Tuesday, February 9, 2016

Markets drift lower as oil drops to the $28s

Dow rallied in the PM to finish off just 12, decliners over advancers 2-1 & NAZ fell back 14.  The MLP index dropped 8+ to the 212s & the REIT index lost 4+ to the 291s.  Junk bond funds were weak & Treasuries went a little higher.  Oil sank to the 28s (see below) & gold slid lower, still trying to go over 1200.

AMJ (Alerian MLP Index tracking fund)

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CLH16.NYM....Crude Oil Mar 16....27.92 Down ...1.77  (6.0%)

Live 24 hours gold chart [Kitco Inc.]

Crude tumbled as price volatility climbed to a 7-year high and analysts warned of wider swings to come.  Futures fell as global equities flirted with a bear market.  Volatility is set to “spike” as prices seek an equilibrium, which could drag crude below $20 a barrel, a report said.  The CBOE Crude Oil Volatility Index, which measures expectations of price swings, rose as high as 73, almost the highest since 2009.  The global oil surplus will be bigger in H1 than previously estimated, according to the International Energy Agency.  Oil is down about 25% this year on speculation a global glut will persist amid the outlook for increased exports from Iran after the removal of sanctions & brimming US crude supplies.  Futures dropped to a 12-year low, into the $26s.  US crude inventories rose above 500M barrels to the highest since 1930.  Brent for Apr settlement dropped $2.51 (7.6%) to $30.37 a barrel.

Oil Tumbles 6 Percent, Volatility Near Seven-Year High

Hiring managers have their fingers directly on the pulse of the US economy, & they're feeling a steady heartbeat of demand.  While financial markets may be signaling that the economy is inching towards recession, recent labor-market data shows persistent hiring, near-record job openings, & growing confidence among workers that they can quit their jobs with the prospect of easily finding another one.  Of particular significance is the fact that job gains over the last 3 months are occurring in the most cyclically sensitive industries: construction & more surprisingly, manufacturing.  Over the last 3 months, payrolls at construction firms & factories have increased 176K, the 2nd-biggest gain over a similar period since Mar 2006.  Labor Dept data showed that job openings rose in Dec to 5.61M, the 2nd-highest level on record, a sign that companies are looking past tepid global growth & anticipating that the economy will keep forging ahead.  Job -openings rate at construction companies in Dec were the highest since Feb 2007, while in manufacturing it rose to a record in data going back to 2000, propelled by demand among non-durable goods industries.

A Stronger Jobs Outlook at Builders and Factories Alleviates U.S. Recession Fears

Goodyear reported a better-than-expected quarterly profit, helped by higher sales volume & lower raw material costs.  The company has benefited from lower oil & rubber prices.  Cost of goods sold fell 8% to $3.07B while tire unit volume rose 7% to 42.1M units in the qtr, partly due to the acquisition of Nippon Goodyear in Japan.  The company posted a net loss of $1.42 per share for Q4.  EPS was $7.68 a year earlier, due to a $2.2B tax-related benefit.  Excluding items, EPS was 93¢ while revenue fell to $4.06B from $4.36B, hurt by a strong $.  Analysts had expected EPS of 75¢ on revenue of $4.01B.  The stock rose 1.11.  If you would like to learn more about GT, click on this link:

Goodyear Profit Beats on Higher Sales Volume, Lower Costs

Goodyear Tire & Rubber (GT)

This was a choppy day, but the bears remain in command of the stock market.  Oil is back to sliding lower & may want to test lows in the 25s.  The only encouraging factor today was Dow managed to finish above 16K, an important support level.  However the oil & stock markets look gloomy while earnings remain uninspiring.  In addition, tech has been VERY weak this year, dragging NAZ down an enormous 740 already!
Dow Jones Industrials


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