Friday, November 3, 2017

Markets crawl higher powered by Apple earnings

Dow went up 22, decliners over advancers about 5-4 & NAZ rose 49.  The MLP index rebounded 1+ to the 268s & the REIT index lost 1+ to the 352s (retail property REITs were hit hard).  Junk bond funds were mixed & Treasuries inched higher.  Oil jumped 1+ to the 55s (more below) & gold gave back 7 to 1270.

AMJ (Alerian MLP Index tracking fund)

Live 24 hours gold chart [Kitco Inc.]

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Stocks headed for the longest string of weekly gains since 2013 as Apple (AAPL),  Dow stock with rket cap topping $900B, results & strong services sector data added to optimism in the economy.  The $ rose, while Treasuries fluctuated as the latest jobs report did little to alter views on the timing for higher interest rates.  The S&P 500 moved steadily higher in the PM, for an 8th week of advances as AAPL jumped more than 3%.  The Volatility Index (VIX) fell to a record low & the $ added to gains after the services sector looked robust.  The 10-year Treasury yield held near 2.35%. Crude topped $55 a barrel on reports Mexico's state-owned oil company made a major discovery.  An index of emerging-market currencies declined the most in a month as the market digests Venezuela's plan to restructure its debt.  Payrolls data provided a mixed picture of the strength of the labor market, though distortions from the hurricanes in Aug made it difficult to draw firm conclusions.  Based on fed fund futures, the odds for a rate hike in Dec were unchanged at a high level.  Investors are also weighing the impact of House Rep leaders' sweeping tax plan, which includes lowering the corp tax rate to 20% from 35%.  Meanwhile, Pres Nicolas Maduro said Venezuela will seek to restructure its global debt after the state oil company makes one more payment.  While the risk of contagion is low, an index of emerging-market currencies declined for the first time this week.

U.S. Stocks at Records, Dollar Gains on Economy: Markets Wrap

The US trade deficit rose 1.7% in Sep to $43.5B from $42.8B in Aug, the gov said.  The forecast called for a $43.3B gap.

U.S. exports surge to nearly 3-year high, but trade deficit widens

Proposed changes in the GOP tax plan could affect homeowners in more expensive neighborhoods & car buyers interested in electric vehicles.  Investors in tech companies could see higher divs.  Future retirees & asset managers are happy about a change that didn't materialize.  A look at how the GOP tax plan could impact certain industries:  The tax plan contains some unpleasant surprises for those thinking about buying a new home, particularly in high-cost areas. The plan would limit the mortgage interest deduction on newly purchased homes to the first $500K of the loan, instead of the present $1M limit.  The plan also caps the deduction for property taxes at $10K.  Car buyers might be less charged up about electric vehicles.  The plan eliminates a $7500 federal tax credit for buyers of electrics after the current tax year.  Industry analysts & environmental groups quickly predicted a plunge in EV sales.  Even with the credit, electric vehicles are less than 1% of US auto sales & that's likely to decline further.

Homebuilders gloomy, asset managers relieved over tax plan

Oil prices rose, nearing their highest levels in more than 2 years, with buyers attracted by expectations of an extension to a global pact to cut output that has reduced oversupply.  Global benchmark Brent futures traded up 4¢ at $61.03 a barrel, approaching levels around $61.70 a barrel last seen in Jul 2015.  Brent has risen around 38% since its low in 2017 reached in Jun.  US West Texas Intermediate (WTI) crude traded at $54.78 a barrel, up 24¢ & WTI is around 30% above its 2017 low hit Jun.  This week's Energy Information Agency (EIA) report on crude inventories & exports showed a large draw in US stocks, showing that market is rebalancing.  OPEC meets at the end of Nov to discuss further action after it agreed nearly a year ago with Russia & other producers to hold back 1.8M barrels per day (bpd) of oil supply.  Russia said on yesterday the deal, which is due to expire in Mar, could be extended if necessary but that a decision was not imminent.  While supplies are being withheld, demand is also rising, especially in China, whose roughly 9M bpd of imports have surpassed those of the US to top the world's crude importer list.  Physical oil prices are rising. Saudi Aramco, the UAE's ADNOC & Qatar Petroleum have all raised their crude prices for Asian buyers, with Aramco's Dec premium over the average of the Oman & Dubai benchmarks now at the highest in 3 years.

Oil near two-year high as tightening market attracts buyers

Stocks closed higher, but without a lot of conviction.  Gains were modest & market breadth continues weak.  The bulls remain optimistic, taking the popular averges to record highs.  The chart below is the kind bulls like to see.  But fundamentals behind it are only so-so & passing tax legislation will be critcal to extend this rally.  In the meantime, enjoy higher stock values.

Dow Jones Industrials


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