Markets waver during earnings season

Dow fell 19 (well off the AM lows), advancers over decliners 3-2 & NAZ added 12.  The MLP index lost 1+ to the 319s & the REIT index gave up 1+ to the 372s.  Junk bond funds did little & Treasuries were up a tad.  Oil was weak (see below) & gold inched higher (still above 1300).

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Crude Oil Sep 16

42.96

-0.17

-0.39%

Purchases of new US single-family homes rose in Jun to the highest level in more than 8 years, indicating a firm & resilient housing market.  Sales increased 3.5% to a 592K annualized pace, the fastest since 2008, Commerce Dept data showed.  Figures for May were revised higher & the forecast called for a 560K rate.  While new-home purchase data are subject to big swings from month to month, the broader picture for residential real estate shows steady gains fueled by stable employment & low borrowing costs.  Faster wage growth & construction of properties priced for entry-level buyers have the potential of further stoking the market.

The Commerce Dept revised the May reading to a 572K pace from a previously estimated 551K.  The pickup in demand last month was led by a 10.9% increase in the West & in the Midwest, sales jumped 10.4%.  The gain in sales pushed down the supply of homes to 4.9 months, the lowest since Feb of last year, from 5.1 months in May.  There were 244K new houses on the market at the end of Jun, compared with 241K in the prior 2 months.  The median sales price of a new house advanced 6.1% from Jun 2015 to $306K.  The gain reflected more purchases of homes valued $400K-500K.  18% of the homes sold in Jun, the biggest share since Sep, were in that price range.

New-Home Sales in U.S. Jump to Highest Level Since February 2008

Caterpillar, a Dow stock, pared its earnings forecasts for the 2nd time in 3 months & is stepping up the pace of job cuts this year as demand for mining & energy equipment fails to rebound.  Annual sales will be $40-40.5B, compared with its forecast in Apr of $40-42B.  EPS excluding restructuring costs will be about 3.55, down from previous projection of 3.70.  That brings the forecast in line with the estimate of analysts.  Improving commodity prices, which entered a bull market in Jun, haven’t been enough to revive demand from miners & energy companies, which have been cutting costs to shore up profit after raw materials from copper to crude slid last year.

“World economic growth remains subdued and is not sufficient to drive improvement in most of the industries and markets we serve,” CAT said.  “Commodity prices appear to have stabilized, but at low levels. Global uncertainty continues, and the recent Brexit outcome and the turmoil in Turkey add to risks, especially in Euro.”  In Q2, EPS fell to 93¢ from 1.31 a year earlier, the company said.  EPS excluding one-time items was 1.09, beating the 96¢ estimate.  Sales in the qtr declined to $10.3B from $12.3B a year earlier.  CEO Doug Oberhelman has reorganized the mining & energy segments, shutting down dozens of factories & eliminating thousands of jobs as a prolonged commodity slump eroded sales of engines, giant trucks & shovels.  A years-long initiative to streamline the & distribution network has yielded results as the gross margin has climbed annually since 2013, even as revenue has slumped.

Additional workforce reductions in H2 will push up restructuring costs to about $700M, from a previous forecast of $550M.  The stock  went up 4.06.  If you would like to learn more about CAT, click on this link:
club.ino.com/trend/analysis/stock/CAT?a_aid=CD3289&a_bid=6ae5b6f7

Caterpillar Lowers Forecast Again as Brexit Clouds Outlook

Caterpillar (CAT)

Oil prices dipped, with US crude hitting 3-month lows, as oversupply concerns weighed on the petroleum complex ahead of data likely to show unseasonably high gasoline stocks despite the peak summer driving period.  Oil prices are still up more than 60% from 12-year lows crude in Q1.  But the rally has faded since the benchmarks breached $50 in May, amid worries oil may be headed again for a glut like that which forced prices off from highs above $100 in mid-2014.  Hedge funds & other money managers cut their net long position, bets on rising prices, by 31M barrels to 453M in the latest week.  Gasoline was slightly higher at $1.3358 a gallon.  The refining margin, or profit, for turning crude into gasoline, also perked slightly, to $13.30 a barrel.  US inventory reports for last week from industry group the American Petroleum Institute & the Dept of Energy are expected to show a fall in crude stocks but a rise in gasoline supplies.

Oil Dips on Oversupply Worries; U.S. Crude Hits April Lows

Not a lot going on in the stock market today.  Janet is meeting with her friends, but that meeting is not expected to provide any excitement.  The Brexit vote gives an excuse to do nothing with interest rates for the balance of the year.  Her words after the meeting will say nothing new.  Maybe they will give a tiny hint that there could be an increase eventually.  The popular averages remain near their record highs even though economic data is not exciting (shown by comments from CAT).

Dow Jones Industrials