Friday, November 23, 2018

Lower markets as oil plunges again

Dow retreated 149, decliners modestly ahead of advancers & NAZ lost 6.  The MLP index dropped 4+ to the 242s & the REIT index was flattish.  Junk bond funds fluctuated & Treasuries were higher in price.  Oil sank 3+ taking it under 51, another recent low, (more below) & gold lost 4 to 1224.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil50.93

GC=FGold   1,223.90

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Stocks opened sharply lower & crude oil prices plummeted as retailers hoped that the annual Black Friday shopping stampede would boost earnings.  Millions of Americans this year woke up at the crack of dawn after Thanksgiving to take advantage of some of the massive sales deals offered on one of the biggest shopping days of the year.  Tech stocks led the decline, with Google parent Alphabet (GOOG), Facebook (FB) & Apple (AAPL) falling more than 1% each.  Crude oil prices extended their free fall with an approximately 6% drop to their lowest levels this year.   Major retailers shares were mixed with Amazon (AMZN), eBay (EBAY) & Overstock (OSTK) climbing.  Trading can be quiet the week of Thanksgiving, with many traders absent from their desk, while it is a shorter week than usual, with US markets closed yesterday & having an abbreviated session on Fri.  Despite thinner volumes & a shortened week, overall the week of Thanksgiving has been a good one for equities.  According to Dow Jones market data, the broad-based S&P 500 has been up every week of Thanksgiving since 2012 & the S&P 500 has finished every Wed-Fri higher since 2012.  Technology & other fast-growing stocks rebounded Wed, halting a stock-market selloff that has left investors on edge as to whether the longest bull market ever can regain its step.  Shanghai stocks fell the most in 5 weeks today amid worries over China's economic growth & doubts over chances of Pres Xi Jingping & Pres Trump achieving a de-escalation in the Sino-US trade war when they meet next week.  Shanghai Composite Index slumped 2.5% & Hong Kong's Hang Seng was down 0.6%.  Japan's markets were closed for a holiday.  In Europe, London's FTSE traded lower by 0.1%, Germany's DAX rose 0.2% & France's CAC added 0.1%.

US stocks, crude oil extend declines as Black Friday begins

New data released predicts total holiday retail sales will top $1T this year for the first time, showing its strongest growth since 2011.  The most ironic part for some, according to eMarketer's projections, is that the 5.8% boost this year will specifically come from brick-&-mortar retailers as the “doom-and-gloom narrative” continues to play out in the media.  “While e-commerce will continue to see strong double-digit gains, brick-and-mortar retail should be a particular bright spot this holiday season,” eMarketer said, while noting that not everyone stands to benefit from the windfall.  “Several [stores] have shut their doors this year, but others are really capitalizing on the strong consumer economy. Retailers are luring in shoppers with remodeled stores, streamlined checkout and options to buy online, pick up in-store,” was added.  Brick-&-mortar sales for the 2018 holiday season are expected to jump 4.4% to $878.4B (higher than the $863B projected in Q3), the group said.  Additionally, the stores will represent the majority of traffic at 87.7%, even though its share has steadily declined over the years.  E-commerce sales this holiday season are expected to increase 16.6% to $123.7B, which will represent 12.3%  of all holiday retail sales this year, a figure that has been growing steadily.  The figures coincide with recent statistics from the International Council of Shopping Centers (ICSC) last month that predicted consumers plan to spend 4.5% more than last year.

Holiday sales to top $1 trillion for first time ever

Oil prices fell to their lowest this year, on course for their biggest one-month decline since late 2014 when OPEC opted to pump as much crude as it could to gain market share & sent prices on a near-unbroken 2-year slide.  Global supply, led by the US, is growing more quickly than demand & to ward off a build-up of unused fuel such as the one that emerged in 2015, OPEC is expected to start withholding output after a meeting planned for Dec.6.  But this has done little so far to prop up the price.  The value of a barrel of oil has dropped by 17% so far in Nov, in a 7-week streak of losses.  Brent crude oil futures fell 80¢ on the day to $61.89 a barrel, having hit a session low of $61.52, while West Texas Intermediate (WTI) crude futures lost $1.04 to trade at $53.23 a barrel.  Volatility as a result has spiked to its highest since late 2016, as investors have rushed to buy protection against further steep price declines.  Volatility, a measure of investor demand for a particular option, has jumped above 60% for very bearish near-term sell options, double what it was 2 weeks ago.  Global oil supply has surged this year.  The Intl Energy Agency expects non-OPEC output alone to rise by 2.3M bpd this year, up from its forecast 6 months ago of 1.8M bpd.  Demand next year meanwhile is expected to grow at a rate of 1.3M bpd, compared with a forecast of 1.5M bpd 6 months ago.  Adjusting to lower demand, top crude exporter Saudi Arabia said yesterday that it may reduce supply as it pushes OPEC to agree to a joint output cut of 1.4M bpd.

Oil hits 2018 lows on emerging supply glut

Pres Trump warned yesterday there could be a gov shutdown next month over security on the border with Mexico, suggesting he could hold up a funding deal if no more money is provided for a wall between the 2 countries.  “Could there be a shut down? There certainly could and it will be about border security, of which the wall i&s a part,” Trump said.  Congress faces a deadline next month to fund parts of the federal gov  a possible showdown over money for Trump's proposed border wall.  Having won control of the House in midterm elections, Dems have said they will be even less motivated than before to meet Trump's wall demands.  Trump also said he had given the military the authorization to use lethal force if necessary on the border with Mexico.  “If they have to they are going to use lethal force. I’ve given the OK - I hope they don’t have to.”  Trump also warned that the US could close the whole border with Mexico for a period of time “if we find that it gets to a level where we are going to lose control or our people are going to start getting hurt.”  This would mean Mexico will not be able to sell their cars into the US, added Trump, who has complained about the number of cars US manufacturers produce in Mexico.  Vehicle exports from Mexico to the US in 2017 totaled 2.3M units.  Ahead of congressional elections earlier this month, Trump denounced the approach of a caravan of migrants as an “invasion” that threatened American national security & he sent thousands of troops to the border to help secure it.  Defense Secretary Jim Mattis said on Wed that he had been granted authority to allow troops on the Mexican border greater powers to help protect border officials & would await direction from the Dept of Homeland Security.  Mattis said troops could help protect the border agents with shields & batons, but would be unarmed.  2 US officials said this week a memo signed by White House Chief of Staff John Kelly gave Mattis the authority to protect immigration agents & if necessary, could include actions like use of lethal force, crowd control, temporary detention & cursory searches.  Trump has issued ultimatums about wall funding before, with little impact, even with the Rep Party in majority control of the Sen & the House.  If the 2 parties cannot reach a funding deal, there would be a partial gov shutdown, with  “essential services,” including some at the Dept of Homeland Security, likely remaining in operation.

Trump warns of government shutdown next month over border security  

One more dreary day in what is traditionally a bullish week.  The Dow is down 1.2K in this shortened week (shortly ahead of the early close) & has fallen about 2K in Nov.  There is plenty of ordinary glum news on the trade front, a slumping housing house market, fears of rising interest rates, oil in solid bear market along with geopolitical risks.  Major worries that faltering global business could reduce demand for oil is a dark cloud over the entire stocks market..  The Dow is currently not far from its yearly lows.  That's not a good sign.

Dow Jones Industrials

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