Thursday, March 30, 2017

Markets rise when oil tops $50 (again)

Dow climbed 69, advancers over decliners 3-2 & NAZ gained 16.  The MLP index lost a fraction to the 318s & the REIT index crawled higher to the 343s.  Junk bond funds inched higher & Treasuries slid lower.  Oil rose over 50 & gold was weak (more on both below).

Dow Jones Industrials

Live 24 hours gold chart [Kitco Inc.]

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Crude rose to a 3-week high after Kuwaiti comments bolstered optimism that OPEC & its partners will extended output curbs.  Futures climbed almost 2%.  Kuwait & other countries support prolonging production cuts that are scheduled to expire in Jun.  Prices rose yesterday after US gov data showed that gasoline inventories dropped more than expected, while refineries boosted the amount of crude they processed by the most in almost 3 years.  While US crude supplies rose to a record last week, they increased by less than they were expected to, signaling that more oil is being pulled out of storage.  That optimism & the disruption in Libyan output helped drive prices up 3.7% over the past 2 sessions, their longest stretch of gains in more than a month.  They slid last week to the lowest since Nov as American supply gains countered output cuts by other producers.  West Texas Intermediate for May advanced 77¢ (1.6%) to $50.28 & the contract touched $50.46, the highest since Mar 9.  US gasoline inventories dropped 3.75M barrels last week & they were projected to fall 2M barrels.  Refineries processed 16.2M barrels a day of crude last week, up 425K barrels from the prior week, according to the EIA (the biggest weekly increase since Jun 2014).  Nationwide crude stockpiles rose by 867K barrels to all-time high of 534M.  Analysts projected a 2M barrel gain.  Oil output climbed further to above 9.1M barrels a day.

Gold prices settled lower, as strength in the $ & some gains in equities drew investor interest away from the precious metal.  Jun gold fell $8.80 (0.7%) to settle at $1248, the lowest finish for the Jun contract since Mar 20.

Gold Prices Finish Lower As Dollar Strengthens

VF Corp, a Dividend Aristocrat, the distributor of brands including North Face, Timberland & Wrangler, outlined plans for the 5-year period thru 2021, & said it expects to return $8B to shareholders in the period.  The company said it will overhaul its portfolio, shift to a consumer & retail-centric model, boost direct-to-consumer & digital operations & shift investment to Asia, especially China.  The company expects revenue to grow at a 5-year compounded annual growth rate (CAGR) of 4-6% & EPS to grow at a 5-year CAGR of 10-12% with margins reaching 51.5% by 2021.  The company expects to generate more than $9B of cash & the board has approved a new $5B share buyback.  VFC will change its fiscal year end to Mar 31 from the Sat closest to Dec 31 of each year, which it expects will give it better visibility into revenue growth & expense planning.  The stock fell 2.12.  If you would like to learn more about VFC, click on this link:

VF Corp. Sets 5-year Goals, Unveils $5 Billion Share Buyback

V.F. Corporation (VFC)

China's main indices capped the 4th day in the red as lingering concerns over liquidity were further heightened by curbs on property investment.  The blue-chip CSI300 index fell 0.9% to 3436 while the Shanghai Composite lost 1 to 3210.  Smaller caps led the decline, with the tech-heavy start-up board sliding 1.8% to a 5-week low.  China's central bank skipped open market operations for a 5th day & was set to drain 40B yuan today.  The property market was another area of concern for investors, as an increasing number of cities joined a broad move by authorities to slap curbs on home purchases.  The National Academy of Economic Strategy, a gov think tank, urged authorities to guard against risks in the property & financial sectors by properly managing monetary & land supply "floodgates," adding to worries about more restrictions on property developers.  Moody's Investors Service warned that the financial risks facing China from a potential property downturn had grown as record lending had made banks more risk-prone while the gov was less able to combat those risks.  An index tracking real estate developers fell 1.1%.  The steep correction in newly-listed stocks, now in its 3rd session, has seen dozens of them tumbling by the maximum allowed 10%.

China Shares Down For 4th Day as Liquidity Concerns Linger

Optimism about the economy continues to be strong.  That thought was aided by the revised GDP data today.  Trump is doing his part.  Next Thurs & Fri he will host Chinese President Xi Jinping at the Mar-a-Lago estate.  But chaotic goings in DC bring a dark cloud over the stock market which investors have been overlooking for months.  Dow just needs another 80 to put in the black for Mar.  It would also be up a massive 2400 since the Nov election.

Dow Jones Industrials

stock chart  

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