Tuesday, October 25, 2016

Markets drift lower on sluggish earnings

Dow pulled back 53, decliners over advancers 2-1 & NAZ pulled back 23.  The MLP index lost 2+ to the 311s & the REIT index fell 1+ to the 342s.  Junk bond funds were a little higher & Treasuries also rose.  Oil was weak (more below), barely hanging in above 50, & gold went up. 

AMJ (Alerian MLP Index tracking fund)

Light Sweet Crude Oil Futures,D

Gold Futures,Dec-2016

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Crude dropped as the $ strengthened & analysts predicted weekly gov data will show that US supplies climbed.   Futures fell almost 1% as the $ reached its strongest since Mar increasing bets that the Fed will raise interest rates by year-end.  A stronger greenback curbs the appeal of commodities denominated in the US currency to investors.  Crude stockpiles probably rose 1.75M barrels last week.

Oil has fluctuated near $50 a barrel amid uncertainty about whether OPEC can implement an accord to cut output when its members gather at an official meeting in late No.  A committee will meet this week to try to resolve differences over how much members should pump.  Last month’s OPEC deal pushed prices higher, bringing some drilling back in the US, which has in turn prevented crude from making new highs.  West Texas Intermediate for Dec delivery slipped 20¢ (0.4%) to $50.32.

Americans took a dimmer view about the economy this month, the latest sign households have become a bit cautious in recent weeks.  The Conference Board index of consumer confidence dropped to 98.6 in Oct from 103.5 in Sep.  Economists expected the index to fall to 101.2.  Consumers' assessment of current conditions weakened over the month & their outlook for the labor market was also less optimistic in Oct than a month earlier.

October Consumer Confidence Below Expectations

Home-price growth accelerated in Aug, as a lack of inventory & low interest rates helped push prices to near-record levels.  The S&P CoreLogic Case-Shiller Indices covering the entire nation rose 5.3% in the 12 months ended in Aug, a small jump from a 5% increase reported in Jul.  The 10-city index gained 4.3%, up from 4.1% last month & the 20-city index gained 5.1% year-over-year, up slightly from a 5% increase in Jul.  The strong rise in prices comes amid other signs the housing recovery is gaining strength.  The share of first-time buyers rose to 34% in Sep, the highest since Jul 2012, according to the National Association of Realtors.  The national Case-Shiller index is now just a hair away from the record high set a decade ago in 2006.  "Supported by continued moderate economic growth, home prices extended recent gains," said David Blitzer, managing director at S&P Dow Jones Indices.  The hottest markets in the country have shifted away from Cal & toward the northeast, as many buyers priced out of the Silicon Valley area flee to secondary tech hubs.

Home-Price Growth Heats Up in August

There were a bunch of earnings reports today.  By & large they were not encouraging.  Oil continues to struggle, trying to stay above the important 50 support level.  Safe haven investments gold & Treasuries are attracting more attention.  Earnings results are not giving the lift that the bulls were hoping for.  Drab economic growth is the root of the problem.  Dow can not break away from 18K.

Dow Jones Industrials


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