Tuesday, February 23, 2016

Lower markets as oil prices fall

Dow gave up 129, decliners over advancers 2-1 & NAZ fell 47.  The MLP index dropped 6 to the 243s & the REIT index was fractionally higher to the 308s.  Junk bond funds slid lower & Treasuries saw more selling.  Oil is back down to the 32s & gold climbed higher.

AMJ (Alerian MLP Index tracking fund)

CLJ16.NYM.....Crude Oil Apr 16...32.77 Down .....0.62  (1.9%)

GCG16.CMX...Gold Feb 16......1,219.70 Up ...10.20 (0.8%)

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Sales of previously owned US homes unexpectedly rose in Jan to the 2nd-highest pace since early 2007, indicating the industry will keep prospering.  Closings, which usually take place a month or 2 after a contract is signed, advanced 0.4% to a 5.47M annual rate, according to the National Association of Realtors.  Prices climbed from Jan 2015 as the number of dwellings on the market fell.  Near record-low mortgage rates, steady job gains & better wage growth are helping encourage prospective buyers, including first-time purchasers.  Further strengthening in residential real estate will support the economy & make up for weakness in manufacturing tied to weaker global growth.  The Jan sales pace was the 2nd-strongest in 9 years.  The forecast called for a 5.32M annualized rate.  Compared with a year earlier, purchases increased 7.5% before adjusting for seasonal variations.  The median price of an existing home rose 8.2% from Jan 2015 to $213K.  The appreciation was led by an 8.7% year-to-year advance in the Midwest & an 8.5% gain in the South.  Prices have been driven higher because of a lean supply of available houses.  The number of previously owned homes for sale fell 2.2% from Jan 2015, to 1.82M.  At the current sales pace, it would take 4 months to sell those houses, compared with 3.9 months at the end of the prior month.  Sales of existing single-family homes increased 1% to an annual rate of 4.86M, the most since Jul.  Purchases of multifamily properties fell 4.7% to a 610K pace.  Of all purchases, cash transactions accounted for about 26%, down from 27% a year earlier.

Sales of Existing U.S. Homes Rise to Second-Highest Since 2007

German business confidence fell for a 3rd month in a sign that companies in Europe's largest economy are growing more concerned as slowing global growth roils financial markets.  The Ifo institute business climate index dropped to 105.7 in Feb from 107.3 in Jan.  The estimate was for a decline to 106.8.  China's cooling economy is weighing on global trade & hurting German exporters.  The concern is whether that feeds through into the domestic economy, which has so far been supported by record-low unemployment & rising wages.  A measure of the current situation in Germany improved to 112.9 from 112.5 & a gauge of expectations dropped to 98.8 from a revised 102.3.  German exports dropped 0.6% in Q4, the Federal Statistics Office said.  Capital investment rose 1.5% & gov spending climbed 1%, leading the 0.3% expansion in GDP.  The nation’s economy has taken a hit from weak global demand, with the Markit Economics Purchasing Managers Index of manufacturing falling to a 15-month low in Feb.  The rate of job creation was the slowest in almost a year.  Investor confidence slid to its lowest level since Oct 2014, the ZEW Center for European Economic Research said last week.

German Business Sentiment Falls as Turmoil and China Sow Concern

Oil fell from a 2-week high as Saudi Arabian Oil Minister Ali al-Naimi said the market should set prices.  The proposal for oil producers to cap output at Jan levels is "ridiculous" & puts “unrealistic demands” on Iran, Oil Minister Bijan Namdar Zanganeh said today.  Saudi Arabia & Russia, the 2 biggest crude producers, agreed to a cap on condition other major producers, notably Iran & Iraq, follow suit.  Saudi Arabia isn't cutting output, the kingdom’s oil minister, Ali al-Naimi said.

Oil stockpiles will keep accumulating into 2017 as supply continues to exceed demand, capping any price recovery, the International Energy Agency said.  US inventories probably expanded further from the highest level in more than 8 decades.  Oil is down about 13% this year on speculation a global glut will persist amid the outlook for increased exports from Iran & brimming US stockpiles.  Iran will add more output capacity than any other member of the OPEC over the next 6 years as it seeks to regain lost market share after the removal of sanctions, the IEA said.

Oil Falls as Saudi Arabia's Naimi Says Market to Set Price

There is profit taking today after the market advance yesterday.  Optimism was running to high that simple words would solve the enormous problem of too much oil around the world.  Dow is up 400 this month but remains down almost 1K YTD.  Stocks are on defense with no easy solutions to the global glut of oil.

Dow Jones Industrials


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