Friday, January 29, 2016

Markets surge on the last trading day in January

Dow vaulted 394 closing at the highs, advancers over decliners 7-1 & NAZ climbed 107.  The MLP index rose 2 to the 254s & the REIT index gained 6 to the 312s.  Junk bond funds were higher & Treasuries rallied, taking the yield on the 10 year bond down to 2.93%.  Oil had a good advance but below the AM highs & gold edged higher.

AMJ (Alerian MLP Index tracking fund)

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CLH16.NYM....Crude Oil Mar 16....33.70 Up ...0.48 (1.4%)

Live 24 hours gold chart [Kitco Inc.]

Chevron, a Dow stock, is the first super-major oil producer to report Q4 results, & posted its first loss since 2002.  It's bracing for a review of its credit rating.  A glut of crude from the Persian Gulf and North American shale fields has collapsed prices, forcing the company to write down the value of its fields.  Despite the red ink, CVX still plans to pay $2B in divs in about 6 weeks to fulfill a promise to protect payouts at all costs.  The company probably will cut spending on new projects for a 4th consecutive year in 2017 to as little as ½ the $42B it spent in 2013.  The Q4 net loss was 31¢ per share, compared EPS of $1.85 a year earlier.  The loss was worse than any analyst predicted.

Earnings were hurt by $1.1B in charges as the plunge in energy prices slashed the long-term earning power of its portfolio of oil & gas holdings.  The impact of tumbling prices more than wiped out any upside from the 3.5% increase in output from it wells & its geologists discovered enough new crude & gas to replace 107% of what it produced during 2015.  The stock rose 55¢.  If you would like to learn more about CVX, click on this link:

Chevron Posts First Loss Since 2002

Chevron (CVX)


For the first time in almost a decade, China has lost ground in catching up with the US economy, when output is measured in dollars.   US GDP increased $590B in 2015 from a year earlier.  China's economy, while reporting 6.9% growth for the year, added $439B, as a weaker yuan sapped the value of output gains in dollar terms.

Last year was the first time since 2006 that China made no progress in closing the gap with the world's largest economy.  While the US economy expanded 2.4% for a 2nd straight year, China slowed to the weakest expansion pace in a qtr-century as old growth drivers like heavy industry & exports slow.  As for 2016, China's economy is forecast to expand 6.5% in real terms, while the yuan is projected to depreciate to 6.79 against the $, down more than 7% from the average level in 2015.

China Stumbles in Race to Pass U.S. as World's Biggest Economy

Business activity across the Midwest rebounded in Jan as producers saw a sharp increase in orders, adding to hopes that the US economy claws back in Q1 after an anemic end to last year.  The Chicago Business Barometer, also known as the Chicago PMI, jumped to 55.6 from 42.9 in Dec, marking the best clip of growth in a year.  Readings above 50 represent expansion.  Economists anticipated a much smaller improvement to 46.0.  A surge in new orders boosted activity in the region, with a gauge of new business rising more than 20 points to 58.8, the best in 12 months.  Production, meanwhile, moved back to positive territory.   Though the report was much stronger than expected, Philip Uglow, chief economist of MNI Indicators, the compiler of the report, expressed caution.  "Previously, surges of such magnitude have not been maintained so we would expect to see some easing in February," he said.  "Still, even if activity does moderate somewhat next month," he added, "the latest increase supports the view that GDP will bounce back in Q1 following the expected slowdown in Q4."

Midwest Manufacturing Sector Jumps Out of Contraction in January

The Bank of Japan unexpectedly adopted a negative interest rate policy today which brought out buyers for stocks.  The economy has been troubled, but it may take more than this move for a cure.  Meanwhile, the US economy is having a difficult time advancing, demonstrated by disappointing GDP data.  Following today's rise, Dow is still down almost 1K in Jan making for one ugly month.  Treasuries are attracting buyers with the yield on the 10 year bond at the lowest since May (negative bets on the stock market).  The strength of today's rally without fundamental support is a big worry!!

Dow Jones Industrials


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