Monday, February 1, 2016

Markets limit losses after Stanley Fischer's comments

Dow pared AM losses to only 17, decliners slightly ahead of advancers & NAZ gained 6.  The MLP index fell 4+ to 451 & the REIT index was fractionally higher to the 313s.  Junk bond funds were mixed & Treasuries retreated.  Oil resumed its sell-off (see below) & gold had a good gain on growing financial uncertainty around the globe. 

AMJ (Alerian MLP Index tracking fund)

CLH16.NYM....Crude Oil Mar 16....31.68 Down ...1.94  (5.8%)

Live 24 hours gold chart [Kitco Inc.]

Federal Reserve Vice Chair Stanley Fischer said it was too difficult to gauge the impact on the US economy from recent turmoil in financial markets and uncertainty over China, leaving policy makers undecided about what to do next.  “If these developments lead to a persistent tightening of financial conditions, they could signal a slowing in the global economy that could affect growth and inflation in the United States,” Fischer said.  “But we have seen similar periods of volatility in recent years that have left little permanent imprint on the economy.”  His remarks follow a tumultuous Jan in which expectations for additional interest-rate increases in 2016 plunged.  When the Fed raised rates in Dec, officials gave projections suggesting they saw 4 increases this year.  Investors currently foresee one, based on futures-market pricing.  World stocks have been battered in the new year, dropping 6% even after a bounce-back in the past 2 weeks.  Oil has dropped 12%.  Fischer emphasized that he “can't answer” questions about what the Fed will do at the next meeting in Mar.  “We simply do not know. The world is a uncertain place, and all monetary policy makers can really be sure of is that what will happen is often different from what we currently expect.”  Fischer nonetheless stuck by his past assurances that inflation is likely to move back toward the central bank's 2%, although it will take longer than previously expected.  He also reiterated that the Fed expects to make “gradual increases in the federal funds rate.”  “Once these oil and import prices stop falling and level out, their effects on inflation will dissipate,” he said.  He also believes that progress made in getting Americans back to work is likely to continue.  “You’ve got a labor market that’s been remarkably strong for a long time, and continues to be remarkably strong,” he said.

Fischer Says Fed's Next Decision Unclear

Oil futures fell as downbeat economic data from China & growing doubts over a coordinated oil-producer output cut helped prices settle lower for the first time in 5 sessions.  West Texas Intermediate (WTI) crude finished at $31.62 a barrel, down $2, after advancing 10.8% over the past 4 consecutive sessions.

WTI Oil Settles With a Loss Of 6%

Abbott Labs, a Dividend Aristocrat, will buy Alere for $5.8B to boost its global diagnostics business & enter into new markets.  ABT will pay $56 per share in cash, a premium of about 51% over the Fri close.  ALR diagnostic tests are used in doctor offices, clinics & at home.  ABT, with annual sales of $20.4B in 2015, said its total diagnostics sales would exceed $7B after the close of the deal.  The deal will be immediately add to its EPS upon close & contribute significantly thereafter.  ABT stock rose 60¢ & ALR jumped up 16.91 to near the buyout price.   If you would like to learn more about ABT, click on this link:

Abbott Labs to Buy Alere for $5.8B

Abbott Labs (ABT)

Nothing like calming words from a Fed official to help the stock market.  But words have different meanings to different people.  Oil is drifting downward again with reality setting in that production cuts are not likely.  China's economy is not charging forward as in the past.  Even the US economy is stumbling around with only a modest upward bias.  Stocks remain on defense.

Dow Jones Industrials

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