Dow fell 91 (above the lows), decliners over advancers better than 3-2 & NAZ lost 12. The MLP index plunged 9+ to the 372s & the REIT index was up 1+ to 320. Junk bond funds were mixed & Treasuries rallied. Oil slumped to the 45s (see below), testing its lows from last year, & gold also retreated.
AMJ (Alerian MLP Index tracking fund)
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US auto sales outpaced estimates for last month as car buyers snapped up more pickups & SUVs, & took advantage of cheap financing. Nissan beat estimates, as did Fiat Chrysler Automobiles (FCAU), which projected a better month for the industry than the rosiest analyst. FCAU's North American unit delivered 178K vehicles last month for a 6.2% gain that topped the 4.8% prediction. The group has reported 64 straight monthly increases. Nissan’s US auto sales rose 7.8%, beating the average estimate for a 5.3% gain. Ford (F), GM (ZGM), Toyota (TM) & Honda also did better than projected. Consumers are choosing SUVs & pickups, taking advantage of relatively inexpensive lending terms & gasoline prices. This surge in demand for profitable light trucks plays to the strength of FCAU, which gets most of its sales from pickups, SUVs & vans. Nissan brand, which reported sales of crossovers, trucks & sport utility vehicles rose 22%. Sales of its luxury Infiniti brand rose 22% to 10K, powered by a 68% rise in QX60 SUV sales. Ford light-vehicle sales rose 5%, compared with estimates for a 1.8% increase, while GM deliveries rose 6.4%, beating projections for a 0.6% improvement. TM reported a 0.6% gain, compared with estimates for a 0.1% decline from a year earlier, & Honda's 7.7% increase topped projections for a 4.7% gain.
US construction spending barely rose in Jun as private outlays posted their biggest drop in a year, but the underlying trend suggested the economy remained on solid ground. Construction spending increased 0.1%, the smallest rise since Jan, according to the Commerce Dept. May's outlays were revised sharply higher to show a 1.8% gain instead of the previously reported 0.8% rise. Economists had forecast construction spending rising 0.6%. Construction spending was up 12% compared to Jun of last year. In Jun, construction spending was restrained by a 0.5% drop in private construction spending, the largest decrease since Jun 2014. Spending on private non-residential construction projects fell 1.3%, the biggest drop since Jan 2013. Spending on nonresidential structures has been undermined by investment cutbacks in the energy sector in response to the tumble in crude oil prices. Outlays on private residential construction, however, rose 0.4% to their highest level since May 2008, reflecting gains in home building & a bump up in renovations. Public construction outlays jumped advanced 1.6% to their highest level since Nov 2010. Spending on state & local gov projects, the largest portion of the public sector segment, rose 2.2% to the highest level since Sep 2010. Federal gov outlays dropped 4.7%, the biggest fall since Jan.
Oil has fallen to a 6-month low, & hopes of a quick rebound are fading as demand heads into an autumn swoon. Brent crude tumbled below $50 for the first time since Jan. Gasoline fell the most in almost 3 years. The slump may have further to go. US refineries, which turned a record amount of crude into gasoline during Jul, typically slow down from Aug-Oct for maintenance. Also, demand for gasoline typically eases after summer as the seasonal workforce shrinks & families stop vacationing. Hedge funds are growing more pessimistic. Money managers cut bets on rising Brent prices last week by the most in more than a year & are the least bullish on US crude since 2010.
The 2nd-biggest US coal producer filed for bankruptcy hours before the EPA was due to publish new rules. The Environmental Protection Agency today will release Obama's new rules for power producers, rules that are expected to reduce greenhouse gas emissions in the sector more than 30% by 2030. As the White House puts its cards on the table, the 2nd-largest US coal producer is folding its current hand & reshuffling. Alpha Natural Resources (ANR) declared bankruptcy to get out from under $3.3B in debt accumulated over the past several years. The specific timing of its filing, hours before the EPA publishes its rules, may be coincidental. That it has happened at all is not. Several factors converged to bring about coal's collapse, of which Obama is only the easiest for coal industry leaders to blame. There's the US natural gas boom, which gave power producers a cheaper, less-polluting alternative. Coal companies took on debt around 2011, when Chinese demand pushed prices up globally. That binge has wound down since then, taking coal prices with it, & coal companies like ANR are left holding the bill. "The change and challenges the U.S. coal industry has experienced over the last several years are greater than any in the past three decades," said CEO Kevin Crutchfield. "There is no doubt more uncertainty ahead, but also transformational opportunity in the coal sector for those who make proactive, strategic decisions." ANR sells its coal, from 50 mines, to power generators, steelmakers, & industrial companies. While ANR turns its attention inward, its peers are bracing for a fight. They have been for a while. Closely held Murray Energy today announced that it will file five lawsuits against the the Clean Power Plan, which, the company said in a release, "will adversely restructure the electric power system in America and will force every State to radically change their energy policies." ANR stock last traded at 24¢.
This was another bad day for stocks, although buying in the last hour reduced losses. The big story is the collapse in oil which is dragging down all oil issues, including MLPs. The collapse of a major coal company is not helping matters. The early economic news for Jul is so-so. Autos are doing well, but the overall economy is giving inconsistent signals. Uncertainty about the Iran deal is adding uncertainty to the oil markets. Approval would bring another 1+M barrels per day of oil to the market with too much supply, which has the potential to drag prices lower. Aug may not be a pretty month for the stock market.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CLV15.NYM | ....Crude Oil Oct 15 | ....45.82 |  ...1.71 | (3.6%) |
US auto sales outpaced estimates for last month as car buyers snapped up more pickups & SUVs, & took advantage of cheap financing. Nissan beat estimates, as did Fiat Chrysler Automobiles (FCAU), which projected a better month for the industry than the rosiest analyst. FCAU's North American unit delivered 178K vehicles last month for a 6.2% gain that topped the 4.8% prediction. The group has reported 64 straight monthly increases. Nissan’s US auto sales rose 7.8%, beating the average estimate for a 5.3% gain. Ford (F), GM (ZGM), Toyota (TM) & Honda also did better than projected. Consumers are choosing SUVs & pickups, taking advantage of relatively inexpensive lending terms & gasoline prices. This surge in demand for profitable light trucks plays to the strength of FCAU, which gets most of its sales from pickups, SUVs & vans. Nissan brand, which reported sales of crossovers, trucks & sport utility vehicles rose 22%. Sales of its luxury Infiniti brand rose 22% to 10K, powered by a 68% rise in QX60 SUV sales. Ford light-vehicle sales rose 5%, compared with estimates for a 1.8% increase, while GM deliveries rose 6.4%, beating projections for a 0.6% improvement. TM reported a 0.6% gain, compared with estimates for a 0.1% decline from a year earlier, & Honda's 7.7% increase topped projections for a 4.7% gain.
U.S. Car Sales Top Estimates With GM, Ford, Fiat Chrysler Wins
US construction spending barely rose in Jun as private outlays posted their biggest drop in a year, but the underlying trend suggested the economy remained on solid ground. Construction spending increased 0.1%, the smallest rise since Jan, according to the Commerce Dept. May's outlays were revised sharply higher to show a 1.8% gain instead of the previously reported 0.8% rise. Economists had forecast construction spending rising 0.6%. Construction spending was up 12% compared to Jun of last year. In Jun, construction spending was restrained by a 0.5% drop in private construction spending, the largest decrease since Jun 2014. Spending on private non-residential construction projects fell 1.3%, the biggest drop since Jan 2013. Spending on nonresidential structures has been undermined by investment cutbacks in the energy sector in response to the tumble in crude oil prices. Outlays on private residential construction, however, rose 0.4% to their highest level since May 2008, reflecting gains in home building & a bump up in renovations. Public construction outlays jumped advanced 1.6% to their highest level since Nov 2010. Spending on state & local gov projects, the largest portion of the public sector segment, rose 2.2% to the highest level since Sep 2010. Federal gov outlays dropped 4.7%, the biggest fall since Jan.
U.S. construction spending gain smallest in five months
Oil has fallen to a 6-month low, & hopes of a quick rebound are fading as demand heads into an autumn swoon. Brent crude tumbled below $50 for the first time since Jan. Gasoline fell the most in almost 3 years. The slump may have further to go. US refineries, which turned a record amount of crude into gasoline during Jul, typically slow down from Aug-Oct for maintenance. Also, demand for gasoline typically eases after summer as the seasonal workforce shrinks & families stop vacationing. Hedge funds are growing more pessimistic. Money managers cut bets on rising Brent prices last week by the most in more than a year & are the least bullish on US crude since 2010.
Oil’s Drop Below $50 May Be Just the Start as Demand Swoons
The 2nd-biggest US coal producer filed for bankruptcy hours before the EPA was due to publish new rules. The Environmental Protection Agency today will release Obama's new rules for power producers, rules that are expected to reduce greenhouse gas emissions in the sector more than 30% by 2030. As the White House puts its cards on the table, the 2nd-largest US coal producer is folding its current hand & reshuffling. Alpha Natural Resources (ANR) declared bankruptcy to get out from under $3.3B in debt accumulated over the past several years. The specific timing of its filing, hours before the EPA publishes its rules, may be coincidental. That it has happened at all is not. Several factors converged to bring about coal's collapse, of which Obama is only the easiest for coal industry leaders to blame. There's the US natural gas boom, which gave power producers a cheaper, less-polluting alternative. Coal companies took on debt around 2011, when Chinese demand pushed prices up globally. That binge has wound down since then, taking coal prices with it, & coal companies like ANR are left holding the bill. "The change and challenges the U.S. coal industry has experienced over the last several years are greater than any in the past three decades," said CEO Kevin Crutchfield. "There is no doubt more uncertainty ahead, but also transformational opportunity in the coal sector for those who make proactive, strategic decisions." ANR sells its coal, from 50 mines, to power generators, steelmakers, & industrial companies. While ANR turns its attention inward, its peers are bracing for a fight. They have been for a while. Closely held Murray Energy today announced that it will file five lawsuits against the the Clean Power Plan, which, the company said in a release, "will adversely restructure the electric power system in America and will force every State to radically change their energy policies." ANR stock last traded at 24¢.
U.S. Coal Giant Greets Obama Climate Rules With Bankruptcy
This was another bad day for stocks, although buying in the last hour reduced losses. The big story is the collapse in oil which is dragging down all oil issues, including MLPs. The collapse of a major coal company is not helping matters. The early economic news for Jul is so-so. Autos are doing well, but the overall economy is giving inconsistent signals. Uncertainty about the Iran deal is adding uncertainty to the oil markets. Approval would bring another 1+M barrels per day of oil to the market with too much supply, which has the potential to drag prices lower. Aug may not be a pretty month for the stock market.
Dow Jones Industrials
