Markets drift lower on earnings and consumer confidence

Dow gave back 8, decliners over advancers 4-3 & NAZ was off 25.  The MLP index lost 3+ to the 302s & the REIT index rose 1+ to the 331s.  Junk bond funds were a little lower & Treasuries fell, taking the yield on the 10 year Treasury up to 1.85%.  Oil slid lower (more below) & gold climbed higher.

AMJ (Alerian MLP Index tracking fund)

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Exxon Mobil Corp, a Dow stock & Dividend Aristocrat, reported a 38% drop in quarterly profit that still beat expectations as cost cuts partly offset declining crude oil prices.  EPS was 63¢, down from $1.01 a year earlier.  Analysts forecast EPS of 58¢.  Earnings fell in all divisions, including the refining arm, which has generally bolstered profits when oil prices are low.  Production fell about 3% to 3.8M barrels of oil equivalent per day.  The refineries processed about 2% less crude oil during the qtr than it did a year earlier.  The stock fell 2.19.  If you would like to learn more about XOM, click on this link:

club.ino.com/trend/analysis/stock/AAPL?a_aid=CDXXX&a_bid=6ae5b6f7

Exxon Mobil profit drops 38 percent but beats estimates

Exxon Mobil (XOM)

Chevron, another Dow stock & Dividend Aristocrat, quarterly profit plunged 35% from a year earlier & revenue slid more than expected amid low oil prices, though the company returned to the black after 3 straight qtrs of losses.  Still, earnings came in above estimates.  CEO John Watson said Q3, though down from a year ago, improved from the first 2 qtrs of the year.  The company has cut capital spending & operating & administrative expenses by more than $10B from the first 9 months of 2015 "as a result of a series of deliberate actions we have taken," he said.   During the qtr, the average sales price per barrel of crude oil & natural gas liquids was $37, down from $42 a year ago.   Pressured by the prolonged swoon in oil prices cutting into profitability, the company has looked to cut costs.  CVX has said it would cut about 8K jobs, up to 12% of its workforce, & slash $B from its capital-spending budget to deal with market conditions.   In all Q3 EPS was 68¢, down from $$1.09 a year earlier.  Revenue slipped 12% to $30.14 B.  Analysts had projected EPS of 37¢ on $30.33B in revenue.   Profit in downstream, or refining, operations dropped 52% to $1.07B.  Upstream operations, which include exploration & drilling, meanwhile, in the US, saw a narrower loss at $212M, compared with $603M a year ago, due to lower operating & depreciation expenses, & lower tax items, partially offset by lower crude oil.  Watson said the company has progressed toward lowering the cash break-even in the upstream business.   The company also raised its quarterly div by a penny to $1.08 a share, its 29th consecutive increase.  The stock jumped up 3.94.  If you would like to learn more about CVX, click on this link:

club.ino.com/trend/analysis/stock/CVX?a_aid=CD3289&a_bid=6ae5b6f7

Chevron Returns to Profit, but Revenue Slides

Chevron (CVX)

MasterCard reported a better-than-expected quarterly profit, driven by higher spending by customers on its network.  EPS jumped to $1.08 & analysts had expected 98¢.  Revenue rose 13.8% to $2.88B.  Worldwide purchase volume rose 9% to $882B, on a local currency basis.  Cross-border volumes, the value of transactions made by card holders outside the card-issuer's country, jumped 12%.  The stock shot up 3.08.  If you would like to learn more about MA, click on this link:

club.ino.com/trend/analysis/stock/MA?a_aid=CD3289&a_bid=6ae5b6f7

MasterCard 3Q Profit Beats on Higher Purchase Volume

Mastercard (MA)



Oil futures remained lower after data from Baker Hughes revealed that the number of active US rigs drilling for oil fell by 2 to 441 this week.  That marks the first weekly decline since Jun.  The total active US rig count, which includes oil & natural-gas rigs, climbed by 4 to 557.  December crude fell 54¢ (1.1%) to $49.17.

Oil Futures Remain Lower As Baker Hughes Reports Small Decline In U.S. Oil-rig Count

Lackluster consumer confidence & uneven earnings kept the Dow near break-even all day.  The Dow had been going sideways;staying close to its starting value, prior to earnings season a couple of weeks ago & continued that performance.  Uncertainties relating to the presidential election are a significant negative that has been a drag for the Dow.  That attitude will not change next week.

Dow Jones Industrials

Markets climb higher on GDP data

Dow rose 64, advancers over decliners 3-2 & NAZ gained 13.  The MLP index lost 1+ to the 304s & the REIT index went up 2+ to the 332s.  Junk bond funds inched higher & Treasuries remained under selling pressure.  Oil continued weak (more below) & gold was higher.

AMJ (Alerian MLP Index tracking fund)

CL=F

Light Sweet Crude Oil Futures,D

49.22

-0.50

-1.0%

GC=F

Gold Futures,Dec-2016

1,273.10

3.60

0.3%

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US economic growth picked up in Q3 after an uninspiring H1 as a build in inventories & a soybean-related jump in exports helped cushion softer household spending.  The 2.9% annualized increase in GDP was the biggest in 2 years & followed a 1.4% gain the prior qtr, according to Commerce Dept data.  The forecast called for 2.6% growth.  Consumer spending, the biggest part of the economy, rose a less-than-projected 2.1%.  The data are in sync with the views of Fed policy makers that the economy is making slow & steady progress.  At the same time, solid employment & steady income gains are a sturdy base for households to continue in the role as the economy's main driver of growth, a contrast with the drag from business investment.  Consumer purchases grew at about ½ the pace as in Q2 & corp investment in equipment declined for a 4th straight qtr, the longest such stretch of the current expansion.

Inventories rebounded in Q3 after shrinking in the prior qtr, contributing to growth for the first time since early 2015.  Exports accelerated, adding the most to GDP since Q4-2013.  To get a better sense of underlying domestic demand, economists look at final sales to domestic purchasers, which strip out inventories & exports.  Such sales grew an annualized 1.4 % last qtr after a 2.4% increase in Q2.  Central bank officials can point to evidence that growth is healthy enough to warrant raising interest rates, just not necessarily at the Fed's gathering next week.

U.S. Economic Growth Rebounds on Inventory, Export Boost

Consumer confidence dropped more than previously reported to match the lowest level since 2014, with Americans less upbeat about both current & future conditions in the weeks before the presidential election.  The University of Mich final index of sentiment fell to 87.2 from 91.2 in Sep.  The projection called for 88.2 after a preliminary reading of 87.9 earlier this month.  Long-term inflation expectations declined to a record low.  The drop in sentiment suggests that consumer spending may continue to moderate.  While hiring has been solid & wages are rising, the uncertainty of the election could also be weighing on confidence.  “Prospects for renewed spending gains will depend on continued growth in jobs and wages as well as low inflation and interest rates,” Richard Curtin, director of the University of Mich consumer survey, said.  Asked about the year-ahead outlook for the economy, 35% expected good times, the lowest reading since Nov 2013.  “This may be due to the temporary impact of uncertainty aroused by the election,”  This figure compares with the average of 91.4 in the first 9 months of this year.  The current conditions index, which measures Americans' perceptions of their personal finances, declined to 103.2, the lowest in a year, from 104.2 in the prior month.  The gauge of expectations 6 months from now decreased to 76.8, the weakest since Sep 2014, from 82.7 in the previous month.  Respondents expected the inflation rate in the next year will be 2.4%, the same as in the Sep survey.  Over the next 5-10 years, they project a record-low 2.4% rate of price growth, after 2.6% in the prior month.

Consumer Sentiment in U.S. Matches Lowest Reading Since 2014

Crude is set for the first weekly drop since mid-Sep as an OPEC committee meets to discuss how deeply some of its members should cut production to comply with the group's pledge to reduce supply.  West Texas Intermediate oil slid more than1.3%.  Brazil will attend the OPEC gathering tomorrow in Vienna as the bloc that controls about 40% of world production seeks non-member cooperation on reducing output.  Brazil will join other producers from outside the group, including Russia.  OPEC may agree on a collective cut and postpone difficult decisions on individual quotas.

The outcome of the group's committee meeting, which will try to resolve differences over how much individual members should produce, will have ramifications for the market in the medium to long term, Sec General Mohammed Barkindo said.  He called for members to “forge ahead together” after Iraq this week demanded to be exempt from any cuts.  West Texas Intermediate for Dec delivery slipped 48¢ (1%) to $49.24 & prices are down 3.2% this week.

• Oil Heads for Weekly Drop as OPEC Meets to Discuss Output Quotas

Stocks liked the GDP data, although it gives a somewhat mixed picture.  Maybe they figure it's mixed enough to keep the Fed in its hold pattern when considering a rate hike.  The consumer data is chilling as it suggest chaos around the election is having a negative effect on consumer spending.  The Dow continues going nowhere fast, although the bulls are happy that the 18K support has held with all this uncertainty.

Dow Jones Industrials