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Wednesday, December 9, 2015
Higher markets as oil rallies off multi year lows
Dow bounced back 130, advancers over decliners 5-2 & NAZ slid back 4. The MLP index recovered 11+ (a huge rebound) to the 269s & the REIT index was fractionally lower to the 318s. Junk bond funds were mixed to higher & Treasuries headed lower. Oil rose after recent selling (see below) & gold climbed higher from depressed levels.
China’s consumer inflation picked up last month, boosted by price
gains for food & services, signaling demand in the economy is stabilizing after accelerated fiscal stimulus & a year of interest-rate cuts. The consumer-price index rose
1.5% in Nov from a year earlier, the National Bureau of
Statistics said, compared to the 1.4% estimate & 1.3% in Oct. The producer-price
index fell 5.9%, compared to a projected 6% drop,
extending declines to a record 45 months. Inflation
firmed with help from a 2.1% for services, while slower
declines in imports signal demand is stabilizing after 6
interest rate cuts since Nov last year & expanded gov
spending. The pickup still leaves room for additional easing, as CPI is
forecast to rise at ½ of the gov target this year.
The
increase for services was offset by a 1.2% gain for consumer
goods. Food prices climbed 2.3% while non-food items rose 1.1%, continuing their rebound from the 0.6% gain in Jan that
was the slowest in 5 years. Reflecting
the 2-speed nature of China’s economy, the biggest declines in
producer prices were driven by the 19.9% drop for mining & 10.7% drop for raw materials, whereas consumer goods fell just 0.4%. Prices for consumer durables retreated 1% while clothing
prices gained 0.7%.
Oil rose on strong Japanese economic data & lower crude oil storage
figures from the US, but many investors expected a fall to
below 2008 lows due to a mounting global supply glut. US crude was supported by a surprise 1.9M-barrel fall in crude inventories to 488M barrels last week. The drop, as estimated by industry group the American Petroleum
Institute, compared with analysts' expectations for an increase of
252K barrels. Japan's core machinery orders unexpectedly jumped in Oct &
reforms aimed at encouraging imports in China, including of
energy-intensive machinery helped improve the outlook for Asian demand. However a strong dollar, weakening demand, soaring supplies &
expectations of a US rate rise kept investors wary of further
weakness. An outlook of slightly higher prices towards the end of 2016 is
based on the expectation that some producers, especially US shale
drillers, will cut output due to low prices & as most established
producers like Russia & OPEC are close to maximum production capacity.
Costco reported a fall in
comparable-store sales for Q3 as a stronger
dollar reduced the value of sales from overseas markets. Comparable sales, including fuel & foreign currency impacts, fell 1% in its Q1 & analysts had expected growth of 0.3%. The company gets almost 30% of
revenue from outside the US. Excluding fuel & foreign exchange impact, comparable-store sales
rose 6%, above the 5.9% growth expected. EPS was 1.09, compared with 1.12 last year. Revenue rose 1% to $27.22B from $26.87B a year earlier. Analysts had expected EPS of 1.17 on
revenue of $27.57B. The stock dropped 9.28. If you would like to learn more about COST. click on this link: club.ino.com/trend/analysis/stock/COST?a_aid=CD3289&a_bid=6ae5b6f7
Stocks were oversold, bringing out bargain hunters. Additionally, there is a rumor than DuPont (DD), a Dow stock, & Dow (DOW) will merge, another excuse for a market rise. Both stocks rallied. But these are short term influences. Economies are sluggish around the globe & oil has significant fundamental problems with too much oil being produced & no cuts seen. Dow 30 is still down slightly YTD.
...0.33 
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