Monday, May 16, 2016

Markets rise on oil gains again

Dow climbed 92, advancers over decliners better than 3 to 1 & NAZ added 23.  The MLP index jumped 5+ to the 297s on higher oil prices & the REIT index pulled back 1+ to the 344s.  Junk bond funds were little changed & Treasuries were sold as stocks were being purchased.  Oil shot up 1+ to the 47s (see below) & gold is having a good day.

AMJ (Alerian MLP Index tracking fund)

Crude Oil   47.42      1.21 (2.62%)

Gold      1,287.00   14.30 (1.12%)

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Factory activity across NY state unexpectedly contracted in May after climbing for 2 consecutive months, the latest sign that headwinds remain for the manufacturing sector.  The state's business conditions index tumbled to -9.0 this month from 9.6 in Apr (results below zero represent contraction).  The gauge had reflected contracting activity for 7 straight months before improving in Mar, & then picked up steam to hit the best level in a year last month.  American factory activity has been pinned down by weaker global demand, a strong $ that makes US goods less competitive abroad & an energy price rout that has prompted budget cuts across the oil space.  Signs of renewed demand emerged in Mar, & producers in Apr signaled further, albeit modest, improvement. Many economists & factory owners have said that while a break in the $'s climb & stabilization in oil & the Chinese economy have helped conditions in recent months, the sector isn't out of the woods.  A drop in demand pulled the New York index lower this month.  New orders fell 17 points, from the best level in about a 1½ years, to -5.54.  Shipments also fell back below the expansion threshold, dropping 12 points to -1.94.  Meanwhile, producers reported lower selling prices & head counts held steady.   Despite the pullback in activity, producers remained cautiously optimistic that conditions would improve in the coming months, leaving a 6-moth outlook gauge little changed from Apr.

Empire State Manufacturing Plunges into Contraction in May

Oil prices jumped more than 2% to their highest since Nov 2015 on the back of more disruption to supplies from Nigeria.  Supply disruptions have most likely pushed oil production below consumption levels in May for the first time in at least 2 years, meaning the world has started eating into the huge stockpiles of oil which knocked as much as 70% of crude prices between 2014 & Feb 2016.  In Nigeria, output has fallen to its lowest in decades following several acts of sabotage.

Oil Prices Rise on Nigerian Outages, Goldman Forecast


China stocks rebounded after the securities regulator denied media reports it was cracking down on fundraising, & mergers & acquisitions in certain sectors, helping to offset disappointing Apr economic data.  The blue-chip CSI300 index rose 0.7% to 3095, while the Shanghai Composite Index gained 0.8% to 2850.  The market had dropped for 4 weeks in a row amid increasing concerns that a recent pick-up in China's economic activity may be fizzling out.  Confidence was also hit last week by media reports saying China would suspend additional fundraising & M&As in 4 industries, including online finance, gaming, film & virtual reality.  But most stocks in those sectors rose after the securities regulator denied the report & said it would continue to support M&As by qualified listed companies, with no change to existing policies.  Although data released over the weekend showed that China's investment, factory output & retail sales all grew more slowly than expected in Apr, traders said much of the impact had already been priced in

China Shares Post Modest Gains

The reasons for oil prices rising is flimsy,  an outage in Nigeria  which encouraged an analyst to turn more optimistic.  Economic fundamentals remain uneven & in general drab.  Traditionally that does not encourage a lot of stock buying.  But the bulls are trying to take command of the markets & maybe they will succeed.

Dow Jones Industrials


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