Wednesday, May 25, 2016

Higher markets on hopes for a delay in the next rate hike

Dow climbed 145 (but off the highs), advancers over decliners better than 2-1 & NAZ gained 33.  The MLP index added 3+ to the 304s & the REIT index was about even in the 338s.  Junk bond funds were up & Treasuries drifted lower while stocks were being purchased.  Oil rose into the 49s (a new 2016 high) & gold retreated again (see below).

AMJ (Alerian MLP Index tracking fund)

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CLN16.NYM....Light Sweet Crude Oil Futures,J....49.41 Up ...0.79 (1.6%)

Live 24 hours gold chart [Kitco Inc.]

Microsoft, a Dow stock, will ax as many as 2K jobs, many in Finland, home base of the handset business it acquired 2 years ago from Nokia.  CEO Satya Nadella has been gradually exiting a business championed by predecessor Steve Ballmer & had already written off most of the $9.5B acquisition.  Nadella hasn't publicly declared a full retreat, saying that the company “will continue to innovate across devices.”  But it’s clear he has other priorities, including tablets, gaming devices, cloud services & software designed to boost workplace productivity.  The company will take a $950M impairment & restructuring charge, including $200M for severance payments.  It expects to complete the cuts & other actions by year-end.  MSFT will be left with a skeletal crew in Finland, where Nokia once employed thousands when it dominated the global handset market.  The stock went up 53¢.  If you would like to learn more about MSFT, click on this link:

Microsoft’s Exit From Smartphone Business Moves Into High Gear

Microsoft (MSFT)

Global crude supplies will start to dwindle in as little as 2 years, boosting prices, as the industry cuts investment to weather the worst market collapse in a generation, according to Statoil.  Oil companies reduced capital expenditure last year & are likely to cut it further this year & next, Statoil said.  Lower spending means there could be a “significant effect” on crude supply after 2020, it said.  “For the first time in history, we’ve seen cutting of capex two years in a row and potentially we risk a third year as well for 2017,” it added.  “It might be that we see quite a dramatic reduction in replacing the capacity and of course that will have an impact, eventually, on price.”  Despite signs the supply glut is easing, companies are preparing for a prolonged downturn.  The industry reduced capital spending by 24% last year & is expected to cut it by another 17% to about $330B this year, the International Energy Agency said.

Producers have seen their earnings plunge & debt pile up as crude trades at ½ the level it was at 2 years ago.
All of this depends on the oil price.  Oil companies have said they see supply & demand rebalancing, yet they're still girding for an extended period of low prices.

Gold settled at its lowest level in 7 weeks as overall gains in the $ & equities continued to dull the metal's investment appeal.  Prices for the yellow metal tallied a 4.4% loss during a 6-session losing streak.  Jun gold fell $5.40 to $1223 an ounce.

Gold Futures Settle At a Seven-week Low

Dow has risen 350 this week, hardly chump change, on no special news.  Oil is at a 7 month high, but there is plenty pain ahead for energy companies.  Hopes & prayers are high that economy will be just weak enough to give the Fed one more excuse, as if it needed that help, to postpone a rate hike in Jun.  Q1 earnings are generally in & have been lackluster at best.  Retail has big problems with the sluggish economy.  For the time being, risky stocks are "in" & gold is on the "outs." 

Dow Jones Industrials


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