Wednesday, May 17, 2017

Markets tumble on Trump worries

Dow sank 217, decliners over advancers 4-1 & NAZ gave back 71.  The MLP index dropped 3 to the 306s & the REIT index was fractionally higher in the 339s.  Junk bond funds retreated & Treasuries rallied, taking the yield on the 10 year Treasury down to 2¼%.  Oil went up (more below) & gold jumped up 21 to 1257 on Trump worries.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil49.04


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The latest political turmoil in DC has triggered a bout of risk aversion in financial markets after the extended lull of the past few weeks.  Asian equities retreated overnight, S&P 500 Index futures slipped & haven assets from gold to the ¥ advanced as the unrelenting pace of developments threatened to derail Trump administration policy prescriptions cheered by the stock market.  With the White House on the defensive, volatility gauges reflected growing anxiety among equity investors.  The CBOE Volatility Index jumped more than 8%.  US stocks, 2 days removed from a record close, are in for a weak Wed.  S&P 500 e-mini futures dropped as much as 0.7% overnight before paring the slide to 0.4% 90 min before the open.  That’s still the biggest drop in a month.

Here's How Markets Are Reacting to News of the Trump-Comey Memo

Oil prices strengthened ahead of US crude inventory data that could give investors a clue as to whether an OPEC-led output cut is making progress in reducing the persistent global supply overhang.  US light crude rose 18¢ to $48.84 after starting the day in negative territory on industry data from the American Petroleum Institute (API) estimated that US crude stocks had risen 882K barrels in the latest week.  That defied expectations for a draw in the stockpiles of 2.4M barrels.  WTI rose as high as $49.66 on Mon after Saudi Arabia & Russia agreed on the need to extend output curbs by members of OPEC & other producers.  The supply cuts of 1.8M barrels per day (bpd) were initially agreed to run during H1-2017.  Riyadh & Moscow say they should be extended until Mar & an extension is due to be discussed at an OPEC meeting on May 25.  OPEC nations such as Kuwait, Iraq, Oman & Venezuela have said they supported an extension to the supply cuts, signaling that the meeting next week will go smoothly.  It is possible that a deeper cut could even be on the table.  The extension would come as global stocks remain stubbornly high, in part because US production has climbed 10% since mid-2016 to 9.3M bpd, not far off that of top producers Russia & Saudi Arabia.  North Sea oil output, generally seen in terminal decline, is expected to jump by a net 400,000 bpd in the next 2 years with new projects & greater efficiencies.  Trade sources shipping data indicated a rising number of tankers storing oil offshore China because facilities on land are full.

Oil Turns Positive as Market Awaits EIA Data

Target’s, a Dividend Aristocrat, Q1 earnings were a bullseye for investors who sent the shares higher, as the broader market moved sharply lower, after it reported a smaller-than-expected decline in same-store sales.  But the CEO said he's not ready for a round of high 5s just yet.  The retailer reported a 1.1% decline in revenue from a year ago to $16.02B, outpacing expectations for $15.62B.  Comparable-store sales, a key metric for retailers which measures completed transactions at stores open at least a year, declined 1.3%, driven primarily by a decline in traffic & purchase sizes.  However, the decline wasn't as steep as the 3.6% drop forecast.  “We feel good about progress in the first quarter, but we’re not doing high fives. We know we have a lot of work to do. As a company, we have a very strong foundation…we have a very clear strategy in place and our focus will be on week-to-week execution from a physical and digital standpoint,” CEO Brian Cornell said.  TGT has revamped its focus in the space & saw sales rise 22% across its digital channels in Q1.  The company has worked to streamline in-house digital operations, abandoning a partnership with Curbside, an app that allowed customers to pick up orders outside the stores, instead working on developing its own service.  Additionally, TGT had reportedly been working on an acquisition strategy before opting to develop its own competitive platforms.  Cornell said, that while the qtr began with “very soft trends,” TGT saw improvement later in the qtr, particularly in Mar.  “We are in the early stage of a multi-year effort to position Target for profitable, consistent long-term growth, and while we are confident in our plans, we are facing multiple headwinds in the current landscape,” he said.  “As a result, we will continue to plan our business prudently while preparing our team to chase business when we have an opportunity.”  Q1 EPS was $1.21, a 6.1% decline from the same time a year ago, but were well above expectations of 91¢.  The company expects a low single-digit decline in same-store sales both in Q2 & for the full year, with EPS of 95¢-$1.15 in the current qtr.  The stock shot up 1.40 on a tough day in the stok market.  If you would like to learn more about TGT, click on this link:

Target Shares Rise on 1Q Earnings but CEO Not Ready to ‘High Five’ Yet

Target (TGT)

This one brutal day for the stock market.  Comey's firing is bringing more questions & the administration is on defense.  The  Trump rally was priced to perfection & can not handle the abundance of negative news coming from DC.  There are negative implications for the economy & expansion plans that Trump has been working on.  This distraction is putting the plans on hold until the mess gets sorted out.  Stock market bulls will be away until things settle down in DC.

Dow Jones Industrials


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