Wednesday, January 10, 2018

Lower reports after report that China may slow US debt purchases

Dow lost 24, decliners over advancers 2-1 & NAZ gave back 33.  The MLP index rose 1 to the 291s.  Junk bond funds weakened & Treasuries were sold again on news China may slow US Treasury debt purchases.  Oil went over 63 (more below) & gold recovered 6 to 1319.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil63.35

GC=FGold   1,318.60

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Stocks fell, Treasury yields rose & the $ weakened after a report that said Chinese officials were said to be wary of American gov debt, further roiling a bond market unnerved by a recent selloff.  The 10-year Treasury yield rose toward 2.59% ahead of a note auction after senior gov officials in Beijing recommended slowing or halting purchases.  The news rippled thru markets, with gold, the € & Swiss franc jumping.  The S&P 500 headed for its first decline of the year, while European equities snapped a 5-day rally.  The $ retreated against most G10 peers.  West Texas oil surged past $63 a barrel as US industry data signaled crude stockpiles dropped.  Reduced asset purchases by the world's top central banks, rising commodity prices & looming US debt sales all support the case for higher bond yields, but until now they have proved resilient.  The move in benchmark Treasuries, into what what has been called a bear market has left traders weighing where yields will go from here & what impact the change will have on other assets.  In Asia, the ¥ climbed for a 2nd day as traders unwound short positions in the wake of the Bank of Japan paring back purchases of ultra-long dated bonds.  China's central bank weakened its daily fixing on the yuan by the most since Sep, one day after a report showed it has adjusted its currency-fixing mechanism, a move interpreted as an embrace of greater fluctuation in the exchange rate.

Treasuries, Stocks Slump on China as Dollar Falls: Markets Wrap

Oil extended gains from the highest close in more than 3 years as US industry data signaled crude stockpiles dropped an 8th week.  Futures climbed as much over 1% after rising 2.5% the previous 2 sessions.  US crude inventories fell 11.2M barrels last week, the American Petroleum Institute was said to report.  If the draw is replicated in Energy Information Administration data today, it would be the biggest decline for this time of the year since 1999.  Oil is continuing its advance after a 2nd annual gain as OPEC & its allies trim supply to drain a global glut.  The group is facing the challenge of rising US crude output, which the EIA expects to rise above 10M barrels a day as soon as next month, before eventually topping 11M in Nov 2019.  West Texas Intermediate for Feb delivery rose to $63.44 & volume traded was about 23% above the 100-day average.  Prices advanced $1.23 to $62.96 on yesterday, the highest close since Dec 2014.  Brent for Mar settlement climbed to $69.37 after advancing 1.5% on yesterday to the highest since Dec 2014.  The global benchmark crude was at a premium of $5.85 to Mar WTI.  US crude inventories probably dropped by 3.75M barrels last week, according to a survey before the EIA report.  Stockpiles at Cushing, Oklahoma, the delivery point for WTI & the nation's biggest oil-storage hub, probably slid by 1.5M barrels.

US import prices recorded their smallest increase in 5 months in Dec & underlying imported price pressures were muted amid declining costs for food & consumer goods.  The Labor Dept said that import prices edged up 0.1% last month after an upwardly revised 0.8% rise in Nov.  That was the smallest gain since Jul & was well below expectations for a 0.5% increase.  Import prices were previously reported to have increased 0.7% in Nov.  In the 12 months thru Dec, import prices increased 3.0%, slowing from Nov's 3.3% jump.  Import prices rose 3.0% in 2017 after advancing 1.9% in 2016, the biggest calendar year increase since 2011.  Prices for imported petroleum rose 2.0% last month, reflecting higher crude oil prices, after surging 8.1% in Nov.  Import prices excluding petroleum fell 0.2% which followed a 0.2% gain in Nov.  Import prices excluding petroleum rose 1.3% in the 12 months thru Dec.

US import prices post smallest gain in 5 months

China is a huge economy which is rapidly growing.  Its moves can shake markets, as was the case today.   However, earnings will start coming this week & they will drive the stock market.  The Dow & other popular stock averages are essentially at record highs with high levels of confidence from consumers & business execs.  Following winds should allow the market rally to continue assuming those guys in DC can get their act together on passing meaningful legislation.

Dow Jones Industrials

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