Dow sank 202 closing at the lows, decliners over advancers a more modest 3-2 & NAZ declined 77. The MLP index rebounded 2 to the 306s & the REIT index fell 3+ to 310. Junk bond funds were sold again & Treasuries advanced. Oil retreated (see below) & gold crawled higher.
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](http://www.kitco.com/images/live/gold.gif?0.04353538893019138)
Oil dropped to the lowest in more than 2 months as stockpiles in developed nations have reached record levels & US crude supplies keep rising as.oil inventories have expanded to a record of almost 3M in the past year as the Organization of Petroleum Exporting Countries pumped above its collective quota & Russian output rose to a post-Soviet high, swelling global stockpiles. Iran is pushing to regain oil sales lost to sanctions. Oil price competition in Europe is set to intensify when Iranian crude returns, the IEA said. An industry report showed American oil drillers put rigs back to work. Rigs targeting oil in the US rose by 2 to 574, after more than 100 were idled since the start of Sep. Total oil inventories in developed nations increased by 13.8M barrels to about 3B in Sep, a month when they typically decline. The pace of gains slowed to 1.6M barrels a day in Q3, from 2.3M a day in Q2, although growth remained “significantly above the historical average.” There are signs some fuel-storage depots in the Eastern Hemisphere have been filled to capacity, it said. Crude stockpiles at Cushing, Oklahoma expanded by 2.24M barrels thru Nov 6. That’s the first increase in 4 weeks & the biggest gain since Mar. Output rose 25K barrels a day to 9.19M a day. US refineries boosted operating rates by 0.8 percentage point to 89.5% last week. US oil processors boosted utilization in Nov during 4 of the past 5 years as the annual maintenance period, timed to a post-summer lull in fuel demand, finishes & plants gear back up for winter.
Oil Market Swamped by Rising Supply
US producer prices dropped in Oct for a 2nd straight month & the cost of services fell, pointing to subdued inflation pressures that would argue against the Federal Reserve raising interest rates next month. The Labor Dept said on the producer price index fell 0.4% last month after falling 0.5% in Sep. In the 12 months through Oct, the PPI fell 1.6%, the largest decline since the revamped series started in 2009 & following on the heels of a 1.1% drop in Sep. Oct also marked the 9th straight 12-month decrease in the index. Economists had forecast the PPI rising 0.2% last month & dropping 1.2% from a year ago. A strong dollar & tepid global demand have dampened price pressures, leaving inflation constantly running well below the Fed's 2% target. Despite weak inflation, the Fed is expected to raise interest rates next month after a robust Oct employment report. Producer inflation is likely to remain weak after a report this week showed import prices fell in Oct for a 4th straight month. In Oct, services accounted for 70% of the decrease in the PPI. Services fell 0.3% after dropping 0.4% in Sep. Over 70% of the decrease was attributed to margins received by wholesalers & retailers, which fell 0.7%. Energy prices were unchanged after falling 5.9% in Sep. Wholesale food prices fell 0.8% after a similar drop in the prior month. A key measure of underlying producer price pressures that excludes food, energy & trade services dipped 0.1% after falling 0.3% in Sep.
A strong dollar is restraining US inflation & exports, justifying a slower pace of interest-rate increases, but on balance the US economy is riding out the effects fairly well, Federal Reserve Vice Chair Stanley Fischer said. "While the dollar's appreciation and foreign weakness have been a sizable shock, the U.S. economy appears to be weathering them reasonably well, notwithstanding their large effects on certain sectors of the economy heavily exposed to international trade," Fischer said. "Monetary policy has played a key role in achieving these outcomes through deferring liftoff relative to what was expected a little over a year ago." He noted Fed policy makers have lowered their projections for the likely path of the central bank's benchmark federal-funds rate since the dollar began its ascent in mid-2014. "This greater degree of monetary accommodation seems appropriate given the adverse effects on U.S. aggregate demand coming from the rise in the dollar, an associated weakening of foreign economic prospects, and other developments that have restrained spending and kept inflation undesirably low," Fischer added. He noted that the Fed's latest policy statement signaled a possible rate increase at the Dec 15-16 meeting, "though the outcome will depend on the [rate-setting Federal Open Market] Committee's assessment of the progress--realized and expected--that has been made toward meeting our goals of maximum employment and price stability. Of course, as policymakers, we must always be vigilant to events unfolding differently than we expect, and we must be ready to react accordingly."
Memory of the Oct rally is fading fast on growing worries about a looming interest rate increase by the Fed. The markets are not in good shape when one, overdue rate causes so much selling. Of course, somber economic data is another major drag & that is getting more attention. As expected, retail earnings were not pretty. Dow fell 500 last week & is firmly in the red YTD.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CLZ15.NYM | ....Crude Oil Dec 15 | ....40.91 |  ...0.84 | (2.0%) |
Oil dropped to the lowest in more than 2 months as stockpiles in developed nations have reached record levels & US crude supplies keep rising as.oil inventories have expanded to a record of almost 3M in the past year as the Organization of Petroleum Exporting Countries pumped above its collective quota & Russian output rose to a post-Soviet high, swelling global stockpiles. Iran is pushing to regain oil sales lost to sanctions. Oil price competition in Europe is set to intensify when Iranian crude returns, the IEA said. An industry report showed American oil drillers put rigs back to work. Rigs targeting oil in the US rose by 2 to 574, after more than 100 were idled since the start of Sep. Total oil inventories in developed nations increased by 13.8M barrels to about 3B in Sep, a month when they typically decline. The pace of gains slowed to 1.6M barrels a day in Q3, from 2.3M a day in Q2, although growth remained “significantly above the historical average.” There are signs some fuel-storage depots in the Eastern Hemisphere have been filled to capacity, it said. Crude stockpiles at Cushing, Oklahoma expanded by 2.24M barrels thru Nov 6. That’s the first increase in 4 weeks & the biggest gain since Mar. Output rose 25K barrels a day to 9.19M a day. US refineries boosted operating rates by 0.8 percentage point to 89.5% last week. US oil processors boosted utilization in Nov during 4 of the past 5 years as the annual maintenance period, timed to a post-summer lull in fuel demand, finishes & plants gear back up for winter.
Oil Market Swamped by Rising Supply
US producer prices dropped in Oct for a 2nd straight month & the cost of services fell, pointing to subdued inflation pressures that would argue against the Federal Reserve raising interest rates next month. The Labor Dept said on the producer price index fell 0.4% last month after falling 0.5% in Sep. In the 12 months through Oct, the PPI fell 1.6%, the largest decline since the revamped series started in 2009 & following on the heels of a 1.1% drop in Sep. Oct also marked the 9th straight 12-month decrease in the index. Economists had forecast the PPI rising 0.2% last month & dropping 1.2% from a year ago. A strong dollar & tepid global demand have dampened price pressures, leaving inflation constantly running well below the Fed's 2% target. Despite weak inflation, the Fed is expected to raise interest rates next month after a robust Oct employment report. Producer inflation is likely to remain weak after a report this week showed import prices fell in Oct for a 4th straight month. In Oct, services accounted for 70% of the decrease in the PPI. Services fell 0.3% after dropping 0.4% in Sep. Over 70% of the decrease was attributed to margins received by wholesalers & retailers, which fell 0.7%. Energy prices were unchanged after falling 5.9% in Sep. Wholesale food prices fell 0.8% after a similar drop in the prior month. A key measure of underlying producer price pressures that excludes food, energy & trade services dipped 0.1% after falling 0.3% in Sep.
Wholesale Inflation Drops for Second-Straight Month
A strong dollar is restraining US inflation & exports, justifying a slower pace of interest-rate increases, but on balance the US economy is riding out the effects fairly well, Federal Reserve Vice Chair Stanley Fischer said. "While the dollar's appreciation and foreign weakness have been a sizable shock, the U.S. economy appears to be weathering them reasonably well, notwithstanding their large effects on certain sectors of the economy heavily exposed to international trade," Fischer said. "Monetary policy has played a key role in achieving these outcomes through deferring liftoff relative to what was expected a little over a year ago." He noted Fed policy makers have lowered their projections for the likely path of the central bank's benchmark federal-funds rate since the dollar began its ascent in mid-2014. "This greater degree of monetary accommodation seems appropriate given the adverse effects on U.S. aggregate demand coming from the rise in the dollar, an associated weakening of foreign economic prospects, and other developments that have restrained spending and kept inflation undesirably low," Fischer added. He noted that the Fed's latest policy statement signaled a possible rate increase at the Dec 15-16 meeting, "though the outcome will depend on the [rate-setting Federal Open Market] Committee's assessment of the progress--realized and expected--that has been made toward meeting our goals of maximum employment and price stability. Of course, as policymakers, we must always be vigilant to events unfolding differently than we expect, and we must be ready to react accordingly."
Fed's Fischer: Strong Dollar Justifies Rate Hike Pace
Memory of the Oct rally is fading fast on growing worries about a looming interest rate increase by the Fed. The markets are not in good shape when one, overdue rate causes so much selling. Of course, somber economic data is another major drag & that is getting more attention. As expected, retail earnings were not pretty. Dow fell 500 last week & is firmly in the red YTD.
Dow Jones Industrials
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