Markets mixed as Europe weighs more sanctions on Russia

Dow was off 14, decliners were modestly ahead of advancers & NAZ rose 210.  The MLP index stayed in the 209s & the REIT index declined 4+ to the 485s,  Junk bond funds crawled higher & Treasuries were sold bringing higher yields.  Oil rose 3+ to the 103s & gold jumped 16 to 1939.

AMJ (Alerian MLP index tracking fund)

CL=F Crude Oil 104.32  +4.95  +4.1%

GC=F Gold    1,932.20  +8.50  +0.4%

 

 

Start Using the Leverage of Options and the Power of MarketClub Today!

Four Days, Four Trades, +40% Average Returns
Learn to trade options with MarketClub!

2 American energy groups are targeting the Biden administration over its dismissal of domestic oil & gas production, one with a 5 figure ad purchase & another whose pres will offer testimony before a Senate committee next week.  The American Energy Alliance launched a 5 figure ad campaign against Pres Biden & his administration for "sending mixed signals" when it comes to energy production in America.   The ad – titled "Which is it?" – features remarks from Biden, Energy Secretary Jennifer Granholm & US special presidential envoy for climate John Kerry when they dismissed oil production in the US & compares those statements to more recent remarks they have made regarding the importance of increasing oil supply.  "So which is it," the advertisement questions. "We need clear support for domestic energy production."  Thomas Pyle, pres of the American Energy Alliance, claimed the Biden administration has "done everything it possibly can to strangle domestic energy production," saying Biden's plan to release a M barrels of oil per day for the next 6 months from the Strategic Petroleum reserve is not a "sustainable plan to reduce prices."  Pyle also gave similar comments.  "In spite of their rhetoric, the Biden Administration is doing absolutely nothing to encourage the production of American natural gas & oil.  In fact, they are making it more difficult,"  Pyle added: "The pain at the pump is real and this Administration is making it worse, not better."  The Western Energy Alliance is also pushing back against the Biden administration over its unwillingness to increase domestic oil supply.  Tomrrow, Western Energy Alliance Pres Kathleen Sgamma will testify in a hearing by the Senate Commerce Committee.

DRILLING DOWN: Energy groups target Biden over dismissal of US oil production

The US & its European allies are preparing to deliver another slew of sanctions on Russia following mounting evidence of war crimes committed by its forces in Ukraine.  “The European Union condemns in the strongest possible terms the reported atrocities committed by the Russian armed forces in a number of occupied Ukrainian towns, that have now been liberated,” the European Council said.  Ukraine has accused Russian forces of carrying out a massacre in the town of Bucha, where it said 300 residents were killed.  “The massacres in the town of Bucha and other Ukrainian towns will be inscribed in the list of atrocities committed on European soil,” the European Council's statement added.  Haunting photos of residential streets strewn with bodies have been published by intl news outlets. Russia is denying the accusations, calling the photos “another provocation” from Ukraine.  A German gov spokesperson said that further sanctions would be decided “in the coming days.”  Germany's defense minister has also said the EU must discuss banning imports of Russian gas.  “There has to be a response. Such crimes must not remain unanswered,” Christine Lambrecht said.  But Poland says the biggest obstacle to this is Germany itself.  “It’s Germany that is the main roadblock on sanctions,” Polish Prime Minister Mateusz Morawiecki said.  So far, Berlin has refused to embargo oil & gas imports from Russia, saying that Europe depends too heavily upon them.  Some 40% of Europe's gas is provided by Russia — & Germany imports almost 60% of its natural gas from the country.  Other Western leaders have also called for expanding the penalties on Russia.  Secretary of State Antony Blinken said that the US & its European counterparts were examining new financial penalties for Russia “every single day.”

Russia faces barrage of new sanctions after accusations of atrocities in Bucha

Ford's (F) US sales of new vehicles declined 17% during Q1 including a 26% slide last month, as it battles a global shortage of semiconductor chips.  The automaker  reported Q1 sales of 432K vehicles, including 159K units in Mar.  Those figures were in line with expectations.  Andrew Frick, VP of sales, distribution & trucks, said the company experienced some positive signs heading into the spring selling season.  “While the global semiconductor chip shortage continues to create challenges, we saw improvement in March sales, as in-transit inventory improved 74% over February. F-Series had a record 50,000 new retail orders in March, while a record 41% of our overall retail sales came from previously placed retail orders,” he said.  Sales of trucks were off 23% during Q1 & car sales were down 49%, while SUV sales were off just 5.1%.  Ford touted demand for its newest vehicles, such as the Bronco & Bronco Sport SUVs & the Maverick small pickup truck.  Mar Maverick sales increased 115% from Feb, with the average vehicle selling off a dealer lot just 4 days after arrival.  The stock was off 8¢.
If you would like to learn more about Ford click on this link:
club.ino.com/trend/analysis/stock/F_aid=CD3289&a_bid=6ae5b6f

Ford’s first-quarter sales fell 17% as the automaker battled a chip shortage

The rise in demand for oil & gold is the most exciting goings on today.  Meanwhile Treasury yields are rising again.  The 10 year Treasury yields 2;4%.  Last year it was under 1%.

Dow Jones Industrials

 

Markets struggle following a strong employment report

Dow rose 139 with buying into the close, advancers over decliners about 2-1 & NAZ added 40.  The MLP index stayed in the 209s & the REIT index jumped 9+ to the 489s.  Junk bond funds continued strong & Treasuries were sold.  Oil slid lower, closing below 100, & gold plunged 25 to 1928 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Free Apple Analysis!

Bring Your Portfolio Into The 21st Century

Four Days, Four Trades, +40% Average Returns
Learn to trade options with MarketClub!

Gross domestic product (GDP) growth in the US was less than previously estimated in Q4-2021 & downwardly revised to 6.9%, according to the 3rd and final estimate from the Bureau of Economic Analysis (BEA).  The revision was a decrease from the 2nd estimate of 7% but up from the GDP increase of 2.3% in Q3, the BEA said.  It added that the updated estimate was "based on more complete source data" than previously available.  Q4 GDP was driven primarily by increases in private inventory investment exports, personal consumption expenditures (PCE) & exports, which were partially offset by drops in federal, state & local gov spending.  Despite the revised economic activity estimate being lower than its previous estimate, 6.9% economic growth rate is still strong for today's economy.  Consumers who want to take advantage of interest rates before the Fed's next rate hike can consider refinancing their private student loans.  Private inventory investment helped boost real GDP growth in Q4 2021, led by business investments made by motor vehicle dealers.  The demand for new cars continues to surge as some drivers are waiting 6-9 months just to get their new vehicles & dealers face record-low inventory levels.  In fact, the total sales for new vehicles was forecast to reach nearly 1.25M cars in Dec 2021, down 20.5% from the year before.  The GDP growth rate surged from Q3 to Q4 in 2021, but it could take a turn & begin decreasing in the year ahead due to the Federal Reserve's announcement that it is raising interest rates this year.

Final estimate reduces Q4 2021 GDP to 6.9%: Bureau of Economic Analysis

The Russian invasion of Ukraine is unleashing a new era of military spending across Europe.  Member countries of the North Atlantic Treaty Organization (NATO), such as Germany, have done an about-face on its defense budget in recent weeks.   “The Russian invasion of Ukraine was a wake-up call for a lot of Germans, for politicians and for voters, who previously would have been skeptical that military power could still be an important tool of influence in Europe today,” said Sophia Besch, senior research fellow at the Centre for European Reform.  Poland has moved to increase defense spending to 3% of GDP.  Germany has signed a deal to buy F-35 fighter jets & several NATO allies are looking to upgrade from Soviet-era equipment, such as MiG-29s & Russian-produced surface-to-air missile systems, to US.-made weapons.  The US, the top military spender in the NATO alliance by far, is looking at increasing its own defense budget while selling high-tech arms to friendly nations.

Why Russia’s invasion of Ukraine could spark a NATO defense spending spree

The wealth of America's wealthiest people increased by a total of $6.5T last year, mainly driven by soaring stock prices & financial markets, according to the Federal Reserve.  The total wealth of the 1% reached a record $45.9T at the end of Q4, said the Federal Reserve's latest report on household wealth.  Their fortunes increased by more than $12T, or more than a 3rd, during the course of the pandemic.  The top 1% owned a record 32.3% of the nation's wealth as of the end of 2021.  The share of wealth held by the bottom 90% of Americans, likewise, has declined slightly since before the pandemic, from 30.5% to 30.2%.  The wealth growth at the top has potentially stalled or declined slightly so far this year due to stock declines.  The main drivers for the richest Americans last year were stocks & private businesses.  About $4.3T of the overall gains for the 1% last year came from corp equities & mutual fund shares.  The stock portfolios of the top 1% are now worth $23T they own a record 53.9% of individually held shares.  A Gallup poll in 2021 found that 56% of Americans owned at least some stock — slightly above the average of 55% in 2019 & 2020, but still down from the 62% high before the 2008 financial crisis.  Private businesses have also been a powerful engine of wealth for those at the very top.  The 1% own 57% of private companies & the value of private businesses held by the wealthiest increased by 36% ($2.2T) last year.

The richest 1% got $6.5 trillion richer last year, according to the Fed

Housing prices in the US hit a record high in Mar.  The median home price in the country was $405K, according to Realtor.com’s latest Monthly Housing Trends Report.  The report shows the record-breaking median listing price is up 13.5% from Mar 2021.  Compared to Mar 2020 – the start of the COVID-19 pandemic – the current March 2022’s median listing price is up 26.5%.  Despite the record price tag, the experts at Realtor.com believe the housing market is set to "moderate" in the near future.  "Buyer demand is moderating in the face of high costs, and we're beginning to see more homeowners take price cuts on their listings and overall inventory declines lessen in response," said Realtor.com's Chief Economist Danielle Hale, in a statement.  "Assuming all these factors and new construction hold steady, we could begin to see inventory increases this summer – welcome news for buyers who have endured pandemic home shopping and can continue their journey despite higher buying costs," Hale continued.  "For buyers currently in the market, there's good reason to aim to find a home before interest rates increase further. But if it takes longer than a few months, don't give up hope, as there may be more to choose from in the summer months."  While the national listing price median for Mar was $405K, home prices varied significantly in the 50 US metro areas Realtor.com evaluated, which it selected based on size.  Last year, mortgage-finance company Freddie Mac estimated that the US had a shortage of 3.8M homes, which has likely contributed to the competitive home-buying market.  Realtor.com reports that home construction in the US is near 16-year highs.

Housing prices hit record-high, giving buyers hard punch in pocket

Gold futures settled lower, posting a a weekly loss of more than 1%, with prices pressured by a rise in Treasury yields on the heels of a climb in Mar employment & wages. The US created a robust 431K jobs in Mar & the unemployment rate slid to 3.6% from 3.8%, the gov reported.  Hourly pay rose sharply in Mar, pushing the increase in the past 12 months to 5.6%.  Gold for Jun fell $30 (1.6%) to settle at $1923 an ounce.  Based on the most-active contracts, gold marked a 1.6% weekly decline.  The yield on the 10-year Treasury note touched highs above 2.45%.  Strength in Treasury yields can be a negative for gold as they raise the opportunity cost of holding nonyielding assets.  The ICE US Dollar Index was also up by 0.3% today, putting pressure on $-denominated gold prices.

Gold posts a loss for the session, down nearly 2% for the week, after U.S. jobs data

Oil futures ended lower, with prices posting their largest one-week percentage loss in nearly 2 years.  Prices declined on the back of the largest-ever release from US crude reserves & news of a coordinated release by other Intl Energy Agency members from emergency stockpiles.  West Texas Intermediate (WTI) crude for May shed $1.01 (1%) to settle at $99.27 a barrel, the lowest finish since Mar 16.  Front-month prices closed out Q1 with a 33% gain & a 4.8% rise for Mar.  Jun Brent, the global benchmark, lost 32¢ to $104.39 a barrel.  The expired May Brent had climbed nearly 6.9% for the month & 39% for the qtr.  Oil prices extended their loss from Thurs, when Pres Biden authorized the release of 1M barrels of oil per day for the next 6 months from the Strategic Petroleum Reserve.  The move could keep a lid on prices in the near term, but they see it as only a temporary fix for tight global supplies, especially as the war in Ukraine grinds on.  Members of the Intl Energy Agency, which includes the US, most of Europe, Canada, Mexico, Japan & South Korea, said today that they've also agreed to release oil from their emergency reserves, to join the US move.  The IEA plans to release details on the release early next week.  But a volatile week left crude, on a front-month contract basis, with a bruising weekly drops of 12.8% for US benchmark WTI & 11.1% for Brent.  Both saw their biggest weekly percentage declines since late Apr 2020.  Geopolitical headlines continued to attract attention today after Russia accused Ukraine forces of an attack on an oil facility just north of the border between the 2 countries.  Peace talks between the 2 sides continued by videoconferencing despite fighting on the ground.  Yesterday also saw an OPEC+ meeting that rubber-stamped a previously agreed plan that will lift its production target by 432K barrels a day in May.

Oil futures suffer biggest weekly percentage decline in nearly 2 years

Stocks struggled for direction as investors mulled strong employment data that reaffirmed expectations for more hawkish monetary tightening plans by the Federal Reserve.  Meanwhile, West Texas Intermediate crude oil fell to dip below $100 per barrel.  US-allied countries in the Intl Energy Agency (IEA) agreed to their 2nd coordinated deployment of oil stockpiles in a month to calm Russia-Ukraine war-roiled energy markets, one day after Pres unveiled plans for the largest ever release from the Strategic Petroleum Reserve.  For the week, Dow fell all of 43.

Dow Jones Industrials 

Markets crawl higher after 431,000 jobs added in March

Dow went up 36, advancers over decliners 3-2 & NAZ rose 46.  The MLP index added 2 to 211 & the REIT index gained 2+ to 483.  Junk bond funds  remained in demand & Treasuries saw selling, taking yields higher.  Oil was little changed above 100 & gold dropped 25 to 1928.

AMJ (Alerian MLP index tracking fund)

CL=F Crude Oil   103.34 -4.48 -4.2%

GC=F Gold     1,948.80     +9.90 +0.5%

 

 

Start Using the Leverage of Options and the Power of MarketClub Today!

Four Days, Four Trades, +40% Average Returns
Learn to trade options with MarketClub!

Amid soaring inflation & worries about a looming recession, the US economy added slightly fewer jobs than expected in Mar as the labor market grew increasingly tighter.  Nonfarm payrolls expanded by 431K for the month, while the unemployment rate was 3.6%, the Bureau of Labor Statistics reported.  The forecast had been looking for 490K on payrolls & 3.7% for the jobless level.  An alternative measure of unemployment, which includes discouraged workers& those holding part-time jobs for economic reasons fell to a seasonally adjusted 6.9%, down 0.3 percentage point from the previous month.  The moves in the jobless metrics came as the labor force participation rate increased one-tenth of a percentage point to 62.4%, to within 1 point of its pre-pandemic level in Feb 2020.  The labor force grew by 418K workers & is now within 174K of the pre-pandemic state.  Average hourly earnings, a closely watched inflation metric, increased 0.4% on the month, in line with expectations.  On a 12-month basis, pay rose nearly 5.6%, just above the estimate.  The average work week, which figures into productivity, edged down by 0.1 hour to 34.6 hours.  As has been the case thru much of the Covid pandemic era, leisure & hospitality led job creation with a gain of 112K.  The survey of households painted an even more optimistic picture, showing a total employment gain of 736K.  That brought the total employment level within 408K of where it stood pre-pandemic.  Revisions from prior months also were strong. Jan's total rose 23K to 504K, while Feb was revised up to 750K compared with the initial count of 678K.  For Q1, job growth totaled 1.7M, an average of nearly 562K.

Economy adds 431,000 jobs in March despite worries over slowing growth

Russia will want some form of victory before backing down from the war in Ukraine — & escalation in the war is still possible at this point.  Even if Moscow is genuine about its pledge to reduce military activity near Kyiv, it is likely to regroup & focus on the Donbas region where they have seen some headway.  The Donbas is a breakaway region in eastern Ukraine which comprises 2 pro-Russian self-proclaimed republics:  Donetsk & Luhansk. Following Russia's illegal annexation of Crimea from Ukraine in 2014, Russian-backed separatists in the region broke away from the Ukrainian gov.  Russia likely expected a quick victory when it invaded Ukraine on Feb.24.  Instead, there has been fierce resistance from the Ukrainians, & Moscow is still struggling to gain ground after more than a month of fighting.  Moscow' announcement that it would cut back military activity around Ukraine’s capital has been met with skepticism.  Russia & Ukraine are set to resume talks tomorrow, according to a member of Ukraine's delegation.

Russia needs to show ‘success at home’ to justify war in Ukraine

Industry leaders are putting more emphasis on domestic oil production rather than relying on foreign countries to heat our homes & fill up gas tanks.  The Permian Basin in west Texas is the epicenter of domestic oil production – a region where 50% of all the US'crude oil is produced.  "That is the lifeblood of our economy," said Patrick Cohorn, an operations manager with Henry Resources.  Henry Resources is an independent oil & gas producer in the Permian Basin.  Their drilling is a 24/7, year-round operation, producing around 10K barrels a day of crude oil.  They need at least 100 people to run a single rig.  Yet 50K employees in the region were laid off during the pandemic & about 1M nationally.  Henry Resources says they've been lucky to keep their staff, but other companies had to shut down some of their drilling rigs in 2020.  Only 2/3 of the workforce has returned.  "The oil and gas business is very cyclical, and the pendulum tends to swing very hard from one side to the other," Cohorn said.  Oil producers' ideal situation would be selling crude oil at high prices with low operating costs.  Right now, crude oil prices are high, but operating costs are also high.  They're also dealing with supply chain issues & inflation.  Even with these challenges, the Permian Basin has been operating at near-historic levels of production, about 5M barrels a day.  Drilling permits are also increasing year to year: 1600 active drilling permits from Jan-Feb 2021 compared to 1800 active drilling permits in the same time frame.  Yet the profit just isn't there for producers.

Oil producers pump through new struggles as Russia-Ukraine war rages

Favorable jobs report & unemployment data are not getting respect.  Investors are worried about numerous problems starting with war & inflation.

Dow Jones Industrials