Wednesday, August 10, 2016

Energy stocks lead stock markets lower

Dow dropped 37, decliners over advancers 4-3 & NAZ gave up 20.  The MLP index lost 3+ to the 311s & the REIT index was down pennies to 370.  Junk bond funds were mixed to lower & Treasuries went up in price.  Oil  fell more than 1 to the 41s & gold rose.

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Crude Oil Sep 16

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Fewer US housing markets are seeing double-digit gains in prices as affordability becomes more of a challenge in some areas.  In Q2, prices rose 10% or more from a year earlier in 25 metropolitan areas, down from 28 markets in Q1 & 34 in Q2-2015, the National Association of Realtors said.  Home prices have been outpacing income gains, making it harder for some buyers to compete in many of the strongest markets across the US.  The median price of an existing single-family home rose from a year earlier in 83% of the 178 markets measured.  For the first time ever, a metro area, San Jose, California, had a median price of more than $1M.  “Steadily improving local job markets and mortgage rates teetering close to all-time lows brought buyers out in force in many large and middle-tier cities,” Lawrence Yun, the group's chief economist, said.  “However, with homebuilding activity still failing to keep up with demand and not enough current homeowners putting their home up for sale, prices continued their strong ascent -– and in many markets at a rate well above income growth.”  The median price of an existing single-family home was $240K in Q2, up 4.9% from a year earlier.  Prices declined in 29 metro areas, 16% of the markets tracked.

Fewer Housing Markets in the U.S. Have Double-Digit Price Gains

Weakness in global oil markets, which has dragged prices to a 3-month low, may persist as demand slows seasonally & fuel inventories remain abundant, OPEC predicted.  There are “lingering concerns” that US & European refiners may reduce processing rates as profits fade amid a continuing “overhang” of crude & refined fuels.  Gasoline consumption will taper off in the US with the end of the summer-vacation driving season, it said.  “With the end of the driving season in the third quarter, gasoline demand could see a seasonal downward correction,” the organization said.  High inventories of heating oil & diesel fuel around the world mean “the supply side could also continue exerting pressure,” it added.  Oil's recovery from the 12-year lows reached in January sputtered out in early Jun amid plentiful stockpiles, faltering demand growth & signs that US explorers could resume drilling.  OPEC, which is sticking with a strategy to maximize its market share & let prices sag, said it will hold informal talks on the sidelines of a conference in Algiers next month.  “Refining margins have been weakening during the last month due to high product inventories, which were caused by the lower-than-expected increase in demand,” according to the report.  The re-balancing of world markets will resume towards the end of the year, according to OPEC.  Consumption will pick up in the Northern Hemisphere as winter approaches, reversing some of the discount on oil prices for immediate delivery & whittling away the excess in inventories, OPEC forecast.  Production from OPEC’s members increased 46K barrels a day to 33.1M a day in Jul, according to external sources compiled by OPEC.  That's in line with the level the group expects will be needed in Q3.  OPEC included Gabon, which became its 14th member on Jul 1, in both Jun & Jul production totals.   OPEC kept estimates for global supply & demand this year & next mostly unchanged from last month’s report.

OPEC Says Weak Oil Demand Is Here to Stay

The US budget deficit was little changed in Jul as growth in both revenue & spending slowed.   Over the past year, the deficit totaled $487B, down 0.3% from a year earlier, the Treasury Dept said.  The past year has seen a decline in corp tax revenue.  Personal income taxes have been on the rise so far this year, thanks to steady job growth.  But corp taxes haven't kept pace as corp profits suffered due in part to low productivity growth & a tight job market that has firms paying out a larger share of revenues in wages.  The gov posted a deficit for the month of Jul, as outlays exceeded revenues by $113B.  That was a smaller deficit than the $149B monthly shortfall posted last year.  The higher figure from last Jul was partly due to an acceleration of $42B of Aug benefit payments that were pushed forward into Jul.  In the 12 months thru Jul, the deficit represented 2.6% of the nation's economic output (GDP), down from 2.8% of GDP in the 12 months thru Jun.  The longer-term trends show a rising deficit.  Revenues over the past year climbed just 1.2% compared with the 12 months thru Jul 2015, the lowest annual rate in nearly 6 years.  Earlier in the current economic expansion, revenues routinely grew by 6% or more year-over-year.  By contrast, gov outlays have been steadily rising partly as a result of increased spending on Social Security & Medicare as the population ages.  Overall outlays rose 1.0% in the past 12 months compared with the year thru Jul 2015, the slowest pace in more than 2 years.

U.S. Budget Deficit Little Changed in July

Once again, very little happening today.  Oil pulled back, taking energy stocks lower.  That was about it for the day.  The outlook for oil is turning glum & trading in the low 40s may prove to be a ceiling going forward.  Meanwhile popular stock averages remain near record levels.

Dow Jones Industrials


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