Dow lost 22, advancers over decliners about 5-4 & NAZ added 12. The MLP index was steady at 274 & the REIT index went up 1+ to the 346s. Junk bond funds were little changed & Treasuries fluctuated. Oil rose pennies in the 66s (more below on the outlook for oil in H2) & gold was off a tad at 1302.
AMJ (Alerian MLP Index tracking fund)
Prospects for American business in North Korea if summit goes well
OPEC released its monthly report & the group cited a high degree of uncertainty hanging over the global oil market. The global oil oversupply that drove US crude oil prices to around $30 a barrel has now been worked off, according to OPEC, but still the group says the outlook for H2 for the market is highly uncertain. The uncertain outlook suggests that OPEC members may be in no rush to relax their output cuts when they meet next week. OPEC responded to the last bear market by cutting output to help balance the supply glut. In Jan 2017 OPEC & some non-OPEC partners, including Russia, cut oil output by 1.8M barrels per day (bpd). In May, the OPEC Reference Basket (ORB), a weighted average of OPEC members' oil prices, increased by about 8.5% above the previous month, settling at $74.11 a barrel. YTD in May, the ORB value was 31.7% higher at $67.48 a barrel, compared to the same period in 2017. While oil prices have climbed, the group appears to be in no rush to ramp up its oil production. "Recently, crude oil futures have lost some momentum amid uncertainty as traders prepare for potentially more supply returning to the market," OPEC said. The group noted that the oil market continues to be underpinned by geopolitical uncertainty & robust US crude inventories. The economic crisis in Venezuela has crippled the nation's oil output while US sanctions threaten to cut Iranian oil exports. OPEC kept its projected world oil demand growth unchanged for 2018, but offered a slight upward revision to its total non-OPEC supply by 130K bpd to 59.75M bpd. OPEC will meet on Jun 22 to discuss a potential change to its oil production.
The stock market is digesting the news from the summit. Without a dramatic outcome, attention is shifting to the FOMC meeting which will give its report tomorrow. Another rate hike is widely expected. Optimism by small business owners is encouraging for the economy, but did not motivate stock buying. The Dow is sitting on its 2 week rally of 1K & looks to be overbought short-term.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 66.28 | +0.18 | +0.3% |
| GC=F | Gold | 1,301.70 | -1.50 | -0.1% |
As Pres Trump prepares to participate in an historic summit in
Singapore with North Korean leader Kim Jong Un, progress in
relations between the 2 countries could open investment opportunities
for US companies. But future investment in North Korea would not be without its risks. Pyongyang will need to implement legal reforms to protect
American companies & policies to create a more business-friendly
environment for private enterprise & property. Trump has signaled openness to establishing a US embassy in Pyongyang, according to one report,
which could signal a pathway toward normalizing relations. Sources said
that measure was conditional upon what Kim was willing to give
the US in return. While the US is
ultimately hoping to make progress on denuclearization, North Korea is
reportedly looking to gain security assurances, something Secretary
of State Mike Pompeo said the administration is
open to giving them, under the right conditions. Singapore
is the furthest Kim has traveled since 2011, when he assumed leadership
of the country. The summit is scheduled to begin with a one-on-one
meeting between Kim & Trump, before the pair is joined by officials
from their respective administrations. For the
US, the Singapore summit comes on the heels of Trump's controversial
G-7 appearance, where he butted heads with key US allies.
Prospects for American business in North Korea if summit goes well
The Small Business Optimism Index continued its
impressive run in May, climbing to the 2nd-highest level in history
with small businesses reporting great numbers in several key areas. The
index rose by 3 points to 107.8 in May, while tax cuts &
regulatory changes contributed to increased compensation, positive
earnings & sales trends. “Main Street
optimism is on a stratospheric trajectory thanks to recent tax cuts and
regulatory changes. For years, owners have continuously signaled that
when taxes and regulations ease, earnings and employee compensation
increase,” said National Federation of Independent Business (NFIB)
CEO Juanita Duggan. The May
report included several record-setting data points. Employee
compensation increases hit a 45-year high at a record net 35%, positive
earnings trends reached a survey high at a net 3%, positive sales trends
are at the highest level since 1995 & expansion plans are the most
robust in survey history. A net 19% of small business owners noted that they
are planning price increases, the highest level since 2008 while a net
3% reported positive profit trends, the best reading in the survey's
history. “Small business owners are continuing
an 18-month streak of unprecedented optimism which is leading to more
hiring and raising wages,” said NFIB Chief Economist Bill Dunkelberg.
“While they continue to face challenges in hiring qualified workers,
they now have more resources to commit to attracting candidates.” Businesses are planning on growth, with 29% of
business owners looking to hire skilled workers, while 12% are looking
to hire unskilled workers. To help attract workers, 35% of owners said
they are increasing labor compensation. Access
to credit continues as a non-issue with 37% of owners reporting all
credit needs were satisfied with 43% saying they were not interested in a
loan, the lowest reading since 2007.
Small business optimism soars, hiring and wages jump
OPEC released its monthly report & the group cited a high degree of uncertainty hanging over the global oil market. The global oil oversupply that drove US crude oil prices to around $30 a barrel has now been worked off, according to OPEC, but still the group says the outlook for H2 for the market is highly uncertain. The uncertain outlook suggests that OPEC members may be in no rush to relax their output cuts when they meet next week. OPEC responded to the last bear market by cutting output to help balance the supply glut. In Jan 2017 OPEC & some non-OPEC partners, including Russia, cut oil output by 1.8M barrels per day (bpd). In May, the OPEC Reference Basket (ORB), a weighted average of OPEC members' oil prices, increased by about 8.5% above the previous month, settling at $74.11 a barrel. YTD in May, the ORB value was 31.7% higher at $67.48 a barrel, compared to the same period in 2017. While oil prices have climbed, the group appears to be in no rush to ramp up its oil production. "Recently, crude oil futures have lost some momentum amid uncertainty as traders prepare for potentially more supply returning to the market," OPEC said. The group noted that the oil market continues to be underpinned by geopolitical uncertainty & robust US crude inventories. The economic crisis in Venezuela has crippled the nation's oil output while US sanctions threaten to cut Iranian oil exports. OPEC kept its projected world oil demand growth unchanged for 2018, but offered a slight upward revision to its total non-OPEC supply by 130K bpd to 59.75M bpd. OPEC will meet on Jun 22 to discuss a potential change to its oil production.
OPEC sees uncertain outlook for oil market
The stock market is digesting the news from the summit. Without a dramatic outcome, attention is shifting to the FOMC meeting which will give its report tomorrow. Another rate hike is widely expected. Optimism by small business owners is encouraging for the economy, but did not motivate stock buying. The Dow is sitting on its 2 week rally of 1K & looks to be overbought short-term.
Dow Jones Industrials
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