Tuesday, December 20, 2016

Dow approaches 20,000 ahead of the holidays

Dow added 91 (still below 20K), advancers over decliners 3-2 & NAZ went up 26.  The MLP index gained 1+ to the 307s & the REIT index was fractionally higher to the 339s.  Junk bond funds edged lower & Treasuries ran into more selling.  Oil was a little higher in the 53s & gold remains very weak.

AMJ (Alerian MLP Index tracking fund)

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Live 24 hours gold chart [Kitco Inc.]

Oil traded near $52 a barrel as Libya said it reopened 2 oil fields while analysts project gov data to show US crude supplies fell for a 5th week.  Futures fluctuated after rising as much over 1.1% amid gains in US & euro equities.  Libya’s National Oil said it reopened the Sharara & El-Feel fields & said they should help boost output by 175K barrels a day within one month & 270K within 3 months.  Stockpiles probably fell 2.5M barrels last week, based on a survey.  Oil has traded near $50 a barrel since OPEC agreed Nov 30 to cut output for the first time in 8 years.  Non-OPEC producers including Russia will also trim supply.  US crude inventories are at the highest seasonal level since the EIA began compiling weekly data in 1982.  Gulf Coast refiners curb deliveries at the end of the year to reduce local taxes.  West Texas Intermediate for Jan delivery, which expires today, rose 15¢ to $52.27 a barrel & volume was about 38% below the 100-day average.  The EIA is projected to report that US gasoline stockpiles increased in the latest week, while inventories of distillate fuel, a category that includes heating or and diesel, declined.  Crude stockpiles at Cushing, Oklahoma, the delivery point for WTI & the biggest US oil-storage hub, probably increased by 1.9M barrels last week, according to a current forecast.

The Italian gove moved closer to a potential rescue of lenders including Banca Monte dei Paschi di Siena by seeking permission from parliament to increase the nation's public debt by as much as €20B ($21B).  The plan is aimed at providing a backstop to the banking system “through public guarantees in order to restore their short- and medium-term lending ability,” Finance Minister Pier Carlo Padoan said following a cabinet meeting last night.  The funds could also be used “for capital-strengthening programs of banks within recapitalizations that include the sale of shares,” he added.  Monte Paschi CEO Marco Morelli is scampering to find investors to back a private €5B capital increase by the end of this year.  Should his efforts fail, Prime Minister Paolo Gentiloni's cabinet has laid the groundwork for a state-sponsored cash injection with the possible sale of gov bonds.  Gentiloni, who took the job this month, was at pains to describe the steps toward state aid as “precautionary” measures after the cabinet meeting in Rome.  At €2.23T, Italy's public debt is already the 2nd-biggest in Europe after Greece as a percentage of GDP & the fragility of the country's lenders, coupled with recent political instability, has put financial markets on edge.  Padoan, who kept his job after Matteo Renzi resigned as premier, said the impact on the debt would be a “one-off, temporary” & added he was “frankly perplexed” by criticism that the burden would fall on taxpayers.

Italy Paves Way for a $21 Billion Aid Plan for Ailing Banks

Nike, a Dow stock, has set the pace in the sports apparel industry for the last several decades.  But analysts are tempering their expectations for the brand ahead of its expected announcement of its fiscal Q2 earnings after the close.  Intense competition in North America helped to shave 19% off company stock price in 2016.  Shifting fashion trends, from performance & marquee apparel to more casual & retro styles, have loosened the company's hold on the market. NKE has been the Dow's worst performer this year, even as the it reached a series of record highs.  Despite industry headwinds, company execs haven't backed off of their sales target of $50B by the year 2020.  While most analysts remain optimistic about its long-term prospects, an increasingly competitive retail landscape has placed the brand’s short-term sales goals in doubt.  Analysts expect revenue of $8.09B in 2Q, a 5% increase from the same period a year earlier & projections call for EPS of 43¢, down from 45¢ year-over-year.  A downtick in futures orders drove some of the skepticism regarding the company's outlook in recent qtrs.  This qtr will mark the first time NKE won't include futures orders in its earnings report, though execs will discuss the figures during a conference call.  The company argues that a rise in direct-to-consumer sales have diminished the value of futures orders as a bellwether for its overall business.  The stock rose 94¢.  If you would like like learn more about NKE, click on this link:

Nike's Forgettable Year Winds Down

Nike (NKE)

Holiday trading generally doesn't mean much.  This year is different as the Dow is so near to 20K.  Today the Dow was hovering a little under that magic ceiling.  Maybe it will go over tomorrow, although breaking thru that level may have less meaning than at other times, not influenced by temporary factors. The Dow continues to be way overbought & needing a correction.  There are plenty of problems around the globe while the world is out of control.

Dow Jones Industrials

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