Monday, February 29, 2016

Markets slide lower despite gains in oil

Dow dropped 123 (at the lows), advancers over decliners 5-4 & NAZ lost 32.  The MLP index climbed 3+ to a little over 250 & the REIT index lost a fraction, going below 311.  Junk bond funds advanced & Treasuries rallied.  Oil went up again, heading for 34 (see below), & gold had a good gain.

AMJ (Alerian MLP Index tracking fund)

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CLJ16.NYM....Crude Oil Apr 16....33.51 Up ...0.73 (2.2%)

Live 24 hours gold chart [Kitco Inc.]

Contracts to purchase previously owned homes unexpectedly dropped in Jan by the most in 2 years, representing a setback in residential real estate leading up to the spring selling season.  The pending home sales index fell 2.5%, the biggest drop since Dec 2013, after a 0.9% increase a month earlier that was larger than initially reported, according to the National Association of Realtors.  The projection called for the index to rise 0.5%.  Still-tight credit conditions for some Americans, dwindling home choices & higher property prices could be limiting enthusiasm among prospective buyers.  At the same time, persistent job gains, historically low mortgage rates & nascent signs of stronger wage growth should help keep housing from faltering.  “While January’s blizzard possibly caused some of the pullback in the Northeast, the recent acceleration in home prices and minimal inventory throughout the country appears to be the primary obstacle holding back would-be buyers,” the NAR said.  “Additionally, some buyers could be waiting for a hike in listings come springtime.”  The Realtors group revised Dec data from an initially reported 0.1% increase.  Purchase contracts dropped 0.9% in the 12 months ending in Jan after a 3.1% annual advance in Dec, the NAR report showed.  The pending sales index was 106 on a seasonally adjusted basis, the lowest in a year.  Pending sales are a leading indicator because they track new purchase contracts.  Existing-home sales are tabulated when a deal closes, usually a month or 2 later.  Those re-sales, which make up about 90% of the market, unexpectedly climbed in Jan to the 2nd-highest pace since early 2007, NAR reported last week.  Prices climbed from Jan 2015 as the number of dwellings on the market fell.

Pending Sales of U.S. Existing Homes Fall by Most in Two Years

Intense competition among the world's top sports apparel companies is great news for Foot Locker, which beat Q4 earnings expectations even as other traditional retailers in the marketplace floundered.  Adjusted EPS grew 16% to $1.16, better than the $1.12 that had predicted.  Revenue grew 5% to $2.007B, up from $1.91B for the same period a year ago.  Full year sales grew 3.6% to $7.4, a record high for FL.  The sports apparel space is in the midst of a renaissance.  The rise of formal athletic apparel, known as the “athleisure” trend, is increasing demand for basketball & running shoes.  FL has worked closely with its suppliers to stock stores with the apparel that is currently resonating with consumers.  As new brands are churned out new, innovative products in an effort to carve out market share in the US & beyond, FL is poised to reap the benefits.  The stock fell 1.64.  If you would like to learn more about FL, click on this link:

Foot Locker Enjoys Sports Apparel War Spoils

Foot Locker (FL)

Oil prices jumped today after China moved to boost its slowing economy & Saudi Arabia pledged to work with other crude producers to limit market volatility, developments that fed hopes the oil selloff would end.  A survey indicated that OPEC pumped less crude this month than in Jan, boosting market sentiment.  Oil prices remain down about 70% from their mid-2014 highs above $100 a barrel, though a steady rebound over the past 2 weeks has had some traders & investors wondering whether the market has reached a near-term floor.  Even so, the survey showed crude is expected to average at just over $40 a barrel this year.  China, the world's largest oil importer, cut its reserve requirement ratio, the amount of cash banks must hold as reserves, for a 5th time in a year.  Saudi Arabia, which is working with OPEC members Venezuela & Qatar & non-OPEC producer Russia on a plan to freeze oil output at Jan highs, said it wanted stability in crude prices.  But banks say that without an outright cut in output, a production freeze will not boost prices much.  Iran has been a stumbling block to the plan, with its target to raise output to reach pre-sanction export levels.  Iran said today its exports rose over the past month, reaching a 1.75M bpd peak.  The survey on OPEC output indicated its production fell 280K barrels per day (bpd) from Jan.  However production was still about 31M bpd.

Oil up on Saudi Support, China; Poll Shows Less OPEC Output


Dow finished the month up a meager 50, hardly a significant rebound.  Oil & the goings on in China are 2 of the major drivers & they are far less than encouraging.  While off its lows, oil has significant challenges as oil producing countries are struggling to look for ways to limit production.  The Chinese economy is getting stimulus help from the PBOC which is not doing very much good.  The US economy is not turning out impressive numbers & GDP growth in Q1 looks like it will be mediocre.  Dow is down more than 900 YTD.

Dow Jones Industrials


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