Wednesday, August 15, 2018

Markets decline on Turkish uncertainties and tech worries

Dow was off 137 (well off the lows), decliners over advancers 2-1 & NAZ fell a very big 96.  The MLP index fell 4+ to the 281s & the REIT index was up 1+ to the 354s.  Junk bond funds slid lower & Treasuries remained in demand as the Turkish crisis drags on.  Oil fell more than 2 to 65 & gold plunged 18 to 1182.

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Stocks  tumbled with the Dow falling by triple digits as traders worried about the escalating trade feud between the US & Turkey, while shrugging off the latest positive US economic data.  All major indices were down & on a percentage basis the tech-heavy NAZ Composite was down the most, 1.3%, its 3rd decline in the last 4 days, in PM trading.  Crude oil prices plunged 3% to $65.03 after a report that US oil stockpiles are much larger than expected.  The fall in oil prices also weighed on the stock market.  The financial crisis in Turkey remains in focus after the country reportedly raised tariffs on US goods including alcoholic beverages, passenger cars, tobacco, cosmetics, rice & coal.  This was retaliation against the US for the initial sanctions placed against Turkey for not freeing American pastor Andrew Brunson who faces terrorism charges & a prison sentence.  Commodities were mostly lower, feeling the pressure of a rising $ & gold closed at a 1½ year low.

Stocks plunge as Turkey trade feud worries rise

US manufacturing output rose a solid 0.3% last month, led by increased production of cars, electronics & appliances.  The Federal Reserve said that overall industrial production (output at mines & utilities as well as factories) increased 0.1% in Jul after climbing 1% in Jun.   Production slid 0.3% at mines & 0.5% at utilities.  Factory production has risen at a healthy pace this year, though economists worry that it may not last.  Pres Trump's imposition of tariffs on steel imports & on $34B of products from China has sparked retaliatory duties, which may limit exports.  And the $ has increased in value against other currencies, which could further hurt exports by making US products more expensive overseas.  The Jul reading for industrial production fell short of expectations.  But it is still up 4.2% from a year earlier.  Despite the drop last month, mining has surged 12.9% since Jul 2017.  American industry has looked relatively healthy despite trade conflicts with China, Europe & Canada, along with a rising $ that makes US products more expensive abroad.  Helped by tax cuts, the US economy grew at a 4.1% pace in Q2, fastest since 2014.  Employers are hiring, & unemployment is 3.9%, close to a 50-year low.  But manufacturers are coping with labor shortages & supply disruptions connected to the ongoing trade disputes.  Among other things, US tariffs on imported steel & aluminum are raising costs for many manufacturers.

US factory output rose solid 0.3 percent in July

Oil prices plunged after gov data showed a big, unexpected jump in stockpiles of US crude, compounding pressure as the outlook for global economic growth darkened & the stock market slumped.  US light crude ended down $2.03 a barrel (3%) at $65.01, it's lowest closing prices since Jun 6 (after hitting an 8-week intraday low at $64.51).  Global benchmark Brent crude oil fell $1.68 (2.3%) at $70.78, after hitting a 4-month low at $70.30.  US commercial crude inventories rose by 6.8M barrels in the latest week, the Energy Information Administration reported. The forecast called for stockpiles to fall by 2.5M barrels.  The jump in stocks occurred as the nation's crude imports surged by 1M barrels a day, while its exports fell by more than 250K bpd.  That offset record activity at American refineries, which ran at 98% capacity.  Stocks at the closely watched US delivery hub at Cushing, Oklahoma rose by 1.6M barrels.  The East & West coasts both saw inventory levels jump by more than 2M barrels.  Stockpiles of gasoline were down slightly more than expected, while inventories of distillate fuels, including diesel & home heating fuel, rose 3.6M barrels, more than 3 times the increase projected.  Chinese oil importers now appear to be shying away from buying US crude oil as they fear Beijing may decide to add the commodity to its tariff list.  Not a single tanker has loaded crude oil from the US bound for China since the start of Aug, compared with about 300K barrels per day (bpd) in Jun & Jul.

Oil sinks 3% to more than 2-month low, settling at $65.01, after big rise in US crude stockpiles

Macy's (M) raised its annual profit forecast as the department store reported an unexpected increase in a key sales measure.  The department store chain has now reported its 3rd straight qtr of higher sales at existing stores after a 3-year slump.  But shares tumbled in their biggest one-day drop in over a year, perplexing analysts.  Still, the report offered encouraging news for other department stores, which are aiming to reinvent themselves as shoppers move increasingly online.  Macy's, the first of the department store group to release its results, has been expanding its store label brands to help differentiate itself from its rivals.  It's also adding more of the off-price Backstage stores & upgrading its checkout technology to make it faster & easier for shoppers.  It's testing more curated merchandise displays & localized marketing.  It also recently acquired the concept store called Story, which rotates themes & what it sells every few months.  "The combination of healthy stores, robust e-commerce and a great mobile experience is Macy's recipe for success," said CEO Jeff Gennette.  A strong job market & higher confidence are also helping shoppers get in the mood to spend.  The Commerce Dept reported today that Americans shopped at a healthy pace in Jul.  The National Retail Federation, the nation's largest retail trade group, raised its annual sales forecast earlier this week, citing better-than-expected sales in H1 because of tax cuts & an improving job market.  It now expects annual retail sales to rise to 4.5% from the original projection of 3.8-4.4% growth.  The numbers exclude automobiles, gasoline stations & restaurants.  But the trade group warned that trade wars between China & the US could dampen consumer confidence in the critical H2.  Macy's had EPS of 53¢.  That compares with 36¢ in the year-ago period.  Sales fell slightly to $5.57B from $5.64B.  Analysts were expecting EPS of 50¢ on sales of $5.5B.  Sales at stores opened at least a year rose 0.5% in Q2, slower than the 4.2% increase in Q1.  The figure includes Macy's owned businesses as well as from licensed departments.  The company blamed the slowdown in sales to a shift in a key "Friends and Family" promotion into Q1 from Q2.  Adjusting for that shift, Macy's estimated the sales measure would have been up 2.9%.  The company expects EPS for the year to be $3.95-4.15 after previously forecasting $3.75-3.95.  Sales at stores opened at least a year should rise 2-2.5%.  The stock sank a whopping 6.67 (15%).
If you would like to learn more about Macy's, click on this link:

Macy's rebound continues into 2Q, but shares tumble

Turkish officials say Qatar has pledged $15B of direct investments for Turkey as it struggles with a currency crisis.  Officials from Pres Erdogan's office said the pledge was made by Sheikh Tamim bin Hamad Al Thani, who met with the Turkish leader today.  They did not provide further information on the nature of the investments.  During the meeting, Erdogan & Al Thani also expressed their determination to develop ties between their countries "in all areas."  Turkey & Qatar have forged close bonds over the years, with Ankara supporting Doha during its standoff last year with other Gulf neighbors, including sending troops to a Turkish base there.

Qatar pledges $15 billion investment in Turkey amid crisis

Stocks bounced back to reduce losses after selling in the AM when the Dow dipped below 25K.  A bailout from Qatar helped eased the Turkish situation, although details are unknown.  Tech stocks are suffering with all the confusion about Tesla (TSLA) going private.  It looks like the SEC & just about everybody else is investigating this situation which can only be described as confusing.  This confusion brings on selling in the overbought tech sector, especially for the big name sexy stocks.  While more retail earnings are coming, most attention will be on these 2 stories.  Bulls returned in late trading for "bargain hunting" & were happy to see the Dow close well above the important 25K support level..

Dow Jones Industrials

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