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Tuesday, January 5, 2016
Markets waver as oil prices sink again
Dow climbed 9, advancers over decliners about 3-2 & NAZ gave up 11. The MLP index lost 1+ to the 293s & the REIT index shot up 6+ to the 326s. Junk bond funds were higher & Treasuries pulled back. Oil fell below 36 (see below) & gold inched higher.
Apple, a Dow stock fell after Japan’s Nikkei Asian Review reported AAPL would reduce the output of its latest iPhones by about 30% in Q1. The company
had initially told parts suppliers to keep production of the iPhone 6s & 6s Plus models for Q1 at the same level as for
their predecessors iPhone 6 & 6 Plus a year earlier. But inventories of the the new models, which debuted in
Sep, have piled up at retailers in developed markets like China & Europe amid lackluster sales while an increase in the dollar against
emerging markets currencies has made the phone more expensive in those
countries. Production should return to normal in Q2, once the inventory adjustment is complete.
Toward the end of last year, many analysts began predicting that sales of the its best-selling product would slump in 2016,
based on supply chain issues & on weaker demand especially from
saturated, developed markets. Growth is increasingly dependent
on demand for iPhones, while iPad tablet sales decline & adoption of
the Apple Watch remains modest. AAPL predicted in Oct that it would
have another record holiday qtr. The stock dropped 2.64. If you would like to learn more about AAPL, click on this link: club.ino.com/trend/analysis/stock/AAPL?a_aid=CD3289&a_bid=6ae5b6f7
Oil prices fell towards its 11-year low as traders shrugged off growing tensions between 2 of the biggest oil producers, & focused instead on a stronger US $ &
swelling US crude inventories. The dollar hit a one-month high against a basket of currencies,
as traders sought safety over
concerns about sluggish global growth & losses in the Chinese stock
market. An expected build in crude inventories at Cushing, Oklahoma, the
delivery point of the NYMEX futures contract, also weighed on prices. The oil market largely shrugged off rising political tensions in the
Middle East between Saudi Arabia & Iran. Analysts said that as long as
the conflict did not affect oil production in the region it would not
have a consequence for oil prices. The fundamental picture globally, however, appears to be grim. A survey found that OPEC oil output fell in Dec, led by
lower supply from Iraq. Yet, OPEC production was pumping close to record
amounts, signaling few signs that producing members were choosing to
reign in output that has pushed prices to 11-year lows. The collapse in relations between Saudi Arabia & Iran appeared to
exacerbate oversupply concerns, as it puts an end to speculation that
OPEC could somehow manage to agree on a curb to put in the near term. Even so, Iran said it was prepared to moderate its output &
exports, once sanctions are lifted, to avoid pressuring prices, a senior
National Iranian Oil official said.
Eli Lilly forecast 2016 earnings & revenue below expectations & estimated 2015 profit below its forecast,
citing a charge related to a deal. The company expected revenue of $20.2-$20.7B for 2016, below the estimate of $21.36B. The drugmaker's adjusted EPS forecast of $3.45-$3.55 also fell short of expectations for $3.65. Analysts said the forecast was "very conservative" & pointed to uncertainty on foreign exchange trends. Foreign exchange headwinds account for about a major portion of the miss on the revenue forecast. Excluding foreign exchange headwinds, the forecast represented a
growth of mid to high single digit. LLY estimated EPS of $2.28-$2.33 for 2015, below its
forecast of $2.40-$2.45, citing an after-tax charge of about 12¢ related to the acquisition of rights to a glucagon nasal spray
from Locemia Solutions. It has recently launched its Jardiance treatment for diabetes & Cyramza drug for colon & lung cancer. Despite the difficulties, LLY is expected to raise its forecast during the year as the rollout of new drugs continues. The stock rose 1.24. If you would like to learn more about LLY, click on this link: club.ino.com/trend/analysis/stock/LLY?a_aid=CD3289&a_bid=6ae5b6f7
Dow was weighed down today by the negative story on AAPL. However, the rest of the Dow is not soaring. One forecast today called for reduced US GDP growth in Q4 & then again in Q1. The economy is not performing all that well. Autos had a great year in 2015, but may have a difficult time topping that this year which would require sales substantially above 18M as interest rates are being raised. Oil near multi year lows is not helping large segments of the economy. In the first 2 days of the new year, Dow remains in the red.
![Live 24 hours gold chart [Kitco Inc.]](http://www.kitco.com/images/live/gold.gif?0.48211917359858025)
...0.72 (2.0%)
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