Tuesday, November 8, 2016

Markets climb, hoping for a Hillary win

Dow gained 72, advancers over decliners better than 3-2 & NAZ rose 27.  The MLP index was flattish in the 288s & the REIT index added 1+ to 331.  Junk bond funds had modest gains after recent selling & Treasuries were weak.  Oil retreated into the 44s & gold was off a tad.

AMJ (Alerian MLP Index tracking fund)

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Live 24 hours gold chart [Kitco Inc.]

US labor markets are strong & the consumer is really “picking up the pace,” though inflation remains too low & declining inflation expectations are a cause for concern, said Federal Reserve Bank of Chicago pres Charles Evans.  Evans, one of the central bank's most dovish officials who favors delaying rate hikes until inflation advances, said there had been progress on the Fed's preferred measure of price pressures excluding volatile food an energy components.  “We’ve finally gotten core PCE inflation of 1.7 percent,” he said.  “We’re close , we’re getting there, and if I had even more confidence about getting to 2 percent I’d feel better about monetary policy re-normalization. We’ll see how that goes.”  Evans, who will vote on the FOMC next year, said there were reasons to “have not quite as much confidence that we’re going to get to 2 percent and we’re going to get there quickly,” chief of which was expectations.  “I am worried that inflation expectations have been moving down in a way that’s not consistent with 2 percent,” he said.  The way to change that was to assure the public the Fed would meet its goal and “in order to do that, we’re not going to pull back too quickly,” he added.  “I’m probably the only FOMC participant who uses the word ‘overshooting’ in their speeches for inflation,” he continued.  “I don’t think it’s a crime if we were to overshoot.”

Fed’s Evans Lacks Confidence That Inflation Will Reach 2% Target

The US Energy Information Administration (EIA) raised its forecasts for US crude production for 2016 & 2017.  In its monthly energy outlook report, the gov agency forecast US crude output of 8.84M barrels a day this year, up 1.3% from the previous forecast.  For 2017, it sees production rising to 8.73M barrels a day, up 1.7% from last month's forecast.  The EIA also forecast an average price of $42.84 a barrel for West Texas Intermediate crude this year, up from a previous estimate of $42.78.  Brent crude is seen averaging $43.30 this year, down from the $43.43 forecast in Oct.  Dec WTI crude traded at $45.26 a barrel, up 37¢ (0.8%) & Dec Brent crude added 14¢ (0.3%) to $46.29 a barrel.

EIA Raises U.S. Oil Output Forecasts For This Year And 2017

General Motors sales in China rose 5.7% to 345K vehicles in Oct, its best-ever result for the month.  YTD, GM sales in China are up 8.6% from the same period in 2015.

GM China sales: The raw numbers

BrandOct. 2016 SalesChange vs. Oct. 2015
GM Total345,7335.7%
The good news was quite good: Sales of some of the most profitable vehicles were very strong last month.  Cadillac sales more than doubled, giving the luxury brand its 4th month in a row in which its sales in China increased more than 50%.  The star has been the new XT5 crossover, with almost 5K sold last month.  GM's equity income from its joint ventures in China was roughly flat from a year ago at $459M in Q3, despite the fact that GM's sales in China were up 17.4% over the same period.  The problem: GM's pricing is under pressure from low-cost domestic Chinese competitors.  That squeezed GM's profit margin in the region, which was down to 8.7% last qtr from 9.8% a year ago.  The stock lost 29¢.  If you would like to learn more about GM, click on this link:


General Motors Stays on a Profitable Course in China

General Motors (GM)

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Stocks went up in AM & were sideways for the rest of the day.  Tonight we'll find out the election results.  Chances are that if it is a win for Hillary, stocks will rally which will take the Dow nearer to its peak reached earlier this year.  If Donald wins, there should be a sell-off.  The following day, emotion will settle down & ordinary news & rumors will drive market prices.  Retail earnings are going to be coming in soon & next month the Fed can be expected to raise interest rates.  That would be one increase this year after one last year.  Rates remain low relative to historical standards.

Dow Jones Industrials

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