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Dallas Fed: “Texas Manufacturing Activity Expands Again” in August

 

Dallas Fed: “Texas Manufacturing Activity Expands Again” in August

by Bill McBride on 8/28/2017 10:37:00 AM

From the Dallas Fed: Texas Manufacturing Activity Expands Again

Texas factory activity continued to increase in August, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, edged down to 20.3, indicating output grew but at a slightly slower pace than in July.

Other measures of current manufacturing activity also indicated continued growth. The new orders and the growth rate of orders indexes ticked down but stayed solidly positive, coming in at 14.3 and 11.7, respectively. The capacity utilization index fell six points to 12.2, while the shipments index increased seven points to 18.1.

Perceptions of broader business conditions remained positive in August. The general business activity index was largely unchanged at a robust 17.0. The company outlook index posted its 12th consecutive positive reading but slipped 10 points to 16.3 after surging to a multiyear high last month.

Labor market measures suggested continued employment gains and longer workweeks this month. The employment index came in at 9.9, slightly below the July reading, extending this year’s string of positive readings. Eighteen percent of firms noted net hiring, compared with eight percent noting net layoffs. The hours worked index rose five points to 14.5.
emphasis added

This was the last of the regional Fed surveys for August.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Fed Manufacturing Surveys and ISM PMIClick on graph for larger image.

The New York and Philly Fed surveys are averaged together (yellow, through August), and five Fed surveys are averaged (blue, through August) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through July (right axis).

Based on these regional surveys, it seems likely the ISM manufacturing index will increase in August compared to July (to be released Friday, Sept 1st). The consensus is for the ISM index to increase to 56.6 in August from 56.3 in July.

Published at Mon, 28 Aug 2017 14:37:00 +0000

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U.S. stock fund withdrawals largest of 2017: ICI

 

U.S. stock fund withdrawals largest of 2017: ICI

NEW YORK (Reuters) – Investors battered U.S.-based stock funds with the largest withdrawals this year as wild trading disrupted the market’s summertime calm, Investment Company Institute (ICI) data showed on Wednesday.

Nearly $9.2 billion flowed out of equity mutual funds and exchange-traded funds during the week through Aug. 16, with a 37th week of inflows for international shares only slightly offsetting $11.3 billion of withdrawals for domestic stocks, according to the trade group.

U.S. stocks remained on pace to deliver their ninth straight year of positive returns.

Yet two pullbacks of more than 1 percent in S&P 500 index .SPX this month jolted markets following geopolitical tensions between the United States and North Korea as well as questions surrounding U.S. President Donald Trump’s administration bringing its economic agenda to fruition.

Equity mutual fund outflows of $9.9 billion compared with $1.4 billion of stock ETF withdrawals, according to ICI.

“Investors have favored international equity and bond fund strategies as alternatives,” said Todd Rosenbluth, director of ETF and mutual fund research at CFRA.

Investors turned to perceived safe-haven funds, with taxable bond funds attracting $3.8 billion in their 37th straight week of inflows, ICI said. Funds that invest in commodities like gold pulled in $881 million, their best week since June.

Reporting by Trevor Hunnicutt; Editing by Meredith Mazzilli

 

Published at Wed, 23 Aug 2017 17:05:47 +0000

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Wall Street doesn’t want this Trump official to quit

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Cohn outlines Trump tax cuts
Cohn outlines Trump tax cuts

Wall Street doesn’t want this Trump official to quit

  @mattmegan5

Wall Street didn’t flinch at the sudden exits of White House officials like Steve Bannon, Reince Priebus and Sean Spicer. Things may not stay as calm if Gary Cohn follows them out the door.

Cohn is President Trump’s top economic adviser, and considered to be one of the most important remaining players in the administration. Cohn has acted as a moderating force on Trump’s populist instincts on delicate issues like trade. Cohn is also quarterbacking the push to cut taxes along with Treasury Secretary Steve Mnuchin.

Cohn is such a vital member of Team Trump that rumors over his resignation due to the president’s handling of the violence in Charlottesville spooked the market last week, briefly causing stocks to drop on Thursday morning. A White House official sought to reassure Wall Street, telling reporters that “nothing has changed,” and that reports of Cohn’s stepping down as director of the National Economic Council are “100% false.”

Investors are hoping that the former Goldman Sachs(GS) president will remain a source of stability and reason in the often-chaotic White House.

“The loss of Cohn would be another point of destabilization on tax reform, which is what the market wants desperately,” said Mark Luschini, chief strategist at Janney Capital, which manage more than $50 billion in assets.

“Cohn is viewed as a pretty steady, level-headed guy,” he said.

Normally, Wall Street might not care about the day-to-day personnel moves inside the White House. But Cohn’s pro-business views have comforted investors unsettled by Trump’s populist campaign platform, especially his promises to rip up NAFTA and label China a currency manipulator.

“If Cohn were to leave, Trump’s economic policies could take a turn to the more populist side, a turn that markets would not appreciate,” Nomura chief U.S. economist Lewis Alexander warned in a report on Monday.

Such a shift could alarm Wall Street as the White House gears up for key battles in September over the budget, tax reform and renegotiating NAFTA. Investors are also on guard for a potential government shutdown or a stand-off over the debt ceiling, which needs to be raised to avoid a disastrous default.

“Gary Cohn is very establishment. He’s basically Mr. Goldman Sachs. He’s not fringe,” said Ed Yardeni, president of investment advisory Yardeni Research.

Of course, Cohn’s career moves aren’t the only thing the market cares about. Ultimately, the direction of the U.S. economy and corporate profits are what will influence stock prices in the long run.

It’s also worth noting that Cohn may leave the White House soon to take an even more important job. Trump told The Wall Street Journal last month that he’s considering Cohn to replace Federal Reserve chair Janet Yellen when her term expires in February.

In some ways, Cohn’s standing in the White House seems to have been bolstered by the firing of Bannon, Trump’s chief strategist. The two officials frequently butted heads, with Bannon representing the populist or nationalist views that make markets nervous.

“Steve Bannon’s departure is undoubtedly a noteworthy victory for the globalists inside the administration” like Cohn, Isaac Boltansky, director of policy research at Compass Point Research & Trading, wrote in a report on Monday.

But Boltansky urged investors not to celebrate yet. He pointed out the tumultuous nature of the White House and warned that Bannon’s return to Breitbart gives him a powerful platform to influence future policy debates.

“The reality TV nature of the West Wing wars suggest that there could be a reversal of fortunes on the other side of the commercial break,” Boltansky wrote.

Published at Mon, 21 Aug 2017 19:45:36 +0000

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Wall Street extends losses on Trump policy worries

Wall Street extends losses on Trump policy worries

(Reuters) – U.S stocks hit session lows in early afternoon trading on Thursday as investors worried about President Donald Trump’s ability to pursue his pro-growth policies.

The market also remained on edge after a van crashed into dozens of people in the center of Barcelona on Thursday and Spanish media, citing police sources, said at least 13 people were killed.

Catalan’s police said the van crash is being treated as a terror attack.

Trump disbanded two business councils on Wednesday after several chief executives quit in protest over his remarks on white nationalists.

Stocks were rattled earlier in the day following speculation of White House Economic Adviser Gary Cohn’s possible departure.

A White House official said Cohn “intends to remain in his position as NEC director … nothing’s changed.”

“The concern would be if Gary Cohn would decide that if he needs to take a safe step that a lot of CEOs did, it will be very difficult to move forward with pro-growth tax reforms,” said Art Hogan, chief market strategist at Wunderlich Securities in New York.

At 13:04 p.m. ET (1704 GMT), the Dow Jones Industrial Average .DJI was down 177.97 points, or 0.81 percent, at 21,846.9 and the S&P 500 .SPX was down 25.38 points, or 1.03 percent, at 2,442.73. The Nasdaq Composite .IXIC was down 87.89 points, or 1.39 percent, at 6,257.22. Investors have also been assessing minutes from the Federal Reserve’s July meeting that showed growing concerns over weak inflation, muddying the path of interest rate hikes.

Weak inflation has spurred concerns that the Fed may have to cool its monetary tightening pace even though the economy is growing moderately and the unemployment rate is at a 16-year low.

The central bank is also considering reducing its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities.

“If they don’t start selling their asset portfolio in September, which is what they have indicated, that will be a negative signal to the markets,” said Brad McMillan, chief investment officer for Commonwealth Financial Network in Waltham, Massachusetts.

“The Fed is still fairly comfortable with the economics, but they’re getting more concerned about the politics.”

All 11 major S&P sectors were lower, with technology index’s .SPLRCT 1.17 percent fall topping the list.

Apple’s (AAPL.O) 1.24 percent fall weighed the most on the S&P and the Nasdaq.

Cisco (CSCO.O) fell 4.12 percent after reporting a revenue miss in its closely-watched security business.

Wal-Mart (WMT.N) was down 2.30 percent after the retailer reported a drop in margins due to continued price cuts and investments in its e-commerce operations.

Declining issues outnumbered advancers on the NYSE by 2,085 to 718. On the Nasdaq, 2,031 issues fell and 778 advanced.

Reporting by Sruthi Shankar and Tanya Agrawal in Bengaluru; Editing by Anil D’Silva

 

Published at Thu, 17 Aug 2017 17:10:16 +0000

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Wall Street pares gains after Trump disbands two advisory councils

 

Wall Street pares gains after Trump disbands two advisory councils

(Reuters) – U.S. stocks pared gains on Wednesday afternoon after President Donald Trump said he is disbanding his manufacturing council as well as the strategy and policy forum.

Trump’s move comes after two more CEOs resigned from the manufacturing council on Wednesday in response to the president’s comments on the Charlottesville violence over the weekend.

At 13:18 p.m. ET, the Dow Jones Industrial Average .DJI was up 44.93 points, or 0.2 percent, at 22,043.92 and the S&P 500 .SPX was up 4.77 points, or 0.19 percent, at 2,469.38.

The Nasdaq Composite .IXIC was up 14.97 points, or 0.24 percent, at 6,347.99.

Investors will look for clues on future interest rake hikes this year from the minutes scheduled for release at 1400 ET (1800 GMT).

The New York Stock Exchange (NYSE) is pictured in New York City, New York, U.S., August 2, 2017.Carlo Allegri

Policymakers unanimously decided to keep interest rates unchanged in the July 25-26 meeting and said they planned to reduce the central bank’s massive holdings of bonds “relatively soon”.

“If the minutes suggest a deviation, whether them being more hawkish or more dovish, that may cause the market to change direction,” said Adam Sarhan, chief executive of Sarhan Capital in New York.

A slide in inflation readings in recent months, which remain below the Fed’s 2 percent target rate, have made the markets skeptical about a rate hike by December.

However, recent hawkish comments by New York Fed chief William Dudley advocating for another rate hike this year and strong retail sales data on Tuesday have upped the odds.

Chances of a December hike rose to 49.2 percent, up from 42 percent at the start of the week, according to CME Group’s FedWatch tool.

Advancing issues outnumbered decliners on the NYSE by 1,793 to 1,016. On the Nasdaq, 1,762 issues rose and 1,019 fell.

Reporting by Sruthi Shankar in Bengaluru; Editing by Arun Koyyur

 

Published at Wed, 16 Aug 2017 17:29:28 +0000

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Wall Street stages biggest rally in nearly 4 months

Wall Street stages biggest rally in nearly 4 months

  @mattmegan5

The S&P 500 rallied 1%, notching its biggest gain since late April. The Dow climbed 135 points.

Worries about saber-rattling between President Trump and North Korea helped drive U.S. stocks last week to their worst performance in nearly five months.

“This is a sigh-of-relief rally. It appears calmer heads will prevail here,” said Art Hogan, chief market strategist at Wunderlich Securities.

Investors poured back into tech stocks, which had tumbled last week as people cashed out of winning stocks like Apple(AAPL, Tech30). The Nasdaq jumped 1.3% on Monday.

There were other signs that fear is fading: Gold retreated for the first time in four days. The VIX(VIX) volatility index plunged by 22% after springing back to life last week.

Prices for ultra-safe government bonds also fell, lifting yields on Treasuries after they hit a six-week low on Friday. CNNMoney’s Fear & Greed Index remains in “fear” mode, though it edged away from the “extreme fear” territory it neared last week.

Wall Street seemed to mostly shrug off Trump’s attack on Kenneth Frazier after the Merck CEO quit the president’s manufacturing council in protest of the president’s response to the events in Charlottesville. Trump said that now Frazier “will have more time to LOWER RIPOFF DRUG PRICES!”

But Merck(MRK) shares rose modestly, while the iShares Nasdaq Biotechnology ETF(IBB) climbed 1%, in line with the rest of the market.

 

Published at Mon, 14 Aug 2017 20:11:21 +0000

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BLS: CPI increased 0.1% in July, Core CPI increased 0.1%

Forex Photo
tags
By geralt from Pixabay

BLS: CPI increased 0.1% in July, Core CPI increased 0.1%

by Bill McBride on 8/11/2017 08:32:00 AM

From the BLS:

The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.1 percent in July on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 1.7 percent.

The index for all items less food and energy rose 0.1 percent, the fourth month in a row it increased by that amount. … The index for all items less food and energy also rose 1.7 percent for the 12 month period, the same increase as for the 12 months ending May and June.
emphasis added

I’ll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI. This was below the consensus forecast of a 0.2% increase for CPI, and above the forecast of a 0.2% increase in core CPI.

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Investors pull more cash from U.S. domestic stock funds: ICI

Investors pull more cash from U.S. domestic stock funds: ICI

NEW YORK (Reuters) – Momentum for domestic U.S. stock funds waned during the latest week, with investors pulling cash from those products for a sixth week out of the last seven, Investment Company Institute (ICI) data showed on Wednesday.

The funds posted $3.9 billion in withdrawals during the week ended Aug. 2, the trade group said, even as U.S. stocks steamed higher. The S&P 500 is on pace to deliver double-digit percent returns for seventh year in the last decade.

Investors say that rise has left U.S. stocks richly valued and that they have been moving to taxable bonds and international stocks. Each of those categories had a 35th straight week of inflows, according to ICI.

Taxable bonds added $6.1 billion, while world stock funds attracted $4.2 billion.

Bond funds sold $203 billion in shares during the first half of 2017, compared to $136 billion in stocks. Of that, domestic equities took in just $4.3 billion, ICI data showed.

Phil Bak, chief executive at ACSI Funds, said the growth in index funds that own big stakes in technology companies like Facebook Inc and Apple Inc has exacerbated fears of a top-heavy market.

“A lot of people feel that trade will start to unwind,” said Bak, whose firm is based in Ann Arbor, Michigan.

But stocks are not trading in tandem, meaning there are relative winners and losers and in the market. A CBOE S&P 500 Implied Correlation Index that uses options to measure how much markets expect stock prices to move together is trading at 31.4, compared to 57.7 on the day of the U.S. election in November, a turning point for markets.

S&P 500 earnings for the second quarter rose an estimated 12 percent, according to Thomson Reuters I/B/E/S. But in recent days some large companies turned in disappointing results, including airlines, and the U.S. Food and Drug Administration announced it wants to reduce nicotine levels in cigarettes, hitting Altria Group’s shares.

Bak said a lack of correlations between stocks creates a good environment for investors who pick equities beyond those held in the highest proportion by indexes such as the S&P 500.

“We think it’s a pretty good environment to be in stocks,” he said.

Reporting by Trevor Hunnicutt; Editing by Meredith Mazzilli

Published at Wed, 09 Aug 2017 17:00:03 +0000

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Eerie quiet on Wall Street is finally broken

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Haley: Sanctions are a gut punch to N. Korea
Haley: Sanctions are a gut punch to N. Korea

Eerie quiet on Wall Street is finally broken

  @mattmegan5

Markets have been quiet for far too long. That finally changed a bit on Wednesday.

President Trump’s vow of “fire and fury” in response to North Korea, and its threat to strike the U.S. territory of Guam, was a reminder of how unprepared Wall Street is for a shock.

Stocks have been coasting to new highs day after day. The Dow was on track for a 10th straight record close before Trump’s “fire and fury” comments late Tuesday caused stocks to retreat.

Investors aren’t freaking out about North Korea, but there was a noticeable shift in sentiment nonetheless.

“I’m concerned. I can’t predict a shooting war before it happens, but escalating rhetoric of this type is dangerous,” David Kotok, chief investment officer at Cumberland Advisors, told CNNMoney.

The Dow fell as many as 88 points on Wednesday, before ending down just 37 points. The S&P 500 suffered its worst open since mid-June, but closed almost flat.

Of course, North Korea wasn’t the only catalyst for the caution on Wall Street. Disney(DIS) shares slumped after it announced plans to pull its movies from Netflix. That news also sent Netflix(NFLX, Tech30) stock lower. There were also disappointing earnings reports from Fossil(FOSL) and Priceline(PCLN, Tech30).

But that corporate news doesn’t account for the two-month high in the price of gold, which serves as a safe haven during times of worry. The closely-watched VIX volatility gauge remains low, but it’s popped 21% since Monday’s close. CNNMoney’s Fear & Greed index of market sentiment flipped to “neutral” after previously sitting comfortably in “greed” mode.

“The world is getting more dangerous. You don’t wait for the tornado. Seeing the cloud is enough to start moving,” Kotok said.

Kotok said he’s “glad” his asset management firm has been building cash reserves. He’s also been buying shares of the VanEck Vectors Gold Miners ETF(GDX) as well as shares of defense contractors — both of which rallied on Wednesday.

This summer’s rally on Wall Street has left the market almost priced for perfection. The Dow is up nearly 12% this year, while the Nasdaq has soared 18%.

chart trump dow stock markets

The relentless rise has been marked by unusual calm. Consider that the S&P 500 hasn’t suffered a downturn of 5% or more in 408 days, the longest streak since May 1996. Two weeks ago, the VIX(VIX) touched an all-time intraday low.

North Korea worries sent Asian markets sinking overnight. Japan’s Nikkei slumped 1.3%, while South Korea’s KOSPI closed down 1.1%. The iShares MSCI South Korea Capped ETF(EWY) fell 2%. European markets also dipped modestly.

Investors are worried that the war of wordscould turn into a miscalculation that spirals out of control.

“The concern is about how this could devolve into a fairly messy state of affairs that would cause markets to sell first and ask questions later,” said March Luschini, chief market strategist at Janney Capital Markets.

Kotok said Trump’s aggressive threats are a stark departure from Teddy Roosevelt’s famous approach of “walk softly and carry a big stick.”

“Now we have ‘yell loudly and we don’t know about the stick.’ It’s something that just adds to the uncertainty,” said Kotok.

But Luschini warned investors not to overreact to the rising tensions with North Korea.

It’s “premature to de-risk your portfolio” by dumping stocks, Luschini said, because this threat could fade away.

If there’s ultimately no impact on the global economy and corporate profits, it shouldn’t disrupt the stock market either.

Indeed, this is hardly the first time that North Korea has threatened stability in the region. And previous incidents had just a fleeting impact on global markets.

For decades, investors who were brave enough to “buy on the dips” caused by North Korea concerns ended up making money, according to Erin Browne, head of asset allocation at UBS Asset Management.

But the flipside to that, Browne said, is that a “general sense of complacency” has crept into global markets about the North Korea risk.

Published at Wed, 09 Aug 2017 20:31:01 +0000

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3 S&P 500 Laggards Flashing Short Sale Signals

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3 S&P 500 Laggards Flashing Short Sale Signals

By Alan Farley | August 9, 2017 — 10:55 AM EDT

The S&P 500 hit another bull market and all-time high this week, but not all index components rose in tandem. An expanding group of laggards is heading the other way, grinding out downtrends that are now setting off preliminary short sale signals. These plays could generate opportune profits in coming weeks, especially if the broader market turns tail and enters a late-summer correction.

Many traders try to pick tops in strong uptrends when choosing short sale candidates, but those buying impulses feed on this weak-handed mentality, taking each batch of short sellers and squeezing them into oblivion. In turn, those upticks draw the next wave of momentum buyers off the sidelines, generating a positive feedback loop that can lift stocks well above logical price targets. (To learn more, check out: Rules and Strategies for Profitable Short Selling.)

A more reliable approach sells breakdowns in the weakest stocks or waits for pullbacks following big declines. In both cases, short sellers access steady tailwinds of deteriorating sentiment, poor technical positioning and nervous shareholders looking to exit positions at any cost. It also allows those positioned on the short side to sleep at night, confident that the next session won’t start with an unexpected catastrophe.

O’Reilly Automotive, Inc. (ORLY) stock posted an all-time high at $293 in July 2016 and turned lower, carving the next stage of a topping pattern that broke to the downside in May 2017 when it sold off through support at $250. The decline eased into a descending channel, losing ground at a modest pace into July 5, when it plunged in a vertical decline that relinquished more than 41 points in a single session. (See also: O’Reilly Beats on Q2 Earnings Estimates, Cuts Outlook.)

The stock bottomed out at $169 three sessions later, giving way to a recovery wave that has drawn the outline of a bear flag pattern. The bounce turned south at the 50-day exponential moving average (EMA) last week after reaching within 10 points of filling the gap, generating a preliminary short sale signal that predicts a decline to the downtrend low. However, a final buying impulse to $220 is possible, with that level offering a more favorable risk/reward ratio.

Shares of The Mosaic Company (MOS) returned to the 2008 bear market low near $22 in the first quarter of 2016 and bounced in a recovery wave that stalled in the low $30s about two months later. A 10-month consolidation pattern tested the deep low in October, ahead of a January 2017 breakout that attracted aggressive selling pressure and a reversal that has now reached long-term support for the third time. (For more, see: Mosaic Shares Tumble on Disappointing Fertilizer Guidance.)

An old market expression insists that there’s no such thing as a triple bottom because three tests at support are more likely to trigger a breakdown than a new uptrend. In addition, on-balance volume (OBV) entered an aggressive distribution wave in February 2017 and is now testing the 18-month low, signaling that bottom fishers are abandoning losing positions. This loss of sponsorship could presage a breakdown that drops the stock toward deep support at $12.50.

The Kroger Co. (KR) stock topped out at $42.75 in December 2015 and ticked lower through most of 2016, building the next stage in a head and shoulders topping pattern that broke to the downside when the stock violated the neckline in June 2017. A perfect storm of bad news triggered the decline, with the company lowering guidance just one day before Amazon.com, Inc. (AMZN​) upended the supermarket world when it announced the acquisition of Whole Foods Market, Inc. (WFM). (See also: Kroger CEO Not Fazed by Amazon-Whole Foods Tie Up, Shares Pop.)

The stock bottomed out on June 16 and eased into a bear flag that is now testing the underside of the 50-day EMA at $25. It filled the lower of two gaps last week and is unlikely to trade higher than $27 before aggressive sellers return in force. A solid entry plan will be to watch the weekly stochastics oscillator, waiting for a crossover at the overbought level to enter or add to existing short sales.

The Bottom Line

The weakest S&P 500 components could offer the strongest short sales in coming weeks and months, especially if the broad market enters a correction or downtrend. (For additional reading, check out: Stocks Face Miserable August as Correction Looms.)

(Disclosure: The author held no positions in the aforementioned securities at the time of publication.)

 

Published at Wed, 09 Aug 2017 14:55:00 +0000

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S&P closes barely lower despite North Korea tensions

S&P closes barely lower despite North Korea tensions

NEW YORK (Reuters) – U.S. stocks clawed back losses late on Wednesday as investors appeared to brush off geopolitical concerns after falling in the wake of U.S. President Donald Trump’s “fire and fury” warning to North Korea.

Bargain-seeking investors instead turned their focus to strength in the global economy and earnings toward the end of an active trading day.

“It’s amazing when you consider the headlines just how calm the equity markets are, how they’ve taken things in their stride,” said Ryan Detrick, senior market strategist at LPL Financial in Charlotte, North Carolina.

“There was some skittishness earlier but then some buyers stepped in,” he said.

Investors had rushed to safe-haven assets after strongly worded exchanges between Washington and nuclear-armed North Korea late on Tuesday. U.S. Secretary of State Rex Tillerson said he did not believe there was an imminent threat.

“You’d need to see something more tangible than just rhetoric for a broader pullback,” said Richard Steinberg, managing director at HSW Advisors, a finance team within HighTower Advisors, in New York.

After a dip of as much as 0.52 percent earlier in the day, Wall Street’s three major indexes bounced off intraday lows.

The Dow Jones Industrial Average .DJI fell 36.64 points, or 0.17 percent, to end at 22,048.7, the S&P 500 .SPX lost 0.9 point, or 0.04 percent, to 2,474.02 and the Nasdaq Composite .IXIC dropped 18.13 points, or 0.28 percent, to 6,352.33.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., July 19, 2017.Brendan McDermid

While gold XAU=, a safe-haven favorite, pared some gains, it was last up 1.2 percent, at around its highest since mid-June. The Swiss franc CHF= and the Japanese yen JPY= also rose.

Politics lifted U.S. defense stocks. Lockheed Martin (LMT.N), Raytheon (RTN.N), General Dynamics (GD.N) and Northrop Grumman (NOC.N) all rose and the Dow Jones U.S. defense index .DJUSDN was up 1.6 percent after hitting a record high.

The CBOE Volatility Index .VIX, the most widely followed barometer of expected near-term stock market volatility, ended at a session low of 11.11 after rising as high as 12.63.

Six of the S&P 500 sectors ended higher. The consumer discretionary index .SPLRCD was one of its biggest losers with a 0.47 percent drop. Its biggest drags were Priceline (PCLN.O) and Walt Disney (DIS.N).

Disney shares closed down 3.9 percent as investors were skeptical of its plan to launch streaming services rather than rely on Netflix (NFLX.O).

Travel website operator Priceline Group Inc (PCLN.O) fell 6.9 percent after a disappointing financial forecast.

After the bell, Twenty-First Century Fox (FOXA.O) shares were up 0.7 percent following the release of its results.

Declining issues outnumbered advancing ones on the NYSE by a 2.29-to-1 ratio; on Nasdaq, a 2.47-to-1 ratio favored decliners.

About 6.48 billion shares changed hands on U.S. exchanges on Wednesday compared with the 6.16 billion average for the last 20 sessions.

Additional reporting by Sinead Carew, Tanya Agrawal and Sruthi Shanker; Editing by Nick Zieminski and James Dalgleish

Published at Wed, 09 Aug 2017 21:39:10 +0000

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Wall Street swings lower after Trump warns North Korea

by alessandrodandrea from Pixabay

 

Wall Street swings lower after Trump warns North Korea

(Reuters) – U.S. stocks closed lower on Tuesday after a late afternoon selling spree as investors fled for safety after U.S. President Donald Trump vowed to respond aggressively to any threats from North Korea.

After scaling back from record highs earlier in the session, Wall Street’s three major indexes dipped after Trump said North Korea “will be met with fire and fury” like the world has never seen if it threatens the United States.

“Trump’s response was aggressive and that’s why the market turned lower,” said Ken Polcari, Director of the NYSE floor division at O’Neil Securities.

Japan said on Tuesday it was possible that North Korea had already developed nuclear warheads and warned of an acute threat posed by its weapons programs as Pyongyang’s continues missile and nuclear tests in defiance of U.N. sanctions.

Investors, who took the North Korea report from Japan in their stride earlier in the day, lost their appetite for risk after Trump’s comments to reporters during his vacation at his golf club in New Jersey.

The Dow Jones Industrial Average .DJI ended down 33.08 points, or 0.15 percent, at 22,085.34, snapping a 9-day streak of closing records.

The S&P 500 .SPX lost 5.99 points, or 0.24 percent, to close at 2,474.92 and the Nasdaq Composite .IXIC dropped 13.31 points, or 0.21 percent, to 6,370.46.

The CBOE Volatility Index .VIX, better known as the VIX and the most widely-followed barometer of expected near-term stock market volatility, closed at 10.96, its highest in about a month.

Ten out of the 11 major S&P 500 sectors ended lower after the comments with the only gains seen in the utilities sector .SPLRCU, which is seen as a bond proxy because of its slow but predictable growth and dividends.

Utilities closed up 0.3 percent while the materials sector .SPLRCM was the S&P’s biggest loser with a 0.9-percent drop.

Trading volume also picked up in the late afternoon of what had been a sleepy summer session while the U.S. Congress is expected to be in recess until Sept 5.

The S&P hasn’t moved more than 0.5 percent in one day since July and has fallen more than 1 percent only twice this year.

The financial sector index .SPSY gave back gains after news California insurance regulator will probe whether Wells Fargo & Co (WFC.N) and an insurance company harmed residents by selling insurance they did not need. Wells Fargo still ended up 0.3 percent at $52.71.

Shares of Michael Kors (KORS.N) ended up 21.5 percent, after the luxury goods maker raised its full-year revenue forecast.

NYSE declining issues outnumbered advancers 1.73-to-1; on Nasdaq, a 1.47-to-1 ratio favored decliners.

About 6.22 billion shares changed hands on U.S. stock exchanges, slightly above the 6.15 billion average for the last 20 sessions.

Additional reporting by Saqib Ahmed in New York and Tanya Agrawal in Bengaluru; Editing by Sriraj Kalluvila and Nick Zieminski

Published at Tue, 08 Aug 2017 20:33:02 +0000

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Market Update – 08/07/2017

Market Update – 08/07/2017


It’s Showtime!

The July 10, Market Update laid out our case for a tradable high in equities to commence sometime by August. We now have a host of reasons (laid out in this report) for thinking that high is now upon us. It’s Showtime!

As explained in the July 10 Market Update, a 15yr interval points to a tradable top (within the ongoing bull market) in the period September 2016 to August 2017 and we have come to the end of the forecast period.

A popular approach of Lindsay’s was his low-low-high interval. Lindsay showed that counting the number of trading days between two important lows often leads to a high the same number of days into the future. The distance between the lows on 2/11/16 and 11/4/16 was 186 days. Counting forward another 186 days targets a top near August 3, 2017.

Seasonally, a top in August makes total sense as August and September are the two weakest months of the year for equities.

The Decennial pattern warns of a nasty sell-off in equities during years ending in the number 7 (i.e. 2017).  Since 1907 each of these years (with the exception of 1947 which suffered a mere 6.2% drop) has seen a double-digit decline beginning somewhere between June and October.

By Ed Carlson


Ed Carlson

Ed Carlson
Seattle Technical Advisors.com

Ed Carlson

Ed Carlson, author of George Lindsay and the Art of Technical Analysis,
and his new book, George Lindsay’s An Aid to Timing is an independent
trader, consultant, and Chartered Market Technician (CMT) based in Seattle.
Carlson manages the website Seattle
Technical Advisors.com
, where he publishes daily and weekly commentary.
He spent twenty years as a stockbroker and holds an M.B.A. from Wichita State
University.

Copyright © 2012-2017 Ed Carlson

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Published at Mon, 07 Aug 2017 14:54:02 +0000

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Premarket: 7 things to know before the bell

 

Premarket: 7 things to know before the bell

  @ivanakottasova

premarket friday
Click chart for more in depth data.

1. U.S. jobs report: President Trump’s jobs tally could move beyond 1 million on Friday.

The Labor Department will give an update on how many jobs were created in July at 8:30 a.m. ET.

Economists surveyed by CNNMoney estimate that the U.S. added 183,000 jobs in July, down from 222,000 in June. So far, 863,000 jobs have been created during Trump’s presidency.

The unemployment rate is expected to dip to 4.3%.

2. Toyota and Mazda factory in the U.S.: Toyota(TM) and Mazda have announced plans to build a $1.6 billion manufacturing plant in the U.S. that will create as many as 4,000 jobs.

The Japanese automakers said in a statement that the new facility would be operational by 2021, but did not specify where it would be built.

Mazda plans to build new crossover vehicles for the U.S. market at the plant, while Toyota will produce its Corolla model there.

Shares in Mazda(MZDAF) gained 2.8% in Tokyo on Friday.

The move is likely to be seen as a win for President Trump, who had pressured Toyota and other automakers to build more cars in the U.S.

3. RBS picks Amsterdam: The Royal Bank of Scotland said Friday that it plans to use Amsterdam as a European base if Britain makes a clean break from the EU after Brexit.

Shares in the state-backed RBS (RBS)shot up as much as 4% after it announced it swung back into profit in the first half of the year.

4. Global market overview:U.S. stock futures were higher on Friday.

The Dow Jones industrial average closed flat on Thursday, while the S&P 500 was down 0.2% and the Nasdaq shed 0.4%.

European markets were mostly lower in early trading on Friday. Asian markets ended the trading session mixed.

Before the Bell newsletter: Key market news. In your inbox. Subscribe now!

5. Stock market movers — Western Union, Viacom, Mazda, Fluor:Fluor Corp(FLR) shares plunged 10% after hours after the engineering company lowered its outlook for the year.

Viacom(VIAB) lost more than 8% in extended trading after it forecast lower ad revenues on Thursday.

Western Union(WU) gained 5% in extended trading after its earnings beat analyst expectations.

6. Earnings:AMC Entertainment(AMC), CIGNA(CI), Potbelly(PBPB), Trivago(TRVG) and US Cellular(USM) are set to release earnings before the open Friday.

Warren Buffett’s Berkshire Hathaway(BRKA) will follow after the close.

Download CNN MoneyStream for up-to-the-minute market data and news

7. Coming this week:

Friday — U.S. Bureau of Labor Statistics releases monthly jobs and unemployment report

Published at Fri, 04 Aug 2017 09:21:05 +0000

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Where’s my raise? Wage growth still sluggish

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U.S. unemployment rate falls to 16-year low
U.S. unemployment rate falls to 16-year low

Where’s my raise? Wage growth still sluggish

  @lamonicabuzz

More Americans are finding jobs, and the unemployment rate is at a 16-year low. That is undeniably good news.

But there is one number in the jobs report that remains frustratingly subpar: wage growth.

The government said Friday that average hourly earnings for workers rose 2.5% over the past 12 months, to $26.36 an hour. That is good, but not fantastic.

Many economists, including members of the Federal Reserve, feel that wage growth of 3% to 3.5% a year is healthier. That allows consumers to better keep up with inflation.

Wages were growing about 3% a year just before the Great Recession began at the end of 2007, but they have cooled since then. That could pose a problem for the economy.

Without higher wages, Americans may pull back on spending — regardless of whether tax cuts are coming from President Trump and the Republican-led Congress.

“Despite a roaring U.S. labor market, average wage growth remains stubbornly muted,” said Dr. Andrew Chamberlain, chief economist with job search site Glassdoor, in a report.

“Until that trend reverses, the gains from today’s economy will not be translating into improved paychecks for the average American worker,” Chamberlain added.

Usually, employers start to offer higher pay as the economy improves and workers become harder to find. One reason that’s not happening may be that employers are hiring workers who were left behind during the recession and are happy to be finding jobs at all.

When employers realize they don’t need to offer big salaries to attract the workers they need, that keeps a lid on wages.

“It is clear that employers need to do little to attract and retain the workers they want and any significant signs of labor shortages are simply not showing up,” Elise Gould, senior economist with the Economic Policy Institute, wrote in a report.

Still, others think that the modest increase in wages will be good enough to keep Americansin a good mood.

Doug Duncan, chief economist at Fannie Mae, said in a report that it would be a mistake to “nitpick” the gain in wages, adding that the steady rise over the past year “isn’t too shabby.”

It’s also worth noting that many companies in some lower-paying sectors, such as restaurants, leisure and hospitality, are starting to hire more workers.

That may be holding down wages overall, but it’s still a good sign that people are able to find work.

“Low-wage industries grew fastest in July,” said Jed Kolko, chief economist with job search site Indeed, in a report.

“That’s helping the least-educated Americans get back to work. The recovery is now strong and long enough to lift many of the people hurt most by the recession,” Kolko added.

And at least one economist thinks the tide might be turning for all job-seekers. Wage growth should eventually pick up and return to more normal levels as the overall labor market improves.

“It’s simple logic … that as the job market further tightens, workers will be able to demand higher salaries or take their skills to a competitor that will pay a higher wage,” Ameriprise senior economist Russell Price wrote in a report.

“Over time, there’s little doubt that as the labor market gets tighter and tighter, wages and salaries will eventually rise. Workers will start changing jobs to move to the highest bidder,” Price added.

 Published at Fri, 04 Aug 2017 16:30:12 +0000

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US Dollar Falls to Pivotal Support Level

 

US Dollar Falls to Pivotal Support Level

By Cory Mitchell | August 3, 2017 — 1:00 PM EDT

The U.S. dollar has been falling and is approaching a key support level. A breach of this key support level, which the price has traded above since the start of 2015, would indicate that a long-term downtrend in the U.S. dollar is under way. However, if the dollar is able to bounce off support, like it did in mid-2016, it would indicate that the current range is continuing and that the price could rally back toward the 2015 and 2016 highs.

The PowerShares DB US Dollar Index Bullish Fund (UUP) surged above $24 in 2015 and has not closed below that level since, despite a few attempts. The intraday low point over the past 32 months is $23.96. That was in mid-2016, and then the exchange-traded fund (ETF) surged higher from there until the end of the year. In 2017, the price has declined back to that pivotal $24 region. (See also: The PowerShares ETF UUP: An ETF for Dollar Bulls.)

The PowerShares ETF – which tracks the U.S. dollar relative to a basket of currencies – has been in a large range over the past 32 months, oscillating between $24 and resistance at $26.50 to $26.83. If the price keeps declining and closes much below $24, this would suggest that the range is over and that a long-term downtrend is under way. Based on the size of the range (subtracted from the breakout price), the approximate downside target is $21.50. On the other hand, if the price is able to bounce off support, like it did in mid-2016, traders could expect a rally to $25.50 or above (about the mid-way point of the range).

Technical chart showing the PowerShares DB US Dollar Index Bullish Fund (UUP) near a major long-term support level

The CurrencyShares Euro Trust (FXE) shows how the euro is moving relative to the U.S. dollar. While the dollar has declined in 2017, the euro has rallied. On Aug. 2, the CurrencyShares Euro ETF hit its highest level since early 2015. But this is also a resistance area for the euro – $112.70 to $114.81 is a resistance zone that has batted the price lower a number of times over the past two and a half years. (See also: Currency ETF Hits New 52-Week High.)

A breakout for FXE above that resistance zone would indicate that the euro is in a long-term uptrend, with a target between $122 and $128 (depending on the breakout point and the size of the range used, since the range is not uniform). To help confirm the uptrend in FXE, UUP should continue to fall. If FXE starts to retreat from this resistance area, traders could expect a decline back below $107.50 (about the mid-way point of the range). If FXE does begin to fall, confirmation would likely be provided by a rallying UUP.

Technical chart showing the CurrencyShares Euro Trust (FXE) near a major long-term resistance level

The Bottom Line

The U.S. dollar (relative to six major currencies) is at a critical level, and so is the euro relative to the U.S. dollar. The two ETFs can be used to help confirm trades in the other. If UUP declines below support, traders should expect FXE to keep rallying. If UUP bounces, FXE is likely to decline. The long-term implications are significant at these levels. A breakout means a new trend is under way, while a failure to break out means the long-term ranges could be continuing. (For additional reading, check out: ETFs to Buy or Avoid After Strong Q2 GDP.)

Charts courtesy of StockCharts.com. Disclosure: The author does not have positions in U.S. dollar or euro ETFs or forex pairs at the time of writing.

 

Published at Thu, 03 Aug 2017 17:00:00 +0000

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A Reversal Coming To U.S. Major Indexes?

 

A Reversal Coming To U.S. Major Indexes?


Technically speaking, this week could be very important for the major U.S. equity markets. There is an appearance of a “TOPPING PATTERN” forming. I am now awaiting confirmation by the actions of the equity markets, this week. Expect downward pressure beginning this month of August of 2017.

The Only Chart You Need To See!

There is currently limited upside potential in the SPX relative to potential downside for the months of August, September and the early part of October 2017. There are signs for the short, intermediate and longer-term trends returning for the best six months of trading officially inaugurated in November of 2017! This is the timing framework when ‘The Next Runaway Leg Up In The Stock Market Will Resume.’

In last weeks’ market action as the profit taking rotation out of the high-tech sector rotated into the Dow Industrials, it reflected a more defensive approach while being invested in “Blue Chips” during which time it achieved a new high.  Sector rotation increased especially noticeable in the transports and technology sectors that were leading the markets higher. If they continue lower, more sectors will join the decline. I am expecting a coming pop in the VIX on Aug 4, Aug 23, Sept 11 or 12 and finally Sept 28 or 29. 2017.  There was a flight to safety in the Yen as well as a strengthening of the price of Gold, Silver, Bitcoin and WTI Crude Oil.

An Unusual Anomaly:

Over the past couple of weeks, there was this unusual Anomaly which occurred, as you can see in the chart below.  It now makes me more cautious about our long understanding of risk interconnectivity”.

How can the equity, gold, silver, crude oil and bitcoin markets ALL go HIGHER together?

In short, the major equities trend remains to the upside but it’s likely to take shape in a slow grinding process with downward pressure starting in August fora couple months.

By Chris Vermeulen


Chris Vermeulen

Chris Vermeulen
President of AlgoTrades Systems
www.TheGoldAndOilGuy.com

10126 Hwy 126 East, RR#2
Collingwood, ON, L9Y 3Z1

Chris Vermeulen

Chris Vermeulen, founder of AlgoTrades Systems., is an internationally recognized
market technical analyst and trader. Involved in the markets since 1997.

Chris’ mission is to help his clients boost their investment performance while
reducing market exposure and portfolio volatility.

Chris is also the founder of TheGoldAndOilGuy.com, a financial education and
investment newsletter service. Chris is responsible for market research and
trade alerts for of its newsletter publication.

Through years of research, trading and helping thousands of individual investors
around the world. He designed an automated algorithmic trading system for the
S&P 500 index which solves his client’s biggest problem related to investing
in the stock market: the ability to profit in both a rising and falling market.

AlgoTrades’ automated trading systems allows
individuals to investing using either exchange traded funds or the ES mini
futures contracts. It is supported by many leading brokerage firms including:

– Interactive Brokers
– Trade MONSTER
– MB Trading
– OEC OpenECry
– The Fox Group
– Dorman Trading
– Vision Financial

He is the author of the popular book “Technical
Trading Mastery – 7 Steps To Win With Logic
.” He has also been featured
on the cover of AmalgaTrader Magazine, Futures Magazine, Gold-Eagle, Safe
Haven,The Street, Kitco, Financial Sense, Dick Davis Investment Digest and
dozens of other financial websites. His list of personal and professional
relationships approaches 25,000, people with whom he connects and shares
is market insight with out of his passion for trading.

Chris is a graduate of Seneca College where he specialized in business operations
management.

Chris enjoys boating, kiteboarding, mountain biking, fishing and has his ultralight
pilots license. He resides in the Toronto area with his wife Kristen and two
children.

Copyright © 2008-2017 Chris Vermeulen

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Published at Tue, 01 Aug 2017 10:47:00 +0000

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ADP: Private Employment increased 178,000 in July

 

ADP: Private Employment increased 178,000 in July

by Bill McBride on 8/02/2017 08:20:00 AM

From ADP:

Private sector employment increased by 178,000 jobs from June to July according to the July ADP National Employment Report®. … The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis.

“Job gains continued to be strong in the month of July,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “However, as the labor market tightens employers may find it more difficult to recruit qualified workers.”

Mark Zandi, chief economist of Moody’s Analytics, said, “The American job machine continues to operate in high gear. Job gains are broad-based across industries and company sizes, with only manufacturers reducing their payrolls. At this pace of job growth, unemployment will continue to quickly decline.”

This was close to the consensus forecast for 175,000 private sector jobs added in the ADP report.

The BLS report for July will be released Friday, and the consensus is for 180,000 non-farm payroll jobs added in July.

Published at Wed, 02 Aug 2017 12:20:00 +0000

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Dow at record on strong earnings; Apple earnings awaited

 

Dow at record on strong earnings; Apple earnings awaited

Tanya Agrawal

(Reuters) – U.S. stocks were higher in late morning trading on Tuesday, with the Dow coming within spitting distance of the 22,000 mark, helped by strong corporate earnings.

The Dow pierced through the historic 20,000 milestone in January and the 21,000 mark barely one and a half months later.

All eyes will now be on the quarterly performance of Dow-component Apple (AAPL.O), which reports after the closing bell. The iPhone maker’s shares were up 0.25 percent.

Tech has been the best performing sector this year, despite recent bouts of volatility on rising valuation concerns. The tech index’s .SPLRCT 0.49 percent rise on Tuesday led the major S&P sectors.

Amazon (AMZN.O) provided the biggest boost to the S&P 500 and the Nasdaq with its 1.5 percent rise.

“While valuations overall and for the tech sector isn’t cheap, some of the most powerful earnings growth has come from large-cap technology names,” said Bill Northey, chief investment officer at U.S. Bank Wealth Management.

Investors have been counting on earnings to support high valuations for equities. The S&P 500 is trading at about 18 times earnings estimates for the next 12 months, above its long-term average of 15 times.

S&P 500 earnings are expected on average to have grown 10.8 percent in the second quarter, according to Thomson Reuters I/B/E/S.

“We are two-thirds through the earnings season and estimates are going only higher, including for the full year, which is helping support the fundamentals-driven market.” said Northey.

At 10:58 a.m. ET (1458 GMT), the Dow Jones Industrial Average .DJI was up 89.92 points, or 0.41 percent, at 21,981.04 and the S&P 500 .SPX was up 5.6 points, or 0.22 percent, at 2,475.90.

The Nasdaq Composite .IXIC was up 16.49 points, or 0.26 percent, at 6,364.61.

A 0.22 percent fall in healthcare .SPXHC led the laggards. Pfizer (PFE.N) was down 1.10 percent after the drugmaker’s quarterly revenue missed expectations.

Regeneron (REGN.O) fell 3.58 percent following a rating downgrade by a brokerage. The stock was the top drag on the Nasdaq.

Economic data showed U.S. consumer spending barely rose in June as income failed to increase for the first time in seven months.

The core PCE numbers – the Federal Reserve’s preferred metric to gauge inflation – for June edged up 0.1 percent following a similar increase in May.

In the 12 months through June, the so-called core PCE price index increased 1.5 percent after advancing by the same margin in May, remaining below the Fed’s 2 percent target rate.

Under Armour (UA.N) fell 6.41 percent after the sportswear maker cut its full-year sales forecast.

Sprint (S.N) jumped 9.78 percent after swinging to a quarterly profit for the first time in three years.

Advancing issues outnumbered decliners on the NYSE by 1,599 to 1,113. On the Nasdaq, 1,376 issues fell and 1,282 advanced.

Reporting by Tanya Agrawal in Bengaluru; Editing by Anil D’Silva

Published at Tue, 01 Aug 2017 15:37:05 +0000

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Oil races back to $50 — but can it stay there?

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Is OPEC still relevant?
Is OPEC still relevant?

 Oil races back to $50 — but can it stay there?

  @mattmegan5

Crude oil is once again back from the dead, hitting the $50-a-barrel threshold. But is this rebound for real or just another head fake?

Oil rose above $50 a barrel early Monday before retreating a bit. While the milestone was brief, it marked the first time since May 25 that oil traded above $50. The development came after crude spiked nearly 9% last week, its biggest weekly rally in nearly a year.

It’s been another remarkable reversal for the notoriously-moody oil market. Just five weeks ago crude plunged into a bear market, sinking to as low as $42.05 a barrel. It’s now up almost 16% since then.

So what changed?

Most of the rebound has been driven by easing fears about the supply glut, but in recent days, oil bulls have also seized on the deepening chaos in Venezuela. Anything that knocks out more oil production in Venezuela, which has the most oil reserves in the world, could lift crude prices.

Venezuelan President Nicolas Maduro has drawn the wrath of Washington by holding a controversial vote on Sunday that could further erode the Latin American nation’s democracy.

Two senior government officials told CNN on Sunday that new sanctions on Venezuela could be announced as early as Monday. One option is a possible ban on sales of U.S. crude and refined products, though an embargo of shipments of Venezuelan oil to the U.S. is off the table for now, a source said.

Michael Tran, director of global energy strategy at RBC Capital Markets, said it’s “fairly likely” the U.S. will respond to Maduro by “tightening the screws on Venezuela.”

Venezuela has been in financial disarray for years, but the situation has escalated significantly. “It’s been a slow bleed in Venezuela — until it’s not,” Tran said.

 

Other OPEC nations helped drive oil prices higher last week. The oil market rallied after OPEC and non-OPEC countries signaled they’d be open to extending the production cut agreement beyond March 2018, if needed.

The cartel also signaled a willingness to target exports instead of just production. Saudi Arabia also said it would cut exports in August.

Fears about the lingering oil glut have also been eased by steady declines in global oil stockpiles. Inventories have declined thanks to strong demand during the peak of summer driving season in the U.S.

“Fundamentals have been the main driver of the price recovery,” Michael Wittner, global head of oil research at Societe Generale, wrote in a report.

crude oil 50 rebound

 

There’s also been hope that U.S. shale companies may be slowing their drilling after previously ramping up production so aggressively that it freaked out the market.

Halliburton(HAL) executive chairman Dave Lesar said during an analyst conference call last week oil “customers are tapping the brakes” and closely-watched rig counts “showing signs of plateauing.”

Oil bulls are hoping for evidence of restraint when a number of drillers post earnings this week, including Pioneer Natural Resources(PXD), Range Resources(RRC) and EOG Resources(EOG).

The good news for American drivers is prices at the pump remain cheap. The average gallon of gasoline fetched $2.316 on Monday, according to AAA. That is up from $2.239 a month ago.

Analysts don’t think drivers need to fear a speedy return to higher oil prices, though.

Societe Generale recently downgraded its view on the oil supply situation. The firm predicts that global inventories will shrink less than expected during the second half of this year before growing next year.

“We are cautious about prices, especially in September and October,” Wittner wrote.

U.S. shale companies ready to drill acts as a lid on the oil market. If prices keep rallying, it would only encourage robust supply from these U.S. drillers.

“A move to $60 a barrel in the very near term would likely be self-defeating,” said RBC’s Tran. “It’s a very delicate balancing act.”

Crude above $60 would allow U.S. producers to lock in those prices through hedging contracts.

“Once you hedge production, it’s drill, baby, drill,” said Tran.

–CNNMoney’s Patrick Gillespie contributed to this report.

Published at Mon, 31 Jul 2017 16:14:20 +0000

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