Tuesday, November 15, 2016

Dow posts another record close, nearing 19,000

Dow gained 54, advancers over decliners a strong 5-2 & NAZ rebounded 57.  The MLP index added 4+ to the 303s & the REIT index lost 2+ to the 324s.  Junk bond funds rose after recent selling & Treasuries continued weak.  Oil shot up to the 46s & gold crawled a little higher (more on both below).

AMJ (Alerian MLP Index tracking fund)

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Live 24 hours gold chart [Kitco Inc.]

Home Depot, a Dow stock, said Hurricane Matthew & its subsequent flooding poured an additional $100M into sales coffers in the qtr ended Oct 30.  The retailer rung up big transactions on both ends of the Oct storm.  Before the winds hit, residents across the Southeast streamed in for plywood, flashlights, tarps & generators.  After it passed, they stocked up on drywall, chainsaws, sump pumps & lots of trash bags.  Matthew wreaked havoc in Florida, Georgia, South Carolina, North Carolina & Virginia.  Big box stores excel at major weather events in a way that smaller hardware stores can't.  “Through strong collaboration, we were able to get product to our communities in their time of need,” Edward Decker, VP of merchandising, said. But Matthew alone was no great moneymaker for the company.  Representing about 0.5% of revenue, it wasn’t nearly as critical to earnings as rising home equity & a surge in big-ticket purchases were.  As homeowners splurged on flooring, new roofs & appliances, transactions over $900 increased 11.3%.  The stock sank 3.27.  If you would like to learn more about HD, click on this link: 

Home Depot Reaps a Hurricane Windfall

Home Depot (HD)

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Federal Reserve Governor Daniel Tarullo, who has strongly favored keeping benchmark interest rates low to spur additional job growth this year, signaled he's now more open to raising borrowing costs.  “The discussion of when is the appropriate moment for raising rates in order to prevent the economy from overheating too much is now, from my point of view, more on the table than it may have been before,” Tarullo said, adding, “I still think there are grounds for caution.”  The FMOC is widely expected to lift its benchmark federal funds rate by a qtr-percentage point when it meets Dec 13-14.  The group said earlier this month the case for an increase had continued to strengthen as the economy bounced back from a weak first half of 2016.  Tarullo pointed to upward ticks in inflation & core inflation, the latter of which rose to 1.7% in the 12 months thru Sep.  He also cited the expanding work force & increasing wages.  “All of that is suggesting to me that we’re in a somewhat different situation than at least I thought we were in six or eight, 10 or 12 months ago, where I thought we had more opportunity to create more jobs, get more production in the country,” by keeping rates low, he added.

Fed’s Tarullo Says It’s Time to Talk Hikes to Avoid Overheating

Oil prices jumped as much as 5%, bouncing back from multi-month lows on renewed expectations that OPEC will agree later this month to cut production to reduce a supply glut that has weighed on prices for more than 2 years.  Saudi Energy Minister Khalid al-Falih is expected to travel to Qatari this week for meetings with oil-producing countries on the sidelines of an energy forum.  OPEC is due to meet on Nov 30 to hammer out the terms of a deal to limit output.  An outline deal was reached in Sep but negotiations on the detail are proving difficult.  US crude rose $1.99 to $45.31 (a 4.6% gain), after hitting $45.42.  News of an attack on a major oil pipeline in Nigeria gave an additional push to prices.  Oil was due for an upward correction after a month of declines.  But rising Libyan oil production could cap gains.  A tanker carrying the first freshly produced cargo of Libyan crude to be exported since the Ras Lanuf terminal reopened in Sep left the port yesterday.  Libya's oil production has almost doubled to around 600K barrels per day in recent weeks.

Gold futures climbed, with prices rebounding from a string of 6-consecutive session declines.  Dec gold rose $2.80 (0.2%) to settle at $1224 an ounce, recouping a small portion of the more than 6% drop it tallied over the past 6 sessions.

Gold Prices Mark First Climb In 7 Sessions

In the PM the stock market returned to its winning ways on the 1 week anniversary of the election.  Buying brought the Dow solidly in the black & even junk bond funds found buyers & oil had a big pop today,  But the bear market in Treasuries continues.  With many mortgages interest rates linked to the 10 year Treasury yield, mortgages will become more expensive which could dampen housing demand.  The week long stock market rally will affect areas of the economy in different ways.  Once again, this is not a good market for the timid.

Dow Jones Industrials

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