as $54 a share, a 15% premium over yesterday's close & it is believed the deal is likely by the end of next week.  INTC signed a standstill agreement earlier this year with ALTR that expires on Jun 1, giving it the option to launch a hostile bid after that.  In Apr ALTR rejected an unsolicited $54 per share offer from INTC following months of negotiations, according to a leaker.  The merger would be the industry's 2nd megadeal this year & is unlikely to be the last.  INTC stock rose 49¢ & ALTR stock shot up 1.91 to 49.88.  If you would like to learn more about INTC, click on this link:

If you would like to learn more about ALTR, click on this link:

Report: Intel Nears $15 Billion Deal to Buy Altera

Intel (INTC)

Altera (ALTR)

Even though stock averages are close to record highs, they are stumbling around as they have been for 6 months.  Stronger growth in Q2 has been called into question after disappointing data reported from the Midwest.  Then there is the Greek debt mess with no solution in sight.  Dow managed a gain of 235 this month & Jun looks questionable.     

Dow Jones Industrials

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