Tuesday, October 22, 2019

Mixed markets after mixed earnings

Dow lost 39, advancers over decliners about 3-2 & NAZ dropped 58.  The MLP index was steady at 222 & the REIT index was off 1+  to the 416s (still record territory).  Junk bond funds inched higher & Treasuries were purchased today.  Oil went up to the 54s (more below) & gold added 2 to 1490.

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US home sales fell more than expected in Sep as a housing shortage caused prices to increase.  The National Association of Realtors (NAR) said that existing home sales fell 2.2% to a seasonally adjusted annual rate of 5.38M units last month, ending 2 months of sales gains.  Still, overall sales are up 3.9% from a year ago (5.18M last Sep).  Despite historically low borrowing costs -- the Federal Reserve has voted twice this year to cut interest rates, helping the housing market by lowering morgtage costs -- sales have not increased, partially because of a lack of new housing options.  Policymakers at the central bank are expected to lower rates again at the end of Oct.   “Home prices are rising too rapidly because of the housing shortage, and this lack of inventory is preventing home sales growth potential,” Lawrence Yun, NAR's chief economist, said.  The 30-year fixed mortgage rate has dropped 1.16% from the year-ago period, to an average of 3.69%.  The median sales price climbed 5.9% from last year to $272K, the 91st straight month of year-over-year gains.

US home sales falter in September amid rising prices

British lawmakers have rejected the gov's fast-track attempt to pass its Brexit bill within days.  Legislators voted 322-308 against a timetable that gave the House of Commons just 3 days to debate the EU (Withdrawal Agreement) Bill.  The vote likely makes it impossible for Johnson to fulfill his vow to take Britain out of the EU on the scheduled date of Oct 31.  The outcome meant lawmakers want more time to scrutinize the complex legislation.  That throws Prime Minister Boris Johnson's exit timetable into chaos.  He now has 2 choices.  He could agree to give lawmakers more time, which would need a delay to Brexit of at least a few weeks.  Or, as he has threatened, he could pull the bill & try to get lawmakers to vote for a general election that could break the political impasse.  In both cases the EU must agree to delay Britain's departure.  Earlier today, British lawmakers approved Johnson's Brexit deal in principle, with the House of Commons voting 329-299 to send the EU (Withdrawal Agreement) Bill on for further scrutiny & possible amendments.  The votes come after France's foreign minister said he sees "no justification" at this stage for a further Brexit delay.  Johnson had said that if lawmakers rejected his accelerated 3-day timetable for Brexit bill he would pull it & seek an election.

British government wins one Brexit vote, but Parliament rejects fast-track timetable

United Parcel Service's (UPS) strong earnings report was overshadowed by news of the retirement of COO Jim Barber, who was long viewed as the company's next CEO.  Barber is ending his 35-year run with UPS.  He started out with the company as a delivery driver & was appointed COO in 2018.  “That is the normal progression cycle that we have at UPS. People will normally spend their entire careers,” CEO David Abney said.  Shares of UPS fell after UPS announced Barber's retirement in Dec, despite a 14% surge in Q3 profit that beat EPS estimates by a penny at $2.07.  The company's revenue, however, fell short of forecasts at $18.32B, compared with $18.35B expected.  Barber oversees the company's global small package, freight, supply chain, freight forwarding, & engineering, & was instrumental in the company's turnaround.  UPS volume for its Next Day Air delivery within the US rose by about 24% in the qtr, benefiting from strong e-commerce demand.  "We see it in our Next Day Ground & our Next Day Air,” Abney said, who noted that the company's multi- B-$ investments in network upgrades have shaved per-package costs down 2.5%.  Despite the advantage, investors remain wary of the potential ill-effects of the ongoing US-China trade war on the company as it gears up for what could be its biggest holiday season in history.  On an unadjusted basis, EPS was $2.01, in Q3 from the same period last year.  The stock fell 2.42.
If you would like to learn more about UPS, click on this link:

UPS shares fall, despite earnings beat, as COO retirement throws wrench in succession plans

Oil futures finished higher & logged their first gain in 3 sessions, buoyed by a report that major oil producers will consider deeper production cuts when they meet in Dec.  Members of OPEC & their allies will consider making further reductions to crude output when they meet in Dec because of growing concerns about a slowdown in growth for oil demand, according to leakers.  The report also said OPEC member Saudi Arabia wants to first lift adherence to the agreement, as Iraq & Nigeria are among the countries that haven't fully complied with the reductions.  Under the output-cut pact, which began at the start of this year and runs thru Mar 2020, OPEC & its allies, known as OPEC+, agreed to cut production by 1.2M barrels a day.  West Texas Intermediate crude for Nov delivery gained 85¢ (1.6%) to settle at $54.16 a barrel, after falling 0.9% yesterday.  The Nov contract, expires today.  Dec WTI crude, the new front-month contract, settled at $54.48 a barrel, up 97¢ (1.8%).  Global benchmark Brent crude for Dec, meanwhile, added 74¢ (1.3%) to settle at $59.70 a barrel, following a 0.8% skid on a day earlier.  Crude-oil has been under pressure amid worries about global appetite for the commodity as economies inside & outside of the US show signs of a slowdown.  However, hope that the US & China may strike a trade agreement soon has provided a tepid lift for crude prices.  Pres Trump yesterday said Sino-American trade negotiations were progressing well, & his top trade negotiator, Robert Lighthizer, suggested that a draft agreement could be forged at the Nov 11-17 Asia-Pacific Economic Cooperation meeting in Santiago, Chile.

Oil prices log first gain in 3 sessions after report OPEC will weigh deeper output cuts

The best earnings tend to be reported first.  Later reports are only so-so or worse.  Brexit looks to be a lost cause & the EU economies tend to stumbling (recession or near recession).  And the Turkey story is confusing but important.  The Dow dropped more than 100 in the last 2 hours of trading, finishing at its lows.  Not encouraging for tomorrow!

Dow Jones Industrials

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