Monday, July 3, 2017

Higher markets, led by bank stocks

Dow jumped up 154, advancers over decliners 3-1 & NAZ added just 16.  The MLP index went up 3+ to 301 & the REIT index gained 1+ to the 351s.  Junk bond funds rose & Treasuries saw more selling.  Oil climbed (more below) & gold dropped to 1226.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil    46.52
1.59    3.5%

GC=FGold      1,225.30

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Demand for profitable light trucks gave Ford (F) & top Japanese automakers better sales than had estimated for Jun following a 5-month streak of industry declines.  Toyota (TM) deliveries climbed 2.1%, while Honda sales rose 0.8% from the same month last year, both surpassing estimates.  Nissan, which had been expected to record a 2% drop, saw sales rise 2% instead.  Sales at Ford slipped 5%, less than the 6%  drop that had been estimated.  Collapsing demand for sedans & coupes by consumers & rental-car companieshave produced small declines in US sales volumes every month this year & projections indicate that pattern will hold in Jun.  The pace of sales typically increases in H2 powered by promotions starting with the Jul 4 holiday & lasting thru year-end discounts.  But analysts do not project another year of record sales.  General Motors (GM) is the only carmaker to have missed estimates in reporting so far, with sales dropping 4.7%, compared with a forecast for a 3.4% decline, as it curtailed fleet sales.  Among the biggest automakers, only TM & Honda had been expected to report increases in Jun deliveries.  GM, Ford & Fiat Chrysler (FCAU) are all shortening summer shutdowns or forgoing them altogether at some US plants that make popular SUVs & pickups as demand for the bigger vehicles continues to chug along.  At the same time, several car plants are bracing for a cut in summertime shifts & output as manufacturers try to align supply with still-slumping passenger-car demand.  The industrywide selling rate, adjusted for seasonal trends, may have slipped in June to about 16.6 million, compared with 16.8M a year ago, according to the average of analysts’ estimates. The full-year total are estimated at 17.2M that would end a 7-year winning streak for the auto sector but would still mark the 4th-best year on record.  The industry sold 17.55M cars & light trucks last year.

Carmakers Outsell June Estimates in U.S. to End Drab First Half

President Xi Jinping's complaint about a “negative” turn in China's relationship with the US showed the challenge facing Trump when the 2 leaders meet in Germany this week.  Xi's comment during a phone call with Trump on today followed several assertive US moves in Asia, including a naval patrol past a Chinese-controlled islet a day earlier.  The American pres called in part to advance talks on curbing North Korea's nuclear weapons program, which have progressed little since Xi's sunny Apr visit to Trump's Florida resort.  “Ties are also affected by some negative elements, and the Chinese side has already expressed our stance to the U.S.,” Xi told Trump, according to state broadcaster.  “China and the U.S. should tightly grasp the overall direction of development based on the consensus we reached at Mar-a-Lago.”  The remarks were Xi's first acknowledgment of rekindled tensions between the world's 2 largest economies ahead of an expected meeting at the G-20 summit that begins Fri.  Besides Trump's frustration with China's contribution to reining in Kim Jong Un -- expressed in a tweet last month, members of his administration have also renewed criticism of the country while returning to a harder line on trade.  The risk is that Trump rethinks his early detente with Xi & advances a punitive approach similar to what he advocated during the campaign.   Moves such as levying tariffs or boosting ties with Taiwan could prompt retaliation from China, especially as Xi prepares for a key Communist Party party reshuffle.  An 82-word summary of Trump's call released by the White House said “both leaders reaffirmed their commitment to a denuclearized Korean Peninsula” while discussing a range of issues.  The pres “reiterated his determination to seek more balanced trade relations with America’s trading partners,” the White House said.

China Warns Against ‘Negative’ U.S. Turn

Oil extended the longest run of gains this year as US drilling slowed after a record expansion.  Futures rose 0.6%, adding to an 8.3% gain the previous 7 sessions.  US drillers targeting crude reduced the number of active rigs for the first time in 24 weeks, according to Baker Hughes.  Libya's oil production climbed to more than 1M barrels a day for the first time n 4 years, according to a leaker.  While prices surged last week, oil still posted a monthly loss in Jun after tumbling into a bear market on concerns that rising global supply will counter cuts from OPEC & its partners.  There are signs of a slowdown in the US, but Libya is adding more oil to the market as it restarts fields that are exempt from OPEC's production curbs.  West Texas Intermediate for Aug delivery advanced 27¢ to $46.31 a barrel.  The contract gained $1.11 to $46.04 on Fri to the highest since Jun 13.  US drillers reduced the number of rigs by 2 to 756, snapping the longest stretch of gains in at least 3 decades.  The count had climbed to the highest level since Apr 2015.  Libya's output has rebounded from only 690K barrels a day at the start of the year, with Sharara, the country's largest oil field, resuming production last month.  State National Oil Chairman Mustafa Sanalla said in Apr he wanted to boost national output to 1.1M  barrels a day by Aug.

Oil Extends Longest Rally This Year

Even though this is a holiday shortened week, traders are eager to buy bank & oil stocks.  The big banks passed the stress tests & will be able to raise divs & buy back treasury shares.  This is not a long term influence, but makes investors feel good that they can expect to see more income after a dreary time in the last decade.  Tech stocks (shown by the mediocre performance at NAZ) are not considered exciting as has been the case for several weeks.

Dow Jones Industrals


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