Thursday, February 18, 2016

Lower markets as oil retreats after recent gains

Dow dropped 40, decliners barely ahead of  advancers & NAZ lost 46.  The MLP index rose 1+ to the 242s & the REIT index gained 2+ to the 302s.  Junk bond funds were a little higher & Treasuries rallied following recent selling.  Oil slid lower on higher oil inventories (see below) & gold had a big advance (as its chart shows). 

AMJ (Alerian MLP Index tracking fund)

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CLH16.NYM....Crude Oil Mar 16....30.69 Up ...0.03 (0.1%)

Live 24 hours gold chart [Kitco Inc.]

Wal-Mart, a Dow stock & Dividend Aristocrat, lowered its annual sales forecast in a move it blamed on the strong $, adding another headache for a retailer struggling with slow US traffic & decelerating e-commerce growth.  The company expects net sales to be “relatively flat” this year, compared with a previous forecast for an increase of as much as 4%.  The earlier guidance didn't account for currency changes which also cited a push to close underperforming stores for pulling down sales.

The outlook signals that WMT still faces hurdles in recovering from several years of slumping growth. Its US same-store sales increase also was slow last qtr, rising just 0.6%.  That fell short of the 1% predicted.  Though traffic to the stores is climbing modestly, customers are spending less money on their visits.  It also raised its quarterly div to 50¢ from 49¢.  Profit topped projections in Q4, helped by efforts to keep a lid on expenses.  Excluding some items, EPS was $1.49.  Analysts had predicted $1.46.  Net income slid 7.9% to $4.57B.  Revenue fell 1.4% to $129.7B, also hurt by currency effects.  Analysts had predicted $130.6B.  Sales online growth slowed to 8%, despite increased spending by the company on its Web operations.  Profit has been hurt by slowing US sales, as well as increasing spending on employee pay & online operations.  WMT will pay $1.5B in higher wages in the fiscal year ending January 2017 as it raises its minimum wage to $10/hour & gives a one-time raise to more than 1M employees this month.  Those added wages will contribute to profit falling 6-12% this year.  The company said last month that it will close 269 stores worldwide, including all of its small-format express stores.  The stock fell 1.99.  If you would like to learn more about WMT, click on this link:

Wal-Mart Trims Forecast as U.S. Dollar Crimps Overseas Sales

Wal-Mart (WMT)

Oil pared gains after a gov report showed US crude inventories advanced to an 86-year high as imports surged.  Crude stockpiles rose 2.15M barrels to 504 last week, according to the Energy Information Administration.  Imports climbed 11%, the biggest gain since Apr.  Prices climbed earlier as Iran cautiously supported a proposal by Saudi Arabia & Russia to freeze production at near-record levels.

Iranian Oil Minister Bijan Namdar Zanganeh didn’t say if the country, the second-biggest OPEC producer before sanctions were intensified in 2012, would deviate from plans to boost exports after the lifting of restrictions last month.  Supplies at Cushing, Oklahoma, the biggest US oil-storage hub, rose to a record 64.7M barrels.  The site, which is the delivery point for WTI, has a working capacity of 73M.  US crude production fell 51K barrels a day to 9.14M, the lowest since Oct.  Rigs targeting oil fell to 439 last week, the lowest since Jan 2010.  Gasoline supplies climbed 3M barrels to 258M, the highest going back to 1990.  It was the 14th straight gain, the longest stretch since 2008.  Inventories of distillate fuel, a category that includes diesel & heating oil, rose 1.4M barrels to 162.4M.

Oil Pares Gain After U.S. Crude Inventories Rise to 86-Year High

Coca-Cola, another Dow stock & Dividend Aristocrat, raised its quarterly div by 6% to 35¢ & promoted 3 executives to senior VPs.  The company is trying to jump-start sales, as consumers around the world cut back on sugary drinks because of health concerns.  Soda consumption in the US has been declining for more than a decade.  The increased div, from 33¢, lifts the yield to 3.2% from 3%.  KO also said Brent Hastie, Craig Williams & Julie Hamilton will become senior VPs.  Hastie is VP for strategy & planning, responsible for global strategic planning & helping develop new areas of revenue growth.  Williams is pres of the division that manages KO's relationship with McDonald's (MCD), another Dow stock & Dividend Aristcorat, one of its largest clients.  Hamilton is the global chief customer & commercial leadership officer, where she builds commercial strategies & customer capabilities & supports KO global partners.  The stock was up pennies.  If you would like to learn more about KO, click on this link:

Coca-Cola Raises Dividend 6%, Promotes Three Executives

Coca-Cola (KO)

Too much of a good thing will not last.  Oil continues to drive the stock market & the bulls gave up on it.  Empty words about production limits (not cutbacks), especially when inventories are rising, are not enough to keep stock buyers coming,  The outlook for oil remains glum.  Production, especially from the major countries, is holding at record levels (even if not rising).  This is time for the bulls to cash in their short term profits.

Dow Jones Industrials


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