Wednesday, October 26, 2016

Markets pull back on earnings & lower oil prices

Dow gave back 4 (off the early lows), advancers over decliner better than 3-2 & NAZ lost 19.  The MLP index fell 3+ to the 305s & the REIT index sank 6+ the 336s.  Junk bond funds did little & Treasuries were weak.  Oil fell again (more below) & gold drifted lower.

AMJ (Alerian MLP Index tracking fund)

Light Sweet Crude Oil Futures,D
Gold Futures,Dec-2016

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Crude fell to a 3-week low as industry data showed US crude stockpiles rose while doubts grew about Russian willingness to cooperate with OPEC in curbing supply.  West Texas Intermediate futures declined more than 2%.  US crude inventories increased by 4.75M barrels last week, the American Petroleum Institute was said to report.  Analysts estimate Energy Information Administration data today will show that supplies rose.  Output cuts are not an option for Russia, the nation’s envoy to OPEC said.

Oil has fluctuated near $50 a barrel amid uncertainty about whether OPEC implement the first output cuts in 8 years & get producers outside the group to join in, notably Russia.  An OPEC committee will meet this week to try to resolve differences over how much individual members should pump, with Iraq saying it should be exempt exempt because of conflict with Islamic militants.

New US single-family home sales unexpectedly rose in Sep, pointing to sustained demand for housing even as data for Aug was revised sharply down.  The Commerce Dept said new home sales increased 3.1% to a seasonally adjusted annual rate of 593K units, pulling them close to a 9-year high touched in Jul.  The Aug sales pace was revised down to 575K units from the previously reported 609K units.  Economists had forecast single-family home sales, which account for about 9.8% of overall home sales, falling to a rate of 600K units last month.  Sales increased 29.8% from a year ago.  They rose in Q3 compared to Q2, indicating strong demand for housing.  Residential construction, however, likely remained a drag on GDP in Q3.  Despite rising demand for housing, home building has been lagging, with builders complaining about land & labor shortages.  Demand is being driven by rising wages as the labor market nears full employment, as well as by very low mortgage rates.  The inventory of new homes on the market dipped 0.4%  to 235K units.  At the Sep sales pace it would take 4.8 months to clear the supply of houses on the market, down from 4.9 months in Aug.  The median price for a new home increased 1.9% from a year ago to $313K.

September New Home Sales Rise 3.1%

Coca-Cola, a Dow stock & Dividend Aristocrat, rose after the beverage company reported Q3 earnings & revenue just above expectations.  EPS was 24¢, down from 33¢ during the year earlier period.  Adjusted EPS was 49¢, nudging past the 48¢ estimate.  Revenue for the qtr hit $10.6B, down from last year's $11.4B, but above the $10.5B forecast.  The company expects full-year adjusted EPS to decline 4-7% vs. $2 in 2015, while the forecast is for a 4-5% drop.  The stock is up 15¢.  If you would like to learn more about KO,click on this link:

Coca-Cola Posts Q3 Earnings Just Above Wall Street Expectations

Coca-Cola (KO)

Earnings are note impressive & lower oil prices are not helping the case made by the bulls.  But stocks & oil have risen from the lows at the open.  Some traders are listening to the bulls.  The Dow continues to hang in a little above 18K, as it has for months.

Dow Jones Industrials


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