Markets retreat on election nervousness

Dow lost 28, decliners over advancers 5-4 & NAZ gave back 47.  The MLP index fell 3+ to the 288s & the REIT index lost 1+ to the 321s.  Junk bond funds headed lower & Treasuries were sold, taking the yield on the 10 year Treasury over 1.8%.  Oil sank to the 44s on worries of oversupply (more below) & gold retreated but held above 1300.

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Oil dropped to the lowest since Sep as a global supply glut appears to be expanding.  West Texas Intermediate fell more than 2% for a 5th day of losses.  North Sea oil producers in Dec will ship the most crude in more than 4 years.  Prices tumbled yesterday after the Energy Information Administration said stockpiles increased by a record 14.4M barrels last week.  OPEC members who are claiming exemption from an agreement to limit supplies helped boost the group's output to an all-time high last month.

Oil has retreated from near $50 a barrel, triggered by the failure of OPEC to agree on country quotas last week as part of a deal to limit output.  WTI for Dec delivery dropped 86¢, today, after touching $44.37, the lowest since Sep 28.

Shipments of North Sea grades should increase 10% month-on-month to about 2.16M barrels a day.  If all the cargoes load as planned it would mark the most crude oil shipments from the region since May 2012.  The increase just from Sep, when there was field maintenance, would be almost 360K barrels a day.  US crude stockpiles increased last week as imports surged the most in almost 20 years.  OPEC pumped a record 34M barrels a day in Oct.  The gain was led by Libya, Nigeria & Iran, which are exempt from an OPEC deal to cut supply & pumped an additional 400K barrels a day in Oct.  Iraq is also demanding an exemption.

Oil Drops to Five-Week Low Amid Signs of Expanding Global Glut

Federal Reserve policy makers left interest rates unchanged while saying the argument for higher borrowing costs strengthened further amid accelerating inflation, reinforcing expectations for a hike next month.  “The committee judges that the case for an increase in the federal funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress toward its objectives,” the FMOC said.  The decision was 8-2.  Fed officials revealed growing confidence that inflation is on track to reach their 2% target.  The central bank said that the pace of price gains “has increased somewhat since earlier this year” & that market-based measures of inflation compensation “have moved up.”  The committee also omitted previous language saying inflation would probably “remain low in the near term.”  The decision to forgo a rate increase had been widely expected owing to the proximity of next week's presidential election & the lack of a scheduled press briefing after this meeting.  Now the focus will shift to the gathering in Dec, provided the outlook for the economy & inflation isn't thrown into doubt over the next 6 weeks.  This month's statement said the Fed would wait for “some further evidence” of progress in the economy before raising rates, adding the qualifier “some” to language from Sep, a sign that officials moved incrementally closer to a hike.

When leaving rates unchanged in Sep, the FOMC acknowledged the case for tightening policy had “strengthened.”  Minutes of the session showed that was a “close call” for several officials who supported the decision to stand pat & wait for the economy make more progress.

Fed Sets Up Move in December While Leaving Rates on Hold

A British court ruled that the gov parliamentary approval to start the process of leaving the EU, potentially delaying Brexit plans.  The government will appeal against the ruling by England's High Court.  Britain's Supreme Court is expected to consider the appeal early next month.  A spokeswoman for prime minister May said she still planned to launch talks on the terms of Brexit by the end of Mar & added: "We have no intention of letting this derail our timetable."  The £ fell sharply after the vote to leave the EU & rose after the ruling.  The High Court ruled that the gov needs parliament's backing to trigger Article 50 of the EU's Lisbon Treaty, the formal step needed to start the process of exiting the bloc.  Parliament could in theory block Brexit as most lawmakers (MPs) supported staying in the EU in a referendum in Jun.  But few expect that outcome, & a Reuters survey last month suggested MPs would back Brexit now.  Even so, the court ruling makes the already daunting task of taking Britain out of a political & trading club it joined 43 years ago even more complex.

U.K. Court Says Brexit Needs Parliament's Approval, Complicates Plans

Stock traders are jittery, not knowing to expect after the election next week.  Both candidates are unknowns for the stock market & each is carrying a ton of baggage.  While big, the jobs report tomorrow will not calm nerves.  Dow remains under 18K & the VIX, volatility index, shot up 2+ to 22, near its 5 year high!

Dow Jones Industrials