Markets decline as oil resumes its downward path

Dow lost 248, decliners over advancers 4-1 & NAZ sank 75.  The MLP index fell 5+ to the 235s & the REIT index was off 2+ to the 304s.  Junk bond funds were weak & Treasuries
Oil dropped below 31 while & gold rallied, heading towards 1250. 

AMJ (Alerian MLP Index tracking fund)

CLJ16.NYM

.....Crude Oil Apr 16

...30.79

.....1.08

(3.4%)

GCG16.CMX

...Gold Feb 16

......1,244.80

...22.50

(1.8%)

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Federal Reserve policy makers should be prepared to consider raising interest rates in Mar despite recent financial market volatility, said Kansas City Fed pres Esther George, whose outlook for solid growth this year remains intact.  “It absolutely should be on the table” at the next meeting, George said.  “At this point I would not say that the data have suggested there has been a fundamental shift in the outlook.”  The policy-setting FOMC is weighing how fast to raise rates this year, balancing concern over market turmoil & slowing economies globally with indications that US inflation may be picking up.  The projection of FOMC members submitted at the Dec meeting called for 4 additional quarter-point increases in 2016.  “It is clear the markets have taken that off the table,” said George.  “Policy makers have to look at what are the fundamentals of the economy.”  Investors currently view the probability of a single rate rise in 2016 at around 45%.  The economy is on pace to grow at around 2% this year, led by stronger consumer spending & an improving labor market, with inflation “stable and moving in the direction” of the Fed's 2% target, George said.  “My objective is to remove some of the accommodation” & move to a more neutral interest rate.  The Kansas City Fed chief said the central bank should have started raising rates earlier, which would have made it easier to move at a gradual pace toward neutral.

Fed's George Urges FOMC to Keep March on the Table for Rate Hike

Purchases of new homes dropped more than forecast in Jan as contract signings slumped in the western US by the most since May 2010.  Sales declined 9.2% to a 494K annualized pace after a 544K rate in Dec that was the strongest in 10 months, according to the Commerce Dept.  The forecast called for 520K.  Sales in the West fell 32%.  The drop brings new-home purchases more in line with the steady pace of progress since the end of the recession.  Persistent job creation, signs of bigger wage growth & cheap borrowing costs are buoying sales & helping alleviate the weakness in factory output tied to sluggish global demand.  Jan sales were the weakest in 3 months.  The Jan data should be considered as preliminary.  The report said there was 90% confidence the change in sales last month ranged from a 22.7% drop to a 4.3% increase.  In addition to the decline in the West, where the 110K annualized sales pace was the weakest since Jul 2014, purchases dropped 5.9% in the Midwest.  The supply of homes increased to 5.8 months from 5.1 months in Dec.  There were 238K new houses on the market at the end of Janu, the most since Oct 2009.  The median sales price of a new house decline 4.5% from Jan 2015 to $278K.  Previously owned home purchases unexpectedly rose in Jan to the 2nd-fastest pace since Feb 2007.  Closings advanced 0.4% to a 5.47M annual rate.  Prices climbed from Jan 2015 as the number of dwellings on the market dwindled.

Sales of New U.S. Homes Declined More Than Forecast in January

Oil extended declines after oil ministers from Iran & Saudi Arabia signaled they're unwilling to curtail production while US crude inventories surged.  Saudi Arabia won't cut supply as it doesn't trust fellow exporters to follow suit & believes high-cost producers should bear the burden of rebalancing markets, Ali Al-Naimi said.  Iranian Oil Minister Bijan Namdar Zanganeh said a Saudi-Russia proposal to freeze output was "ridiculous" since Iran seeks to boost exports after years of sanctions. US crude supplies rose by 7.1M barrels last week, the industry-funded American Petroleum Institute said.

Iran is seeking to boost production by 1M barrels a day in 2016 after sanctions were lifted last month.  The Energy Information Administration is projected to report today that US crude stockpiles, at their highest in more than 8 decades, climbed last week.  Crude stockpiles at Cushing, Oklahoma, the delivery point for WTI & the biggest US oil-storage hub, increased 307K barrels last week.  Analysts project that the EIA will report that nationwide supplies rose 3.25M barrels.  Iraq seeks “complete agreement” on the preliminary accord reached in Doha last week between Saudi Arabia, Russia, Venezuela & Qatar, Oil Minister Adel Abdul Mahdi said today.  “If some people freeze and others raise, then this is not a good policy,” he said.

Oil Falls as Saudis, Iranians Resist Cuts, U.S. Supplies Gain

This is another dreary day for stocks, something that has become common this year.  Dow is up a meager 1% in Feb & has a good chance of losing that gain by the end of the month next Mon.  The story remains the same.  The outlook for oil is glum, despite recent talks about limiting further production off record high levels.  The US economy is barely getting a grade of "C" & economies around the rest of the world are doing worse.  Stocks continue to be on defense with no end in sight.

Dow Jones Industrials