Thursday, October 20, 2016

Markets drift lower on Draghi's commnets and falling oil prices

Dow gave back 41, decliners over advancers 3-2 & NAZ lost 4.  The MLP index was fractionally lower to 315 & the REIT index fell a fraction to the 343s.  Junk bond funds remained mixed & Treasuries were slightly higher.  Oil dropped more than 1, nearing 50, on profit taking & gold was also weak.

AMJ (Alerian MLP Index tracking fund)

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Live 24 hours gold chart [Kitco Inc.]

The number of Americans filing for unemployment benefits rose more than expected last week, but remained below a level associated with a strong labor market.  Initial claims for state unemployment benefits increased 13K to a seasonally adjusted 260K, according to the Labor Dept.  That marked 85 straight weeks of claims below the 300K threshold associated with a strong jobs market, the longest period since 1970, when the labor market was much smaller.  Economists had forecast first-time applications for jobless benefits rising to 250K.  Part of the increase in claims last week could be related to the effects of Hurricane Matthew, which lashed the Southeast of the country, causing severe flooding, leaving some people temporarily out of work.  The 4-week moving average of claims rose 2K to 251K.  The claims data covered the survey week for Oct nonfarm payrolls.  The 4-week average of claims fell 6K between the Sep & Oct survey periods, suggesting another month of solid employment growth.  The number still receiving benefits after an initial week of aid increased 7K to 2.06M.  The 4-week average of continuing claims dropped 12K to 2.05M, the lowest reading since 2000.
Factory activity across mid-Atlantic states edged down in Oct but still expanded as new orders picked up.  The Federal Reserve Bank of Philadelphia said its index of general business activity covering the regional factory sector fell to 9.7 from 12.8 in Sep (a reading of 0 separates expansion from contraction).   Economists expected the index to register at 5.0 this month.  The new orders index improved markedly, increasing to 16.3 in Oct from 1.4 in Sep.  The shipments index also improved, rising 24 points to 15.3. But a bleak spot in the report is employment, which still isn't growing.  The percentage of firms reporting a decrease in employees in Oct was 17%, exceeding the 13% reporting an increase.  The current employment index edged up slightly to -4.0.  Still, the report said that overall, "firms remain optimistic about business conditions over the next six months, and prospects for employment continue to be upbeat," suggesting continued improvement in the regions's manufacturing sector.

Mid-Atlantic Manufacturing Activity Expanded More Than Expected

The € jumped to an intraday high during Mario Draghi's news conference today, but was quickly sent lower as the ECB boss answered questions on monetary easing.  The currency rallied to as high as $1.1040 after Draghi said the Governing Council had not discussed an extension of its quantitative easing program at today's meeting.  The comment was seen as dashing hopes the central bank would extend the bond purchases beyond Mar 2017, which many economists have built into their forecasts.  However, shortly after, Draghi also said the bank has no plans to abruptly end the QE program, swiftly taking the € off its high, to $1.0966.  The € bought $1.0975 late yesterday.  Other markets were also reacting to Draghi's comments.

Euro Posts Wild Swings As Draghi Grilled On QE

Union Pacific profit fell 13% in Q3 as the railroad hauled 6% less freight & coal demand continued to plummet.  EPS fell to $1.36, down from $1.50 last year.  The analysts expected $1.39.  Revenue declined 7% to $5.17B  from $5.56B.  The forecast was for $5.14B.  CEO Lance Fritz says the grain & energy segments of the economy are improving although the challenges of a strong $ & weak demand for consumer goods continue.  The stock sank 6.48 (7%).  If you would like to learn more about UNP, click on this link:

Union Pacific 3Q profit falls 13 percent as shipments slow

Union Pacific (UNP)

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Earnings are coming in so-so & that's being kind.  The US economy is extending its mediocre rise from 2009.  The Dow is almost triple the recession low in early 2009 with hardly a setback along the way.  It has stalled out this year & that could signal it is tired & needs a significant pullback.

Dow Jones Industrials

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