Markets have biggest drop since the election on airport chaos

Dow dropped 122 (well off the lows), decliners over advancers more than 2-1 & NAZ sank 47  The MLP index plunged 7+ to the 328s & the REIT index lost 2 to the 337s.  Junk bond funds were mixed & Treasuries were little changed.  Oil fell to the 52s & gold was higher but still under 1200 (more on both below).

AMJ (Alerian MLP Index tracking fund)

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Contracts to buy previously owned US homes rebounded last month as buyers adjusted to the recent jump in mortgage rates, according to the National Association of Realtors.  Pending home-sales gauge rises 1.6% from previous month (forecast was for 1% gain) after falling 2.5% the prior month.  Index dropped 2% from Dec 2015 on an unadjusted basis.  While steady growth in jobs, wages & the economy will continue to underpin home purchases, the supply of available properties is at historic lows, limiting any potential gains in the market.  With the Fed projecting 3 interest-rate increases this year, further increases in mortgage costs could put houses out of reach for some buyers.  “The main storyline in the early months of 2017 will be if supply can meaningfully increase to keep price growth at a moderate enough level for households to absorb higher borrowing costs,” the NAR said.  “Sales will struggle to build on last year’s strong pace if inventory conditions don’t improve.”  NAR projects existing-home sales to rise 1.7% in 2017, with median price up 4%.

U.S. Pending-Home Sales Rebound Despite Rise in Mortgage Rates

Oil slipped a 2nd day after drilling in the US rose to the highest in more than a year, countering OPEC's efforts to clear a supply glut.  Futures fell as much as 1.4% after dropping 1.1% Fri.  Rigs targeting crude in the US rose last week to the most since Nov 2015, while American crude output is at the highest since Apr.  West Texas Intermediate for Mar delivery fell 58¢ (1.1%) to $52.59 after sliding 61¢ to $53.17 on Fri.  The number of active oil rigs in the US climbed by 15 to 566 last week.  Explorers have added equipment for 8 months, the longest run since Sep 2014.  American crude production is at 8.96M barrels a day, according to the Energy Information Administration.  OPEC will cut supply by 900K barrels a day in Jan, the first month of the accord's implementation.  A tanker left Libya's Brega port with about 630K barrels of oil oil shipments from Libya have been erratic), the head of Sirte Oil's media office said.

• Oil Falls a Second Day as U.S. Drilling Expands While OPEC Cuts

Gold futures finished higher for the first time in 5 trading sessions.  A steep decline in US equities, with the Dow trading below the key 20K level & signs of growing US inflation helped prices rebound.  Apr gold rose $4.90 (0.4%) to settle at $1196 an ounce.

Gold Futures End Higher After Four Consecutive Sessions Of Losses

Movie theater chain AMC Entertainment offered guidance for full-year 2016 that topped consensus estimates, following its acquisition of 2 other theater chains.  The company expects EPS of $1.13-1.21, compared with $1.06 for 2015.  The current estimate for 2016 EPS of $1.02.  Revenue is expected to be $3.226-3.236B, up from $2.947B in 2015.  It compares with the estimate of $3.145B.  "Industry wide, U.S. box office revenue for 2016 increased approximately 2% compared to 2015, while industry box office for the fourth quarter of 2016, impacted by challenging comparisons related to last year's opening of the largest grossing film of all time, Star Wars: The Force Awakens, declined approximately 4%," the company said.  The numbers include the results of Odeon for the 32-deay period from the completion of its acquisition on Nov 30, as well as for Carmike for the 11-day period from the closure of that deal on Dec 21.  The stock  went up 15¢.  If you would like to learn more about AMC, click on this link:
club.ino.com/trend/analysis/stock/AMC?a_aid=CD3289&a_bid=6ae5b6f7

ACM Sees 2016 Profit And Revenue Topping Estimates 

AMC Entertainment (AMC)

Stock markets were not meant to go straight up & today was a vivid reminder of that.  However Dow finished well off the lows, with overall enthusiasm for stocks still running strong.  Airline & travel stocks were sold on concerns about implications for the travel ban.  MLPs had a rough day although the index is above the trading range for much of last year.  There have been bumps in stocks since Trump took office but investors are with him.  Trump is the new kid in town & more bumps are expected with ones coming from areas we can not imagine presently.

Dow Jones Industrials

 

  

Markets pull back over confusion at US airports

Dow sank 169, decliners over advancers almost 5-1 & AZ retreated 77.  The MLP index gave back 4+ to the 331s the REIT index fell 2 to the 337s.  Junk bond funds.retreated following recent gains & Treasuries were weak.  Oil was lower in the 52s (more below) & gold rose.

AMJ (Alerian MLP Index tracking fund)

CL=F

Crude Oil Mar 17

52.93

-0.24

-0.5%

GC=F

Gold Futures,Apr-2017

1,193.70

2.60

0.2%

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OPEC appears to have persuaded investors that it's making good on promised production cuts.  Money managers are the most optimistic on West Texas Intermediate oil prices in at least a decade as OPEC & other producers reduce crude output.  Saudi Arabia said more than 80% of the targeted reduction of 1.8M barrels a day has been implemented.  Oil shipments from OPEC are plunging this month.  OPEC will reduce supply 900K barrels a day in January, the first month of the accord's implementation, about 75% of the cut that the producer group agreed to make.  11 non-members led by Russia are to curb their output in support.  Hedge funds boosted their net-long position, or the difference between bets on a price increase & wagers on a decline, by 6.1% in the latest week.  WTI rose 1.3% to $53.18 a barrel in the report week.  The US benchmark slipped 0.3% to $53.01 today.  OPEC members Saudi Arabia, Kuwait and Algeria have said they've cut output this month by even more than was required, while Russia said it’s also curbing production faster than was agreed.  Saudi Energy Minister Khalid Al-Falih said that adherence has been so good that OPEC probably won't need to extend the accord when it expires in the middle of the year.  The OPEC-engineered price rally has spurred a surge in drilling in the US shale patch.  Rigs targeting crude in the US rose 15 to 566 last week, the highest since Nov 2015.

OPEC Convinces Investors That Its Oil Output Cuts Are Real

US consumer purchases climbed in Dec by the most in 3 months as incomes picked up, signaling a strong hand-off into 2017.  The 0.5% advance in consumption, which accounts for about 70% of the economy, followed a 0.2% advance in the prior month, a Commerce Dept report showed, matching the forecast.  Incomes rose 0.3%, less than projected.  Americans stepped up purchases during the holiday season & sales of automobiles stayed strong, capping a record year for the car industry.  Solid hiring, rising wages & low borrowing costs have increased the wherewithal to spend, while rising sentiment & expectations of lower taxes under Trump are potential tailwinds.  “The consumer has almost everything going for it,” Ryan Sweet, a senior economist at Moody’s Analytics said before the report.  “As the consumer goes, so goes our economy. We’re setting up for another decent year in 2017.”  Adjusting the figures for inflation, consumer spending increased 0.3% in Dec, also the most in 3 months.  The latest advance was led by a jump in outlays for durable goods, including motor vehicles.  In 2016, real household outlays climbed 2.7%, the least in 3 years.  Consumers flocked to auto dealerships last month to top off a record year for the industry.  For all of last year, incomes rose 3.5%, the smallest advance since 2013.

• U.S. Consumer Spending Rose in December by Most in Three Months

Greek stocks & bonds fell after the gov failed to bridge differences with European creditors over the conditions attached to the country's latest bailout review & the IMF warned that its debt is on an unsustainable path.  Almost 2/3 of the actions creditors have demanded for the disbursement of the next tranche of emergency loans have yet to be completed, the gov conceded in a memo discussed between Finance Minister Euclid Tsakalotos & bailout auditors last week.  Even though the memo laid out a series of commitments to ensure the work will be completed, creditors said the proposals weren't good enough, a separate official said.  Europe's most indebted state is locked in talks with officials over the terms attached to the loans keeping it afloat since 2010.  Greek stocks fell 3.7% to their lowest since Dec 15, while yields on 10 year-notes jumped up 30 basis points to 7.48%, amid renewed doubts about the prospects for completing the review before national elections in the Netherlands, France & Germany later this year.  IMF staff said in a draft report that the current structure of Greek public finances is “fundamentally inefficient, unfair, and ultimately socially unsustainable,” adding to doubts about whether the Fund will eventually re-join the Greek bailout.  Euro area govs, notably Germany, have said failure to get the IMF on board would require a new agreement, which needs to be approved by national parliaments.  In addition to asking for a lower income tax threshold and pension cuts for current retirees, a demand the Greek gov doesn't accept so far, the IMF is also pushing for the European creditors to off more debt-relief measures. “We believe that Greece’s debt burden can be manageable if the agreed reforms are fully implemented,” a spokesman for the euro crisis fund said yesterday.

Greek Markets Tumble as EU Holds Up Payment Amid IMF Doubts

This could be the end of the Trump rally.  Market breadth sends a very negative signal.  The Greek debt mess is a major dark cloud threatening the stock market rally.  Confusion at US airports is not playing well & is making investors nervous about other initiatives proposed by Trump.  Dow remains close to its record highs reached last week, but optimism about the stock market is fading even though the Dow is up about 10% since the election.. 

Dow Jones Industrials