Monday, June 26, 2017

Markets rise although tech remains weak

Dow advanced 14, advancers over decliners more than 2-1 but NAZ lost 18.  The MLP index added 4+ to 290 & the REIT index rose 2 to the 356s.  Junk bond funds climbed higher after selling last week & Treasuries edged higher.  Oil was up (more below) & gold had a big drop to 1243.

AMJ (Alerian MLP Index tracking fund)

Live 24 hours gold chart [Kitco Inc.]

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Senate leaders released a slightly revised version of their health-care bill as Senate Majority Leader Mitch McConnell tries to win over enough holdouts to pass the measure, with at least 6 Reps signaling opposition.  The most significant change is the inclusion of a new provision to encourage Americans to maintain continuous health-care coverage that would replace Obamacare's individual mandate.  The new provision would impose a 6-month waiting period before new insurance goes into effect for anyone who had a break in coverage lasting 63 days or longer in the prior year.  It would take effect beginning in 2019.  A number of Rep senators are still demanding a variety of changes in what is shaping up as McConnell's toughest test as Senate majority leader.

GOP Leaders Issue Revised Health Care Bill

ECB Pres Mario Draghi effectively put an end to a debate about the inclusion of Greek bonds in the ECB's asset-purchase program, saying commitments offered by creditors earlier this month still don't provide sufficient clarity on the country's future debt path.  The debt measures Greece adopted are “still insufficient to properly assess both their quantitative effect and the timing of their impact on the dynamics of Greece’s public debt,” Draghi wrote to Greek European Parliament member Nikolaos Chountis.  “Until sufficient detail has been provided on the debt measures, serious concerns persist regarding the sustainability of Greece’s public debt.”  The ECB has signaled that lack of clarity over debt relief would hinder its assessment of the sustainability of Greek debt, which is a pre-condition for considering the purchase of the country's bonds under quantitative easing, currently scheduled to run until the end of 2017.  Its euro-area creditors agreed to release €8.5B ($9.5B) in new loans on Jun 15 but postponed until mid-2018 a binding decision on what measures they will provide to ease the country’s burden.  “The Governing Council will decide independently on whether and how to conduct purchases of Greek sovereign debt securities,” Draghi wrote.  “The program has not been designed to target yield developments in individual euro-area countries.”  The gov of Prime Minister Alexis Tsipras is counting on quantitative easing to aid Greece's return to intl debt markets.  With economists seeing bond purchases being gradually tapered throughout 2018, the program will probably be nearing its conclusion when debt-relief details are announced.  “On the borrowing rate at which Greece could tap the markets without aggravating its debt prospects, kindly note that this does not depend only on the future interest rate,” Draghi wrote.  “An improvement in growth prospects for the Greek economy would create the capacity to absorb a higher borrowing rate without having any detrimental effects on debt sustainability.”

Draghi Signals Greek Debt Measures Not Enough for QE Inclusion

Oil prices crept higher in quiet trade that featured bargain hunting after prices slid last week & hit 7 month lows, but gains were limited by rising crude supply in the US & other countries.  US crude futures were up 35¢ (0.8%) at $43.36 a barrel.  In the week to Jun 20, investors in US crude futures & options increased their short positions (bets against rising prices).  OPEC & its partners have been trying to reduce a global crude glut with production cuts.  OPEC states & 11 other exporters agreed in May to extend cuts of 1.8M barrels per day (bpd) until Mar.  However, Nigeria & Libya, OPEC members exempt from the cuts, have hiked output.  Iran was allowed a small increase to recover market share lost under Western sanctions, & said its production has surpassed 3.8M bpd & is expected to reach 4M bpd by Mar.  Also, US shale oil output is up around 10% since last year.  The number of US oil rigs in operation has hit its highest in over 3 years.

Oil edges higher; growing U.S. supply limits gains

The Dow held onto its early gains while NAZ traded in the red for the entire session.  Trump got a big victory from the Supreme Court when it basically upheld his right to impose a travel ban for at least 120 days.  The chaos in DC is calming down, the pendulum is swinging in his favor as the interest in Russian whatever is losing momentum.  The main attention this week will be on passing healthcare which is uncertain.  Passage (& an indication of coming together for a bill the pres can sign) would let Congress work on a new tax plan which is very important for business execs & stock traders.  With stock averages pretty much at record highs, a lot is riding on letting those guys in DC get back to "real" work.
Dow Jones Industrials

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