Tuesday, August 11, 2015

Markets tumble was oil sinks to the $43s

Dow slumped 212 closing near the lows, decliners over advancers 2-1 & NAZ lost 65.  The MLP index slid 1+ to the 354s & the REIT index added 2+ to the 319s.  Junk bond funds were mixed to lower & Treasuries rallied as stocks sold off.  Oil is down to the 43s & gold finished marginally higher.

AMJ (Alerian MLP Index tracking fund)

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CLV15.NYM....Crude Oil Oct 15....43.66 Down ...2.00  (4.4%)

Live 24 hours gold chart [Kitco Inc.]

Oil fell 5% after #2 consumer China devalued its currency, raising questions about its demand for crude, while a new estimate showed non-OPEC producers more resilient than expected in keeping output up despite low prices.  US crude (WTI) hit contract lows, trading less than $1 per barrel above its bottom for 2015.  Brent, the global benchmark, pared most gains from a Mon rally, heading for its largest decline in a week.  China's central bank made what it called a "one-off depreciation" of nearly 2% in the yuan after a run of poor economic data, guiding the currency to a near 3-year low & OPEC projected that crude supplies from countries outside the group will rise 90K barrels per day this year (a sign the crude price collapse was taking longer than thought to hit the North American shale oil industry & other competing sources).  This year so far, WTI has lost 19%, extending the 46% drop in 2014.  Brent has fallen 15%, adding to last year's 48% tumble.  A global oversupply in oil since last summer, led by stubbornly strong US shale crude output & record output by MidEast producers, have driven prices down from 2014 highs above $100 a barrel.  While weekly inventory numbers for US crude have sometimes come in lower than anticipated, they have not sustained a price recovery.  China is another factor for the drop in oil & commodity prices, with its historically low growth forecast of around 7% in 2015.

Oil Tumbles as China Devalues Yuan

McDonald's, a Dow stock & Dividend Aristocrat, started rolling out its new mobile app in the US, & one of the main features is a loyalty program for the chain's drinks.  The app, which was made available recently in the San Diego area, lets people earn a free beverage after 5 purchases of McCafe drinks like coffees & shakes.  The company said it plans to make the mobile app available nationally by Oct, after tinkering with variations in tests.  CEO Steve Easterbrook, who is trying to revive the chain's slumping sales, has conceded that the company has been a "little behind some others" with its app.  As fast-food chains try to court younger customers, mobile apps have increasingly been seen as a way to offer convenience & build customer loyalty.  The app is still fairly limited.  It has a store locator & lets people scroll through the chain's menu and see the nutritional information for various items.  A Quarter Pounder with Cheese, for instance, has 520 calories, while a Cheeseburger has 290 calories.  Customers can't order or pay for food thru the app.  MCD said franchisees will also be able to promote the local deals in their respective regions thru the new app.  In the San Diego area, the initial offers include a buy one, get one free coupon for Big Macs.  The company will continue refining the app & that promotional offers will become more tailored over time.  The app is launching in New York City this week as well.  The McCafe loyalty program is set to expire at year-end and the company will determine then whether to continue it.  The stock fell 58¢ in a down market.  If you would like to learn more about MCD, click on this link:

McDonald's begins rollout of mobile app

McDonald's (MCD)

US wholesalers increased their stockpiles in Jun by the largest amount in more than a year, while sales crept up slightly.  The Commerce Dept said that wholesale stockpiles rose 0.9%, the largest monthly gain since Apr 2014.  Sales increased 0.1% yet have dropped 3.8% over the past year largely because of cheaper oil prices.  The rising inventory levels in Jun possibly suggest that businesses are more confident about an increase in consumer spending & economic growth.  But if sales fail to grow at the same pace as inventories, then the excess supplies could force companies to cut orders & dampen overall growth.  The Jun rise in stockpiles left inventories at the wholesale level at a seasonally adjusted $586B, 5.4% above a year ago.  Many economists expect stockpile levels to continue increasing as consumer demand improves & the precipitous drop in oil prices has settled at slightly less than $50 a barrel.  Wholesale inventories of petroleum have fallen 18% in the past 12 months.  But that increase in inventories must be matched by a similarly large rise in sales that has yet to occur.  The economy has endured a sluggish, 6-year recovery from the recession.  During H1, the economy grew at a modest annual rate of 1.5%, slightly less than the 2% average during the previous 5 years.  That growth could accelerate in H2 (based on a strong job market boosting consumer spending).

US wholesale stockpiles in June show largest gain in year

Stocks gave back yesterday's gains, even though the Greek bailout took a step forward.  Among nagging problems, that bailout is far from a done deal.  Germany, the "big money guy," has reservations.  The China devaluation & too much supply of oil are adding to uncertainty.  Gold should be getting more respect during these troubling times, but nervous money is flowing mainly into Treasuries.  The Dow chart is depressing as the the next FOMC meeting approaches, 5 weeks away.

Dow Jones Industrials

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