Thursday, February 11, 2016

Markets tumble with central banks unable to stop the decline

Dow sank 270, decliners over advancers 5-1 & NAZ dropped 40.  The MLP index was fractionally lower to 213 (already at beaten up levels) & the REIT index fell 5+ to the 287s.  Junk bond funds headed lower & Treasuries continued in a rally mode.  Oil is struggling to hold above 27 & gold shot to the mid 1200s.  More description of market collapses below.

AMJ (Alerian MLP Index tracking fund)

CLH16.NYM...Crude Oil Mar 16...26.83 Down .....0.62  (2.3%)

GCG16.CMX...Gold Feb 16.....1,239.10 Up ...44.40 (3.7%)

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Financial markets are signaling that investors have lost faith in central banks' ability to support the global economy.  US stocks joined a rout that has global equities poised to enter a bear market, as investors ignored Janet Yellen's signal that the Federal Reserve won't rush to raise rates in the face of market turmoil.  A selloff renewed in risk assets from bank shares to crude oil & emerging-market currencies.  Lenders led European stocks toward their lowest since Oct 2013.  The ¥ leaped to its highest in more than a year.  Major sovereign bond markets rallied, pushing 10-year Treasury yields below 1.6% & gold rose beyond $1200.
Signals by central banks from Europe to Japan that additional stimulus is at the ready are failing to ease investor concern that global growth will keep slowing.  Yellen suggested that the central bank might delay, but not abandon, planned interest-rate increases in response to recent turmoil in financial markets.  The MSCI All-Country World Index fell 1% in NY, extending its slide from an all-time high in May toward 20%.  A close below that level would meet the common definition of a bear market in the biggest retreat from risk since the sovereign debt crisis in 2011.  The S&P 500 dropped 1.3%, heading for a 5th straight decline in the longest slide since Sep.  The index has plunged more than 10% this year & trades at the lowest level since 2014.  The gauge rose as much as 1.5% yesterday amid Yellen's comments only to finish lower.

Stock Rout Deepens, Bonds Jump as Faith in Central Banks Falters

Claims for unemployment benefits in the US declined to a 7-week low as hiring managers demonstrated confidence in the outlook after temporary adjustments around the holidays.  Jobless claims dropped 16K to 269K, according to the Labor Dept.  The forecast called for 280K.  With staffing additions probably slowing this year as the labor market makes it tougher to attract skilled workers, employers are showing little appetite to reduce headcounts.  A muted level of dismissals shows sales are holding up for companies even as the global economy & financial markets weaken.
The 4-week average of claims, a less-volatile measure than the weekly figure, fell to 281K from 284K in the prior week.  The number continuing to receive jobless benefits dropped by 21K to 2.24M & the unemployment rate among people eligible for benefits fell to 1.6% from 1.7%.  Claims since Mar have held below the 300K level that is consistent with strength in the job market.

Jobless Claims in U.S. Decline to Lowest Level in Seven Weeks

Oil extended losses to trade near a 12-year low as crude stockpiles expanded to a record even as nationwide supplies slipped.  West Texas Intermediate fell as much as 4.5% after dropping 15% the previous 5 sessions.  Inventories at Cushing, Oklahoma, increased 523K barrels to 64.7M last week.  The site has a working capacity of 73M barrels.

Oil is down 28% this year on speculation a global glut will persist as Iranian exports increase after the removal of sanctions & US crude inventories remain swollen.  The nation's stockpiles are still more than 130M barrels above the 5-year average, even after dropping 754K barrels.  Traders are looking again at using supertankers as temporary storage facilities to profit from the contango, when prices of oil for delivery today are lower than those in future months.  The difference between WTI futures for Mar delivery & for one year later was $12.04 a barrel, the highest in almost a year.  US crude production declined 28K barrels a day to 9.19M a day thru Feb 5, dropping for a 3rd week, according to the EIA.  Imports fell 14% to 7.12M barrels a day, the biggest decrease since Dec 2014.

Oil Extends Loss to Trade Near 12-Year Low on Cushing Supplies

This is another ugly day in the global markets, nothing is going right.  Dow is down a massive 1.8K YTD, a more than 10% retreat this year alone.  Central banks are powerless to stop this decline.  Oil is directing this market decline with no end in sight for this bear market.  Meanwhile Treasuries & gold are in rally mode.  The yield on the 10 year Treasury is close to its record low & gold is at a 1 year high!

Dow Jones Industrials


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