Dow plunged 392 (closing near the lows), decliners over advancers more than 6-1 & NAZ was off 146. The MLP index sank an enormous 13+ to the 264s (near the lows) & the REIT index fell 6+ to the 318s. Junk bond funds were weak (many falling over 1%) & Treasuries rallied as stocks were sold. Oil down to the 33s closed above today's low & gold climbed higher as troubled times attracted buyers.
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](http://www.kitco.com/images/live/gold.gif?0.6133770867253368)
Once a minority view, oil below $30 a barrel is increasingly being touted as the new home for a crude price being battered by troubles in China. Concerns over the Chinese economy are combining with the continued fear of oversupply to potentially push the price of oil to below $30, a level that US crude last hit in late 2003, after reaching the $32s today. A fall below the landmark $30 level would send ripples from Riyadh to Houston as the embattled oil industry struggles to cope with a historic price rout. At the same time, consumers & business are seeing cheaper oil at the gas pump & in their heating bills. For some analysts oil could fall as low as $20 in the short term. The latest oil selloff came after the People's Bank of China made its largest downward adjustment to the yuan since Aug, a move that sent the country's stock market down 7%+ today amid ongoing concerns about the economic health of the Asian giant. China consumes around 12% of global oil, 2nd only to the US. In the past year, Chinese demand has held up as the gov & local refiners took advantage of cheaper oil. More recently, a string of weak economic data has fueled fears about crude demand in the country. Concern over Chinese demand only adds to the host of factors that have pushed US oil prices down 70% from a peak of $107 in mid 2014. The biggest factor in the decline has been oversupply as US oil flooded the market & the world's largest exporter, Saudi Arabia, launched a price war to maintain its market share. There is currently about 2M barrels of oil a day produced more than there is demand for, in an industry that pumps 96M barrels a data. And there is even more oil coming. Oil markets are preparing for hundreds of thousands of barrels of Iranian oil, after the nuclear deal last year promised a lifting of some sanctions on the country. While US oil supply has tailed off from last year's highs, other major producers, like Saudi Arabia & Russia, are so far ignoring the low prices to continue pumping crude at full tilt.
KB Home missed expectations for its most recent qtr, thanks to softer-than-expected deliveries & inventory-impairment & contract-abandonment charges, though sales continued to reflect a recovering housing market. The Los Angeles builder reported a 24% rise in overall revenue to $985.8M & posted another qtr of double-digit gains in new orders & deliveries. The average selling price of a KBH home rose 8% from a year earlier, as prices climbed across each region. "Demand is pretty good out there right now," said CEO Jeffrey Mezger. With traffic at pre-housing-crisis highs & the value of homes in backlog surging over the qtr, "market conditions are pretty good," he said. Still, KBH fiscal Q4 deliveries disappointed. Though they were up 16% from a year ago, "we missed on deliveries," said Mezger, pointing to adverse weather & what has been a continuing labor shortage in the housing industry. Heavy rains halted construction for a slice of the qtr across Texas & Colorado, & a constraint on the subcontractor base meant KBH wasn't able to fully complete by qtr-end work delayed by weather. For the qtr, EPS was 43¢, down from $8.56 a year earlier. Last year's results included a large gain stemming from a reversal of a reserve against losses incurred during the housing crisis. In the latest qtr, the company took a tax hit on that gain. Analysts projected adjusted EPS of 50¢ on $1.07B. The lower-than-expected deliveries shaved 3¢ from EPS. $5.1M of inventory-impairment & land option contract-abandonment charges reduced EPS by another 5¢ & those charges pressured gross margin. Gross margin edged down slightly from a year earlier to 17.2% & fell short of the 18% the Mezger had suggested last qtr. Better-than-expected overhead expense management kept operating margin steady. For the current qtr, Mezger reiterated that gross margin will likely slip to the 16% range as the qtr, ahead of the spring selling season, is seasonally the company's weakest. The stock fell 1.74. If you would like to learn more about KBH, click on this link:
club.ino.com/trend/analysis/stock/KBH?a_aid=CD3289&a_bid=6ae5b6f7
KB Home 4Q Profit Misses Expectations
Macy's will cut $400M in annual costs by closing stores & cutting thousands of jobs, after what it called a "disappointing" sales & earnings performance in 2015. The company expects to cut about 3K associate jobs across its stores & implement a "voluntary separation opportunity" for about 165 senior executives. It also will cut 600 back-office jobs & eliminate 750 jobs by consolidating call centers. Some of the cut employees are expected to be placed in other positions. "In some cases, there will be short-term pain as we tighten our belt and realign our resources," CEO Terry J. Lundgren said. It expects to book about $200M in charges related to the cost-cutting measures & impairments on store closings in its Q4. The stock rose 74¢. If you would like to learn more about Macy's, click on this link:
club.ino.com/trend/analysis/stock/M?a_aid=CD3289&a_bid=6ae5b6f7
Macy's to Cut $400 Million in Costs, Thousands of Jobs
Chaos describes the China stock market & global oil markets. That is too much for the US stock market to handle. If that weren't enough, the oil rich MidEast is spinning out of control as the US pretty much stands by & awaits developments. First thing tomorrow comes the Dec jobs report. Given this scenario, it is difficult to imagine whatever the jobs report says will bring comfort to worried investors. Dow is already down more than 900 this week (before it has ended). The odds are this major selloff will cause Jan to finish in the red, an ominous sign for the next 11 months.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CLG16.NYM | ....Crude Oil Feb 16 | ....33.39 |  ...0.58 | (1.7%) |
Once a minority view, oil below $30 a barrel is increasingly being touted as the new home for a crude price being battered by troubles in China. Concerns over the Chinese economy are combining with the continued fear of oversupply to potentially push the price of oil to below $30, a level that US crude last hit in late 2003, after reaching the $32s today. A fall below the landmark $30 level would send ripples from Riyadh to Houston as the embattled oil industry struggles to cope with a historic price rout. At the same time, consumers & business are seeing cheaper oil at the gas pump & in their heating bills. For some analysts oil could fall as low as $20 in the short term. The latest oil selloff came after the People's Bank of China made its largest downward adjustment to the yuan since Aug, a move that sent the country's stock market down 7%+ today amid ongoing concerns about the economic health of the Asian giant. China consumes around 12% of global oil, 2nd only to the US. In the past year, Chinese demand has held up as the gov & local refiners took advantage of cheaper oil. More recently, a string of weak economic data has fueled fears about crude demand in the country. Concern over Chinese demand only adds to the host of factors that have pushed US oil prices down 70% from a peak of $107 in mid 2014. The biggest factor in the decline has been oversupply as US oil flooded the market & the world's largest exporter, Saudi Arabia, launched a price war to maintain its market share. There is currently about 2M barrels of oil a day produced more than there is demand for, in an industry that pumps 96M barrels a data. And there is even more oil coming. Oil markets are preparing for hundreds of thousands of barrels of Iranian oil, after the nuclear deal last year promised a lifting of some sanctions on the country. While US oil supply has tailed off from last year's highs, other major producers, like Saudi Arabia & Russia, are so far ignoring the low prices to continue pumping crude at full tilt.
Oil Prices Head into the Red
KB Home missed expectations for its most recent qtr, thanks to softer-than-expected deliveries & inventory-impairment & contract-abandonment charges, though sales continued to reflect a recovering housing market. The Los Angeles builder reported a 24% rise in overall revenue to $985.8M & posted another qtr of double-digit gains in new orders & deliveries. The average selling price of a KBH home rose 8% from a year earlier, as prices climbed across each region. "Demand is pretty good out there right now," said CEO Jeffrey Mezger. With traffic at pre-housing-crisis highs & the value of homes in backlog surging over the qtr, "market conditions are pretty good," he said. Still, KBH fiscal Q4 deliveries disappointed. Though they were up 16% from a year ago, "we missed on deliveries," said Mezger, pointing to adverse weather & what has been a continuing labor shortage in the housing industry. Heavy rains halted construction for a slice of the qtr across Texas & Colorado, & a constraint on the subcontractor base meant KBH wasn't able to fully complete by qtr-end work delayed by weather. For the qtr, EPS was 43¢, down from $8.56 a year earlier. Last year's results included a large gain stemming from a reversal of a reserve against losses incurred during the housing crisis. In the latest qtr, the company took a tax hit on that gain. Analysts projected adjusted EPS of 50¢ on $1.07B. The lower-than-expected deliveries shaved 3¢ from EPS. $5.1M of inventory-impairment & land option contract-abandonment charges reduced EPS by another 5¢ & those charges pressured gross margin. Gross margin edged down slightly from a year earlier to 17.2% & fell short of the 18% the Mezger had suggested last qtr. Better-than-expected overhead expense management kept operating margin steady. For the current qtr, Mezger reiterated that gross margin will likely slip to the 16% range as the qtr, ahead of the spring selling season, is seasonally the company's weakest. The stock fell 1.74. If you would like to learn more about KBH, click on this link:
club.ino.com/trend/analysis/stock/KBH?a_aid=CD3289&a_bid=6ae5b6f7
KB Home 4Q Profit Misses Expectations
KB Home (KBH)
Macy's will cut $400M in annual costs by closing stores & cutting thousands of jobs, after what it called a "disappointing" sales & earnings performance in 2015. The company expects to cut about 3K associate jobs across its stores & implement a "voluntary separation opportunity" for about 165 senior executives. It also will cut 600 back-office jobs & eliminate 750 jobs by consolidating call centers. Some of the cut employees are expected to be placed in other positions. "In some cases, there will be short-term pain as we tighten our belt and realign our resources," CEO Terry J. Lundgren said. It expects to book about $200M in charges related to the cost-cutting measures & impairments on store closings in its Q4. The stock rose 74¢. If you would like to learn more about Macy's, click on this link:
club.ino.com/trend/analysis/stock/M?a_aid=CD3289&a_bid=6ae5b6f7
Macy's to Cut $400 Million in Costs, Thousands of Jobs
Macy's (M)
Chaos describes the China stock market & global oil markets. That is too much for the US stock market to handle. If that weren't enough, the oil rich MidEast is spinning out of control as the US pretty much stands by & awaits developments. First thing tomorrow comes the Dec jobs report. Given this scenario, it is difficult to imagine whatever the jobs report says will bring comfort to worried investors. Dow is already down more than 900 this week (before it has ended). The odds are this major selloff will cause Jan to finish in the red, an ominous sign for the next 11 months.
Dow Jones Industrials
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