Friday, September 19, 2014

Dow sets new record while stocks drift lower

Dow rose 14, decliners over advancers 3-2 & NAZ fell 13.  The Alerian MLP index rose 3+ to the 537s & the REIT index was up pennies in the 297s.  Junk bond funds rebounded after recent selling & Treasuries saw buying.  Oil fell for a 3rd day on rising US supplies & as a stronger dollar weighed on commodity prices.  Gold fell to an 8-month low, near a multi year lows, as equities surged to a record, crimping demand for the precious metal as an alternative asset.

AMJ (Alerian MLP Index tracking fund)











CLV14.NYM....Crude Oil Oct 14....92.15 Down ...0.92  (1.0%)

Live 24 hours gold chart [Kitco Inc.]




Syria Rebel
Photo:    Bloomberg

Congress’s bipartisan passage of Obama's plan to arm & train Syrian rebels sets up a broader debate over the use of US military force when lawmakers return after the Nov election.  Yesterday’s 78-22 Senate vote came a day after the House passed the measure, which now goes to Obama for his signature.  When lawmakers return in mid-Nov for a post-election session, they plan a broader & likely far messier debate over the use of military force to combat Islamic State extremists.  Senators in both parties said before yesterday’s vote that the promise to hold that debate persuaded them to support the more narrow authority now.  The Syrian authorization is part of a package that funds the gov thru Dec, extends the Export-Import Bank’s charter through Jun 30 & provides $88M to help fight the spread of the Ebola virus in West Africa.  Obama requested the Syria aid on Sep 10.  He contends the US needs to help Syrian rebels combating the Sunni extremist group Islamic State, which has swept from Syria deep into Iraq with a campaign of terror that included the beheading of US journalists & a British aid worker.  “The strong bipartisan support in Congress for this new training effort shows the world that Americans are united in confronting the threat” from Islamic State, Obama said.  “As Americans, we do not give in to fear.”  National Security Adviser Susan Rice said that it will take months to begin training Syrian rebels who the US will count on to open a 2nd front against Islamic State.  The House added the Syria authorization measure to legislation funding the gov starting Oct 1, which avoids a repeat of last year’s 16-day partial gov shutdown.  House lawmakers adopted the Syria measure & then passed the spending package on a bipartisan vote.

Congress Syria-Rebel Aid Vote Sets Up Fight Over Force


Exxon Mobil, a Dow stock & Dividend Aristocrat, said the US gov is giving it more time to shut its Russian Arctic well beyond the deadline for sanctions aimed at halting the $700M project.  The company asked for an extension to allow it to continue performing shut-down work on the Universitetskaya-1 well in Russia's Kara Sea to make sure the well was safe before it’s temporarily abandoned.  The company already had ceased drilling the offshore well after US sanctions set a Sep deadline for ending the work.  “The U.S. Treasury Department, recognizing the complexity of the University-1 well and the sensitive Kara Sea arctic environment, has granted a license to Exxon Mobil and other U.S. contractors and persons involved to enable the safe and responsible winding down of operations related to this exploration well,” Exxon explained.  Sanctions had prompted XOM & its partner OAO Rosneft to temporarily halt drilling at the well, which lies about 260 feet beneath the sea surface off Siberia’s northern coast.  The well is aiming to tap a resource estimated to hold as much as 9B barrels of crude, worth $880B at current prices.  The halt is a blow to Russian pres Putin’s quest to find a new generation of oil fields to replace declining output from some of the country’s Soviet-era reserves.  The Russian oil industry is dependent on expertise & equipment from the US & Europe to penetrate crude reservoirs that are deeper, denser & more remote than anything they’ve attempted before.  The disruption also is a setback for XOM as it seeks to lift production that touched a 4-year low in 2013 as the rate it’s replacing output with new discoveries tumbled to the lowest in half a decade.  The stock went up 51¢.  If you would like to learn more about XOM, click on this link:
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Exxon Gets U.S. Sanctions Extension to Shut Russian Arctic Well

Exxon Mobil (XOM)




General Motors will begin building a new “top-end, high-technology” sedan next year, as the largest US automaker’s luxury brand contends with declining sales.  Production of the rear-wheel-drive model will start in Q4-2015 at the Detroit-Hamtramck plant.  The sedan, which hasn’t been named yet, “adds to rather than replaces any model” in Cadillac’s lineup, the company said, without giving details of its features.  US Cadillac sales slid 18% last month, including a 35% drop for the CTS sedan.  The deliveries fell 4.7% this year thru Aug, amid gains of 2.8% for GM & 5.1% for the industry.  Cadillac is “not capitalizing” enough on the “tremendous growth” in luxury-auto sales, marketing chief Uwe Ellinghaus said last month.  GM said that the new Cadillac model is part of its previously announced $384M investment at the Detroit-Hamtramck factory. The automaker also said in Aug that it will move production of the Cadillac SRX sport utility vehicle to Spring Hill, Tennessee, from Mexico.  The stock lost 11¢.  If you would like to learn more about GM, click on this link:
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GM to Add New ‘Top-End’ Cadillac Sedan as U.S. Sales Slump

General Motors (GM)




This was a confusing day.  Dow hit a new record high without strength in the rest of the market.  Alibaba (BABA) had its whopper IPO & shot up 25 above the IPO price of 68.  NAZ declined, probably because investors were selling other tech stocks to buy BABA.  The market breadth was negative, always a bad sign.  DC is confused about this war (whatever they call it) with ISIS.  The pres has announced a lot of things we will not do, like sending troops there, but they are already there.  Nothing like giving the bad guys time to build defenses.  Now those guys in DC have to figure out how to pay for the fighting.  There's only 1 way, increase the fiscal deficit.  All the confusion coming from DC about what the US is going to do sends the wrong message to countries in the MidEast.  The stock market doesn't like that & uncertainty is on the rise.

Dow Jones Industrials






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Markets cautiously rise on leading economic data

Dow rose 50, decliners barely ahead of advancers & NAZ added 3.  The Alerian MLP index was up pennies in the 534s & the REIT index went up pennies in the 297s.  Junk bond funds climbed higher & Treasuries were flattish.  Oil & gold continued sliding, drifting lower.

AMJ (Alerin MLP Index tracking fund)



CLV14.NYM....Crude Oil Oct 14...92.93 Down ...0.14  (0.2%)

GCQ15.CMX...Gold Aug 15.....1,226.50 Down ....3.60  (0.3%)












The Conference Board’s index of US leading economic indicators, a gauge of the outlook for the next 3-6 months, climbed 0.2% in Aug after increasing 1.1% in the prior month.  The forecast called for an advance of 0.4% & estimates ranged from gains of 0.2-0.7%.

Leading Economic Indicators in U.S. Increased 0.2% in August


Australian Treasurer Joe Hockey
Photo:   Bloomberg

Global finance chiefs gathering in Australia, face growing pressure to take steps to bolster growth as the global economic outlook dims.  The G-20 economies will share plans of finance ministers & central bankers on ways to boost GDP by 2% over 5 years, a commitment that the group will reiterate, an official said, citing the draft communique.  G-20 delegates see the global growth outlook as less positive than early this year, he said.  The global economic recovery has faltered since a Feb G-20 meeting, with Europe showing signs of slipping into deflation, Japan’s revival blunted by a sales tax increase in Apr & China's 7.5% growth target for 2014 becoming harder to attain.  Some officials, like Treasury Sec Lew, are pressing members to consider more immediate measures to boost demand.  “Overall, the global economy continues to underperform. This is particularly true in the Euro area and Japan,” Lew said.  “More work is needed to achieve faster and more balanced growth, to boost demand especially in surplus countries, and to promote employment.”  OPEC this week trimmed its growth forecasts for the biggest developed economies.  Euro-area GDP is expected to expand 0.8% this year, down from 1.2% forecast in May, while the US will expand 2.1% instead of 2.6%.  Growth in the G-20 slipped in Q2 to 3.2% from a year earlier, down from 3.4% in Q1.  G-20 members have come up with measures that bring the largest economies close to the GDP goal set in Feb, while not meeting the target yet.

Biggest Economies Seek Agreement on Growth as Outlook Dims


Russia plans next week to discuss contingency measures to cut the country off from the global Internet in what the Kremlin called a necessary step to shield the nation from the U.S.-controlled worldwide Web.  Russia’s state security council will examine ways to ensure domestic users can be redirected to servers inside the country rather than relying on the US-managed Internet domain-names system.  “We need to defend ourselves from the U.S. and Europe,” pres Putin's spokesman said .  “This is not about isolating ourselves, it’s about getting ready for possible cut-offs as countries that regulate the Web may act unpredictably.”  Russia, on the brink of recession after US & EU sanctions provoked by the worst geopolitical rift in decades, has been tightening control of the Internet this year.  Putin, a former KGB colonel who’s centralized power since he became president in 2000, has called the Internet a creation of US spy agencies.  Russia may urge its telecommunication operators to adjust their equipment to enable access to the Russian Internet autonomously in case of war or mass protests, according to a Russian newspaper.  The entire global system of Internet domain names & IP addresses is managed by the Internet Corp for Assigned Names &Numbers, or ICANN.  Putting a block on the worldwide Internet doesn’t present technical challenges & is only a matter of political will, said a blogger in Russia.  Russia last month banned anonymous access to the Internet in public spaces & expanded the regulation of media to the blogosphere, requiring those with at least 3K daily readers to register their real names & contact information.  In Feb the authorities had passed a law allowing them to close webpages without a court decision if material is deemed “extremist.”  Russian opposition leader Alexey Navalny, who used to criticize Putin & reveal corruption among his inner circle, was the first victim of that law when his blog on LiveJournal.com was shut in Mar.  Recent legislation requires Internet companies to store Russian users’ information on servers in the country, similar to Chinese regulations.

Russia Plans Break From Global Web as U.S. Rift Deepens


The markets are waiting for Alibaba (BABA) to make its debut.  In the meantime, not much is going on.  Financial bigwigs are meeting, trying to come up with plans to accelerate growth.  As usual, don't expect much to come from this meeting other than hot wait.  Until BABA stock is released for trading, little will happen in the markets.

Dow Jones Industrials



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