Markets rebound after 2 week decline

Dow rose 124, advancers over decliners 4-3 & NAZ added 40.  The MLP index lost 2+ to the 238s & the REIT index added 1+ to the 307s.  Junk bond funds  were mixed & Treasuries declined, bringing higher yields.  Oil fell to the 28s & gold pulled back.

AMJ (Aerlain MLP Index tracking fund)

CLG16.NYM

...Crude Oil Feb 16

...29.33

....0.09

(0.3%)

GCF16.CMX

...Gold Jan 16

.......1,088.20

...3.30

(0.3%)

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The IMF cut its world growth outlook, as the commodities slump & political gridlock push Brazil deeper into recession, plunging oil prices hobble Mideast crude producers, & the rising $ curbs US prospects.  The global economy will expand 3.4% this year, down from a projected 3.6% in Oct in a quarterly update to its World Economic Outlook.  The fund also cut its forecast for growth in 2017 to 3.6%, down from 3.8% 3 months ago.  “This coming year is going to be a year of great challenges and policy makers should be thinking about short-term resilience and the ways they can bolster it, but also about the longer-term growth prospects,” the IMF said.  It estimates the global economy grew 3.1% last year, the weakest pace since the 2009 recession.  Growth in emerging markets & developing nations slowed for the 5th straight year.  The fund said risks to the global outlook remain tilted to the downside, with the world facing 3 big adjustments: the emerging-market slowdown, China's shift to growth driven less by exports & manufacturing, & the Federal Reserve's gradual exit from ultra-low interest rates.  Global growth could be derailed if these challenges aren't managed, the IMF warned.  Downward revisions to forecast growth in emerging markets is a big reason behind the fund’s dimmer outlook.  In advanced economies, the IMF expects a “modest and uneven” recovery to continue.  The fund reduced its forecast for US growth this year to 2.6%, from 2.8% in Oct.  While the economy remains “resilient” overall, the strong dollar is weighing on manufacturing, & low oil prices are curtailing capital investment, it said.  The IMF raised its projection for euro-area growth in 2016 to 1.7%, up 0.1 percentage point from 3 months ago.  In emerging markets, policy makers need to “rebuild resilience against potential shocks while lifting growth,” the fund said.

IMF Cuts Global Growth Forecast to 3.4% in Year of ‘Great Challenges’

Confidence among US homebuilders was unchanged at the start of year, indicating the residential real estate market was sustaining the steady progress made in 2015.  The National Association of Home Builders/Wells Fargo builder sentiment index held at 60 in Jan after the prior month was revised down a point.  Readings greater than 50 mean more respondents reported good market conditions & this month's gauge was in line with the average for all of 2015.  The index meshes “with our forecast of modest growth for housing,” the NAHB said.  “The economic outlook remains promising, as consumers regain confidence and home values increase, which will help the housing market move forward.”  An increase in the sentiment index of single-family home sales this month was offset by a dip in prospective buyer traffic that prompted builders to become less upbeat about the market outlook.  While low borrowing costs and higher property values have given Americans the opportunity to trade up, stronger gains in housing will depend on whether the economy can continue to add jobs at a robust pace.  The gauge of prospective buyer traffic fell to a 6-month low of 44 in Jan from 46 the prior month, while the index of current single-family home sales increased by 2 points to 67.  The measure of the 6-month outlook decreased to 63, the lowest since May, from 66.

Confidence Among Homebuilders in U.S. Was Unchanged in January

Global oil markets could “drown in oversupply,” sending prices even lower as demand growth slows & Iran revives exports with the end of sanctions, according to the International Energy Agency.  The IEA trimmed 2016 estimates for global oil demand as China's economic expansion weakens & raised forecasts for supplies outside OPEC.  While non-OPEC supply is set to drop 600K barrels a day in 2016, Iran's comeback could fill that gap by the middle of the year.  As a result, world markets may be left with a surplus of 1.5M barrels a day in H1.

Oil sank today as the removal of intl sanctions over the weekend freed Iran to revive crude exports, threatening to swell a glut created by fellow OPEC members & US shale drillers.  Saudi Arabia, the biggest oil exporter, signaled again on yesterday it won't relent in its strategy to preserve market share even as prices crash.  Iran could be the only source of supply growth in OPEC this year as a surge in Iraq fizzles out.  Iran could add 300K barrels a day by the end of Q1 & 600K barrels a day by the middle of the year.  While that's below official ministry plans to add 1M a day by mid-year, it could still be enough to pressure prices further, the agency predicted.  The country pumped at a 3½ year high of 2.9M barrels a day in Dec.  Global oil demand growth slipped to a one-year low in Q4, from close to a 5-year high in Q3, amid mild winter temperatures & economic weakness in commodity producers.  Consumption growth will slow this year to 1.2M barrels a day, or 1.3%, from 1.7M a day in 2015, averaging 95.7M barrels a day.

IEA Sees Risk of World Drowning in Oil

Dow pulled back after trading much higher in pre-market trading.  This rally is far short of meaningful.  Oil is drifting lower, now it's in the 28s.  China is struggling to increase its growth rate.  The euro market is only sputtering.  Worse, the US growth is drab.  The high yield sector is suffering & more selling can be expected.

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