Dow fell 20, decliners over advancers better than 2-1 & NAZ dropped 83. The MLP index was steady in the 254s & the REIT index gave back 4+ to the 295s. Junk bond funds fluctuated & Treasuries continued to see slightly lower prices which took yields a little higher. Oil was off chump change in the 71s & gold retreated 6 to 2077 (more on both below).
AMJ (Alerian MLP Index tracking fund)
Oil prices are on pace to close out the year about 10% lower as bearish sentiment has taken over due to worries that the market is oversupplied from record production outside OPEC. The West Texas Intermediate contract for Feb gained 10¢ to trade at $71.87 to barrel today & the Brent contract for Mar rose 12¢ to trade at $77.27. But US crude & the global benchmark were headed for the first annual decline since 2020 despite ongoing geopolitical risk in the Middle East due to the devastating war in Gaza. Oil prices rose nearly 3% on Tues on worries that militant attacks on shipping in the Red Sea would disrupt global trade & crude supplies. However, WTI is down over 10% for the year & Brent has lost 9.9%. While fears of escalation in the Middle East have triggered brief spikes in crude prices, traders are primarily focused on the supply & demand balance. The US is producing crude at a record pace, pumping an estimated 13.3M barrels per day last week. Output is also at a record in Brazil & Guyana. The historic production outside OPEC has collided with an economic slowdown in major economies, above all China. OPEC & its allies, meanwhile, have promised to cut production by 2.2M barrels per day in the first qtr of 2024, but traders apparently have little confidence that the bloc's policy will bring the market into balance. Oil production outside OPEC, above all in the US, is expected to more than cover demand growth in 2024, according to the Intl Energy Agency (IEA). Global oil demand growth is expect to fall by ½ to 1.1 mbd next year, while output outside OPEC is expected grow by 1.2 mbd. The shift in crude supply from the Middle East to the US & other Atlantic countries is “profoundly impacting the global oil trade,” the IEA said in its Dec outlook. The US was responsible for 2/3 of the growth in supply outside OPEC this year. This is challenging efforts by producers in the Middle East to defend their market share & lift oil prices, according to the IEA. OPEC seems to have little room to maneuver, with production cuts falling on deaf ears. Brazil has agreed to ally itself with the bloc, but it is not clear what that means for markets.
Oil poised to end the year 10% lower in first annual decline since 2020Apple (AAP) stock, in the Dow, rallied in 2023, but its performance was outshined by all of
its mega-cap tech peers, as the company suffered 4 straight qtrs
of declining revenue. It's the longest such slide for AAPL since the
dot-com bust of 2001. Some of its troubles this year were due to a bad economic environment for phones & computers. Over the summer, total smartphone sales were the slowest in more than a decade. But
AAPL also dealt with some company-specific issues. AAPL didn't
release new iPad models in 2023, the first time that's happened in a
calendar year since the product was launched in 2010. Without new
models, it has less to promote & older versions of the product
don't see official price cuts that boost sales. Earlier this
month, all current model iPads were shipping from AAPL's website in a
day, according to Morgan Stanley analysts. That’s a sign of weak demand
because with the hottest products, AAPL doesn't have enough supply to
ship that quickly. In fiscal 2023, which ended in Sep, iPad revenue dropped 3.4% to $28.3B. On a unit basis,
iPad sales were even worse, falling 15%, according to a recent estimate
from Bank of America analyst Wamsi Mohan. To make matters worse, new Apple Watch models were removed
from its stores in the US days before Christmas over an intellectual
property dispute. After a late Dec appeal,
the devices have been returned to store shelves, but Morgan Stanley
analysts estimate AAPL lost about $135M in sales per day during
the brief ban. Even for its new products, like Mac computers,
consumers showed less interest in opening their wallets for devices with
minor upgrades. Sales of Mac PCs & laptops fell nearly 27% to $10.2B in fiscal 2023. Unit sales declined 11%, according to Bank of
America's estimate. In order to return to revenue growth & support its $3T market cap, AAPL needs some new products to hit & global demand for smartphones & laptops to recover. The stock fell 97¢ 1.07.
Apple’s stock underperformed top tech peers in 2023 due to longest revenue slide in 22 years
Alphabet (GOOG) Google has agreed to settle a lawsuit claiming it secretly tracked the internet use of Ms of people who thought they were doing their browsing privately. US District Judge Yvonne Gonzalez Rogers in Oakland, California, put a scheduled Feb 5, 2024 trial in the proposed class action on hold, after lawyers for Google & for consumers said they had reached a preliminary settlement. The lawsuit had sought at least $5M. Settlement terms were not disclosed, but the lawyers said they have agreed to a binding term sheet thru mediation & expected to present a formal settlement for court approval by Feb 24, 2024. The plaintiffs alleged that Google's analytics, cookies & apps let the GOOG unit track their activity even when they set Google's Chrome browser to “Incognito” mode & other browsers to “private” browsing mode. They said this turned Google into an “unaccountable trove of information” by letting the company learn about their friends, hobbies, favorite foods, shopping habits, & “potentially embarrassing things” they seek out online. In Aug, Rogers rejected Google's bid to dismiss the lawsuit. She said it was an open question whether Google had made a legally binding promise not to collect users' data when they browsed in private mode. The judge cited Google's privacy policy & other statements by the company that suggested limits on what information it might collect. Filed in 2020, the lawsuit covered “millions” of Google users since Jun 1, 2016, & sought at least $5000 in damages per user for violations of federal wire-tapping & California privacy laws. GOOG stock fell 48¢.
Google settles $5 billion consumer privacy lawsuit
Gold prices held steady as they headed towards the end of their best year since 2020 at levels comfortably above $2000 an ounce, buoyed by hopes the Federal Reserve could cut interest rates as early as Mar. Spot gold was at $2064 per ounce, little changed from the previous session. US gold futures settled 0.6% lower at $2071. Bullion has so far risen 13% in a year that saw prices swing between lows near $1800 & a record high of $2135. Gold investors anticipate record-high prices next year, when the fundamentals of a dovish pivot in US interest rates, continued geopolitical risk & central bank buying are expected to support the market. The dollar index (.DXY) was headed for a 2% decline in 2023, while benchmark 10-year Treasury yields languished near their lowest levels since Jul.
Gold Sits Above $2,000 on Track for Best Year Since 2020
US crude oil closed out the year more than 10% lower as bearish sentiment has taken over due to worries that the market is oversupplied from record production outside OPEC. The West Texas Intermediate contract for Feb shed 12¢ to settle at $71.65 a barrel & the Brent contract for Mar lost 11¢ settle at $77.04. US crude & the global benchmark booked the first annual decline since 2020 despite ongoing geopolitical risk in the Middle East due to the devastating war in Gaza. WTI is down 10.7% for the year & Brent has lost 10.3%. Oil prices rose nearly 3% on Tues on worries that militant attacks on shipping in would disrupt global trade and crude supplies.
U.S. Crude Oil Sheds more than 10% for the Year in First Annual Decline Since 2020
After choppy times in the first 10 months of 2023, Dow & gold were bid to new heights in Nov-Dec. WTI rose 256 in 2023 while Dow soared 4550. Now the bulls have the challenge of extending both of these runs. Especially for stocks, waiting for maybe 3 rate cuts in 12 months may not be easy for investors with a presidential race in the background. Have a good holiday & a better new year! 😀😀
Dow Jones Industrials
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