Friday, July 15, 2016

Markets tread water after the attack in France

Dow gained 10, advancers over decliners 5-4 & NAZ gave back 4.  The MLP index fell 1+ to the 321s & the REIT index was fractionally higher in the 368s.  Junk bond funds inched higher & Treasuries were sold.  Oil was up a fraction in the 45s & gold slid lower.

AMJ (Alerian MLP Industrials

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Crude Oil
45.95       0.27 (0.59%)

Live 24 hours gold chart [Kitco Inc.]

Oil futures settled near $46 a barrel to post a gain of more than 1% for the week as some upbeat economic data from China & the US buoyed prospects for energy demand. Aug WTI crude rose 27¢ (0.6%) to settle at $45.95 & prices saw a weekly gain of 1.2%.

Oil Futures Climb Near $46 To Settle Higher For The Week


Oil futures hold onto gains after data revealed a weekly climb in the number of active US rigs drilling for oil, the 6th-weekly climb in 7 weeks.  The active oil-rig count rose 6 to 357 & the total rig count climbed by 7 to 447.

Baker Hughes Reports Sixth-weekly U.S. Oil-rig Climb In Seven Weeks

Factory activity across NY state leveled off in Jul after climbing a month earlier, highlighting the modest & uneven nature of the recovery in the manufacturing sector.  The Empire State's business conditions index declined to 0.6 this month from 6.0 in Jun.  The index has been seesawing around the flat line, with separates expansion from contraction, in recent months.  In May, the gauge registered at -9 after back-to-back gains.  The forecast was for the index to fall slightly to 4.5.  The Empire report is one of several factory surveys conducted by regional Fed banks, looked to for clues about the health of the national manufacturing sector, which accounts for about 10% of American jobs & output.  This month's result underscores the shaky recovery happening across the nation's producers.  The strong $ & collapsing energy prices have pulled down activity for months, as exports became less competitive & energy-exposed customers halted capital spending.  However, as those headwinds eased demand has resurfaced.  Across NY, demand slipped back into negative territory this month & shipments, in turn, dropped.  Inventories remain negative, suggesting firms continue to draw from existing stocks & aren't replenishing.  Factory owners, meanwhile, cut payrolls this month & existing workers logged fewer hours.  Despite modestly better manufacturing conditions across the country in recent months, firm owners have remained hesitant to hire. Respondents expect to keep payrolls steady over the next 6 months, a signal that they are cautious in their overall outlook.

Empire State Manufacturing Slowed in July

Wells Fargo Q2 profit fell as the bank continued to deal with low interest rates that sap lenders' profitability.  The bank reported EPS of 1.01, below 1.03 last year.  Analysts had expected $1.01.  Revenue was $22.16B, in line with expectations.  Lower-for-longer interest rates have put a damper on profits as banks don't earn as much money by lending out their vast deposits.  The UK vote has also pushed bank stocks down, though WFC has a much smaller presence in the UK & investment banking than its counterparts.  A slump in oil prices also hurt the bank, one of the largest energy lenders.  However, the bank extended $63B in home loans in Q2, compared with $62B last year & $44B in Q1.  Yet the mortgage business earned $1.41B, down 17% from the $1.71B it earned in same period a year ago.  Costs increased 3% to $12.87B from $12.47B.  Expenses as a share of revenue was 58.1%, within the 55%-59% range that WFC targets for its efficiency ratio.  In Q2, the bank charged off $263M in energy loans, an increase of $59M from the amount it charged off in Q1.  Overall, the bank's loan book continued to expand at a fast pace, an indication that the firm is growing its balance sheet faster than big-bank peers.  Total loans at the end of Q2 were $957B, a 7.7% increase from $888B last year ago.  Despite the overall loan growth, the profitability of its lending activities continued to be challenged.  Its net interest margin, a measure of how profitably it can lend out its customers' deposits, fell to 2.86% from 2.9% at the end of Q1 & 2.97% last year.  The stock went down 1.23.  If you would like to learn more about WFC, click on this link:

Wells Fargo's 2Q Earnings Slip

Wells Fargo (WFC)

Stocks had a terrific week following the big jobs report last Fri.  But underlying economic data has not been consistent.  Dow is up 600 to new heights since prior to the jobs report.  Earnings next week may not support a continuation of that optimism.  The effects of an increase in global terrorism can be another major negative on economies around the world.

Dow Jones Industrials


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