Thursday, January 12, 2017

Markets sell off in profit taking

Dow fell 144, decliners over advancers 5-2 & NAZ gave back 53.  The MLP index lost 1 to the 318s & the REIT index was down 1+  to 339.  Junk bond funds were a little lower & Treasuries were purchased.  Oil  gained 1 to the 54s (more below) & gold was strong (topping 1200) as stocks were sold.

AMJ (Alerian MLP Index tracking fund)

Light Sweet Crude Oil Futures,F

Gold Futures,Feb-2017

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Fewer Americans than forecast filed applications for unemployment benefits last week, showing a healthy job market at the start of 2017.  Jobless claims rose 10K to 247K (the lowest level since 1973) according to the Labor Dept.  The forecast called for 255K applications.  Continuing claims decreased.  The job market is getting tighter as unemployment is near a 9-year low, creating a shortage of skilled workers that is prompting businesses to hold on to existing employees.  Few layoffs combined with steady hiring will help to underpin a pickup in wages & boost consumer spending, the biggest part of the economy.  The 4-week moving average decreased to 256K last week, from 258K.  Claims have stayed below the 300K level for 97 consecutive weeks, the longest stretch since 1970 & consistent with an improving job market.  The number continuing to receive jobless benefits dropped 29K to 2.09M & the unemployment rate among people eligible for benefits held at 1.5%.

Applications for U.S. Jobless Benefits Rise Less Than Forecast

Oil rose, extending its biggest advance in almost 6 weeks, after Saudi Arabia said it had cut production even more than required by an OPEC accord.  Futures increased over 2% after Saudi Arabian Energy Minister Khalid al-Falih said the kingdom has reduced output to less than 10M barrels a day, going beyond its obligations under a deal between OPEC & other producers.  Prices climbed 2.8% yesterday as the Energy Information Administration said that US refineries used 17.1M barrels a day of crude last week, the most in weekly data compiled since 1989.  West Texas Intermediate for Feb delivery was at $53.44 a barrel in NY, up $1.19 & the contract gained $1.43 to $52.25 on yesterday.  Saudi Arabia, currently producing at a 22-month low, will consider renewing the supply agreement after 6 months, Al-Falih said.

US import prices rose in Dec, boosted by higher prices for petroleum products, but a strong $ kept underlying imported inflation in subdued.  The Labor Dept said import prices increased 0.4% last month after an upwardly revised 0.2% decline in Nov.  The forecast was for import prices to advance 0.7% last month after a previously reported 0.3% drop.  In the 12 months thru Dec, import prices jumped 1.8%, the largest gain since Mar 2012, after edging up 0.1% in the 12 months thru Nov.  Import prices are rising as the drag from lower oil prices fades.  Oil prices have risen above $50 per barrel.  But underlying import prices are likely to remain soft amid sustained $ strength.  Fiscal stimulus is expected to stoke inflation & bolster economic growth, which could prompt the Federal Reserve to raise interest rates at a faster pace than currently envisaged.  Imported petroleum prices increased 7.9% last month after dropping 3.0% in Nov.  Import prices excluding petroleum fell 0.2% after being unchanged the prior month.  The cost of imported food fell 1.4%, the biggest drop since Feb, after surging 1.3% in Nov.  The report also showed export prices rose 0.3% after slipping 0.1% in Nov.  Export prices were up 1.1% from a year ago.

Import Prices Rise on Petroleum

As pointed out many times, the stock market is vastly overbought.  A correction is in order, especially with all the hot air coming from DC.  Actions by the new congress will greatly affect the economy & where the stock market will go.

Dow Jones Industrials

stock chart  

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