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Thursday, April 7, 2016
Markets fall on Q1 profit worries
Dow sank 154, decliners over advancers 3-1 & NAZ lost 52. The MLP index fell 2+ to 260 & the REIT index went up 1 to the 339s. Junk bond funds were hit with selling. Oil pulled back in the 37s (see below) & gold gained ground.
Fewer Americans filed for unemployment benefits last week,
illustrating a healthy labor market that’s allowing workers to feel more
secure in their job. Jobless claims dropped 9K to 267K, according to the Labor Dept. The forecast called
for 270K. Weekly applications have been below 300K for
longer than a year as steady demand encourages employers to retain those
who are qualified & experienced. Dismissals near the lowest level
since 1973 have been accompanied by a steady drumbeat of hiring,
propping up consumer spending and the economy.
The 4-week average, a less volatile measure than the weekly claims numbers, increased to 266K last week from 263K. The
number continuing to receive jobless benefits rose 19K
to 2.19M & the unemployment rate among people eligible for
benefits held at 1.6%.
US
corp profits are expected to drop the most in 6½ years in
Q1, led by a wipeout in the embattled energy sector.
Earnings for companies in the S&P 500 Index should fall
9.8% year-over-year, which would be the sharpest decline since
Q3-2009 & a 4rth consecutive qtr of
contraction.
Oil slipped amid speculation that an unexpected US crude supply decline won't be followed by additional drops. Inventories slid 4.94M barrels last week as imports
slipped, according to an Energy Information Administration report. A
meeting between OPEC members & Russia is set to take place on Apr 17 to discuss freezing oil production in a bid to stabilize the
markets. Prices
have whipsawed since Fri on speculation about whether an accord can
be reached in Doha. Saudi Arabia said it will only agree to a freeze if it's joined by other suppliers including Iran, while Kuwait said a deal can be done without Iran's support. The
Doha meeting is unlikely to have an impact on actual supply without the
participation of OPEC members Libya & Iran. US
crude production dropped 14K barrels a day to 9.01M a day,
the EIA said. Refinery utilization rates rose
ahead of the summer driving season by 1 percentage point, for a 2nd
weekly gain to 91.4% of total capacity. Imports fell to 7.25M barrels a day, the lowest level in 2 months.
The thought of earnings reports is a major dark cloud hanging over the stock market. Besides dreary reports from energy companies, other reports should also be disappointing. Dow is up a meager 100+ YTD.
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