Wednesday, June 14, 2017

Dow rises to new record as tech selling resumes

Dow went up 46, decliners over advancers about 4-3 & NAZ gave back 25.  The MLP index sank 5+ to the 288s (near 1 year lows) & the REIT Index was up fractionally to the 353s.  Junk bond funds were mixed & Treasuries rallied.  Oil dropped to the 44s (7 month low) on higher gasoline inventories & gold rose (more on both below).

AMJ (Alerian MLP Index tracking fund)

Live 24 hours gold chart [Kitco Inc.]

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Federal Reserve officials forged ahead with an interest-rate increase & additional plans to tighten monetary policy despite growing concerns over weak inflation.  Policy makers agreed to raise their benchmark lending rate for the 3rd time in 6 months, maintained their outlook for one more hike in 2017 & set out details on how they intend to shrink their $4.5T balance sheet this year.  “Near-term risks to the economic outlook appear roughly balanced, but the committee is monitoring inflation developments closely,” the FOMC said.  “The committee currently expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated.”  They also issued forecasts showing another 3 qtr-point rate increases in 2018, similar to the previous projections in Mar.  The actions & words struck a careful balance between showing resolve to continue tightening in response to falling unemployment while acknowledging the persistence of unexpectedly low inflation this year.  “Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the committee’s 2 percent objective over the medium term,” the statement said.

Fed Raises Rates, Maintains Forecast for One More Hike

Oil fell to its lowest in more than a month as gov data showed weaker demand at the start of the summer driving season led to another increase in gasoline stockpiles.  Futures fell almost 5%, to the lowest intraday level since May 5.  Gasoline inventories rose 2.1M barrels last week, according to the Energy Information Administration.  Crude inventories fell 1.66M barrels, countering the American Petroleum Institute, which was said to show a build of 2.75M barrels last week.  Adding to the market pessimism, the International Energy Agency said new production from OPEC's rivals will be more than enough to meet growth in demand next year, overwhelming the oil group's efforts to reduce supplies by cutting its own output.  Oil is extending its slump below $50 a barrel as concerns grow that rising US supplies will offset production curbs by OPEC & allies including Russia.  Output at major American shale fields will reach a record in Jul, according to the EIA.  The US, Brazil, Canada & other producers outside OPEC will increase output next year by the most in 4 years, the IEA said in its first forecast for 2018.  As a result, the need for crude from OPEC won't be high enough for the group to reverse cuts it’s currently making to drain a global glut.

Oil Falls Below $45 as Gasoline Glut Signals Weak Summer Demand

Gold settled higher, booking its first gain in 6 sessions ahead of the Fed's 2nd interest-rate hike of the year.  Aug gold finished up $7.30 (0.6%) at $1275 an ounce, as the $ was down 0.5%.  A weaker $ can make assets priced in the currency, like gold, more attractive to buyers using weaker monetary units.

Gold Books Its First Gain In 6 Sessions As Dollar Falls

Greece's prime minister renewed an appeal to intl lenders  to reach an agreement on easing the country's debt burden, a day before finance ministers from the euro currency bloc meet to review its bailout program.  Alexis Tsipras said dealing with Greece's debt, which stands at about €320B ($360B), around 180% of the country's annual GDP, was key to future growth.  A deal was necessary, Tsipras wrote, "not so that money can be given away to Greece, but so that it doesn't have to be given away."  Finance ministers from the 19 European countries using the euro currency are meeting tomrrow to decide whether to unfreeze the latest installment of Greece's rescue loans & to discuss potential debt relief measures to be enacted when the bailout program ends next year.  Greece's left-led coalition gov recently legislated more belt-tightening reforms, including pension cuts, in an effort to meet requirements for the disbursement of its latest long-delayed rescue loan installment.  It needs the funds as it faces a roughly €7B spike in debt repayments in Jul which it will struggle to meet from its own resources.  Greeks, Tsipras wrote, are "full of hope and expectation for this meeting of finance ministers. Because we have done everything we owe and we continue on the same European path."  "And we expect the same from our lenders. For them to respect the rules that they themselves wrote," he added.  "To respect my country. To respect Greece."

Greek PM renews call for lenders to tackle Greece's debt

The rate hike was well advertised, so stocks found it easy to adjust.  But the shootings in VA may have dampened investor enthusiasm today.  Tech stocks have lost their sex appeal.  It wasn't that long ago that NAZ topped its highs above 5K set more than a decade a ago.  Now it's well above 6K & some fans are getting nervous.  Dow is still setting new highs, but that enthusiasm may fade.  This could be a tough summer for stocks & summer officially begins next week.

Dow Jones Industrials

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