Thursday, February 8, 2018

Markets plunge again with the Dow off more than 1000

Dow sank a huge 1032 finishing at the lows, decliners over advancers a very big 8-1 & NAZ sank 274.  The MLP index dropped 9+ to 270.  Junk bond funds declined lower & Treasuries were slightly lower.  Oil fell 1+, going below 61, & gold went up a modest 4 to 1319.

AMJ (Alerian MLP index tracking)

Live 24 hours gold chart [Kitco Inc.]

3 Stocks You Should Own Right Now - Click Here!

Stocks have fallen in recent days in part because of the rising prospect that global central banks will be tightening monetary policy, Federal Reserve Bank of NY Pres William Dudley said.  “Clearly the market is adjusting to the fact that the global economy is growing quite quickly, and as a consequence of that, monetary authorities around the world are either starting to remove accommodation or are thinking about starting to remove accommodation,”  Dudley said.  “So bond yields have moved up, and as bond yields have moved up, that’s put a little bit more pressure on the equity market.”  Stocks have been roiled by the return of long-absent volatility in recent days, as the S&P 500 has declined more than 9%  from its Jan 26 record high.  Treasuries, which typically perform well when stocks sell off, have been battered, too.  The yield on 10-year Treasury notes rose to 2.88% today, matching the highest level in 4 years.  “So far, I’d say this is small potatoes,” Dudley said of recent market moves.  “The little decline that we’ve had in the equity market today has virtually no implications for the economic outlook.”  The central bank's policy-setting FOMC, of which Dudley is vice chair, looks set to raise interest rates at least 3 times this year, according to the prices of futures contracts linked to the federal funds rate.  “It’s really premature to make predictions about whether it’s going to be one, two, three or four” hikes this year, Dudley said.  The FOMC  projection for 3 hikes in 2018 that was published when the committee met in Dec “still seems like a very reasonable projection,” he added, with the caveat that it could speed up or slow down depending on whether or not the economic outlook changes.  A Feb 2 Labor Dept report showing the fastest wage growth over the last 12 months of the expansion so far added to the case for tightening, according to Fed officials who have made public comments on the topic this week.  “Are we moving to a little bit higher rate of wage inflation? I think, you know, possibly,” Dudley added.  “But whether that’s actually happened yet, I wouldn’t want to put too much weight on one report.”  The undershoot of the Fed's 2% inflation goal gives policy makers scope to be patient, he said.

Fed's Dudley Sticks to His Outlook, Calls the Market Moves ‘Small Potatoes’

The United Arab Emirates, a model Persian Gulf petro-state where endless Bs from crude exports feed a giant sovereign wealth fund, isn't the most obvious customer for Texan oil.  Yet, in a trade that illustrates how the rise of the American shale industry is upending energy markets across the globe, the UAE bought oil directly from the US in Dec, according to data from the federal gov.  A tanker sailed from Houston & arrived in the Persian Gulf last month.  The cargo of American condensate, a type of very light crude oil, was preferred to regional grades because its superior quality made more suitable for the UAE's processing plants.  The end of a ban on US exports in 2015 coupled with the explosive growth of shale production, has changed the flow of petroleum around the world.  Shipments from US ports have increased from a little more than 100K barrels a day in 2013 to 1.53M in Nov, traveling as far as China & the UK.  The US exported about 700K barrels of light domestic crude in Dec to the UAE, the Census Bureau reported.  While Energy Information Administration data show it’s the 4th OPEC producer's first cargo of US oil, Adnoc said in Jul it purchased condensate from the US for Sep delivery.   Although it exports more than 2M barrels a day, the Middle Eastern country typically imports extra-light condensate to process in a unit known as a splitter.  With rising crude exports & already booming overseas sales of refined petroleum products such as gasoline, the US net oil imports have plunged to below 3M barrels a day, the lowest since data available starting 45 years ago, compared with more than 12M barrels a day in 2006.  The US could become a net petroleum exporter by 2029, the EIA said.  UAE crude production was 2.85M barrels a day in Jan.  Output has declined from 3.07M at the end of 2016 as OPEC & allies cut production to reduce a global glut & prop up prices.  Until last year, the UAE relied on Qatar for its condensate supply.  But the 2 countries are embroiled in a political dispute & the UAE decided in Jun to ban all petroleum ships from Qatar.

Oil World Turns Upside Down as U.S. Sells Oil in Middle East

The number of Americans filing for unemployment benefits unexpectedly fell last week, dropping to its lowest level in nearly 45 years as the labor market tightened further, bolstering expectations of faster wage growth this year.  Initial claims for state unemployment benefits decreased 9K to a seasonally adjusted 221K in the latest week, the Labor Dept said.  Claims fell to 216K in mid-Jan, the lowest level since 1973.  The forecast called for claims rising to 232K.  Last week marked the 153rd straight week that claims remained below the 300K threshold, which is associated with a strong labor market.  That is the longest such stretch since 1970, when the labor market was much smaller.  The labor market is near full employment, with the jobless rate at a 17-year low of 4.1% & the tighter labor market is starting to exert upward pressure on wage growth.  The Labor Dept reported last week that average hourly earnings jumped 2.9% year-on-year in Jan, the largest gain since 2009, after advancing 2.7% in Dec.  Strong wage growth supports optimism among Fed officials that inflation will increase toward the central bank's 2%  target this year & US financial markets expect the Fed will raise interest rates in Mar.  The Fed has forecast 3 rate increases for this year, but much will depend on the inflation outlook & financial conditions.  The central bank lifted borrowing costs 3 times in 2017.  Last week, the 4-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, declined 10K to 224K, the lowest level since 1973.  The claims report also showed the number of people receiving benefits after an initial week of aid fell 33K to 1.92M in the latest week.  The 4-week moving average of the continuing claims rose 12K to 1.95M.

US jobless claims unexpectedly drop to near 45-year low

Hershey (HSY) profit rose 20% in fiscal Q3, as the maker of Reese's Peanut Butter Cups & Hershey's Kisses benefited from cost-cutting efforts as well as lower cocoa prices.  EPS rose to $1.28 from $1.06 a year earlier & net sales were up slightly to $2.03B from $2B.  The stock lost 1.39.
If you would like to learn more about HSY, click on this link:

Hershey's profit rises 20% in Q3

Stocks were deeply in the red, with the Dow posting triple-digit losses while the NAZ & S&P 500 also tumbled.  The latest round of losses put the NAZ officially in the red for the year, joining the S&P 500 & the Dow.  Today marked the 5th day in a row of 500-plus point intraday swings for the Dow, the most since Oct 2008 at the height of the financial crisis.  The Dow also traded in its 2 biggest intraday ranges in history on Mon & Tues.  Today traders were digesting a constant stream of earnings, with 33 companies in the S&P 500 scheduled to release results.  60% of the companies in the S&P 500 have released their most recent quarterly results & more than ¾ have surpassed expectations on both top & bottom lines.  Corp growth & hopes for further profit growth related to tax cuts have contributed to the stock market's recent rally while bubbling inflationary pressures are being partially attributed to the recent downturn.  In commodities, oil futures were lower, extending a decline from a prior session that saw West Texas Intermediate crude oil futures falling to a one-month low.

Dow's wild ride clips 600+ points off average

The Dow is down around 3K since its peak on Jan 26.  That's below the bear market signal of a 10% decline.  Plenty of new investors in the last decade have no experience with significant declines.  Getting burned for the first time can be very painful.  If margin calls are made, the pain is made much worse (not to mention adding to the selling).  Today's tumble shows that sharp selloffs are not a flash in the pan.  The economy continues to be strong & more good news is expected from tax reform & a growing global economy.  But the stock market rally was vastly overbought & more selling will be needed so that investors will be able to stand on solid ground once again.

Dow Jones Industrials

No comments: