Thursday, January 5, 2017

Thursday, January 5, Night Wall Street Roundup: Nasdaq Reaches Record High, Macy's Stirs Retail Fear

By Noel Randewich
Reuters
January 5, 2017

The Nasdaq squeaked out a record high close on Thursday thanks to Amazon.com, while deep drops in Macy's, Kohl's and other department stores weighed on the broader stock market.

U.S. stocks have wavered over the past three weeks following a strong surge in the wake of the November election, with investors expecting President-elect Donald Trump to stimulate the economy through tax cuts and infrastructure spending.

Many on Wall Street want evidence that his campaign-trail promises will be approved by Republican lawmakers and come to fruition.

"The market is pausing for a reason, it’s waiting for confirmation from Washington and the Trump agenda," said Jeff Zipper, managing director for investments at Private Client Reserve at U.S. Bank in Palm Beach, Florida.

Department stores Macy's (M.N) dropped 13.89 percent while Kohl's (KSS.N) slumped 19.02 percent after the companies said their holiday sales fell more than expected.

The warnings swept up other department stores in their wake - Nordstrom (JWN.N) fell 6.87 percent and J.C. Penney (JCP.N) fell 7.20 percent.

But online retailer Amazon.com (AMZN.O), which has been luring customers away from department stores, rose 3.07 percent, helping push the Nasdaq Composite to a record high close.

The Nasdaq Composite .IXIC rose 0.2 percent to end at 5,487.94, less than 1 point higher than its previous record high close on Dec 27.

The Dow Jones Industrial Average .DJI lost 0.21 percent to end at 19,899.29 while the S&P 500 .SPX lost 0.08 percent to 2,269.

Six of the 11 major S&P 500 sectors fell, with financials .SPSY down 1.02 percent and hurt by JPMorgan (JPM.N), Wells Fargo (WFC.N) and Bank of America (BAC.N).

Adding to downbeat sentiment was the ADP National Employment report, which showed fewer jobs than expected were added in the private sector in December.

The report was seen as a hint ahead of Friday's more comprehensive nonfarm payrolls report that includes both private and public sector hiring.

Broadly, the economy is seen by many economists as near full employment, a factor that may help corporate profits - and stock prices - as fourth-quarter earnings season starts in the next few weeks.

"If we get a 5- or 10-percent pullback here, most people will be buying, because the fundamental backdrop is still pretty good, and getting better. This is probably the best economic environment for a new incoming president in 20 years," said John Canally, chief economic strategist for LPL Financial.

Declining issues outnumbered advancing ones on the NYSE by a 1.27-to-1 ratio; on Nasdaq, a 1.46-to-1 ratio favored decliners.

The S&P 500 posted 17 new 52-week highs and no new lows; the Nasdaq Composite recorded 86 new highs and 15 new lows.

About 7.2 billion shares changed hands in U.S. exchanges, more than the 6.8 billion daily average over the last 20 sessions.


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Thursday, January 5, Morning Global Market Roundup: World Stocks Hit 1-1/2 Year High After Strong China Data

By Abhinav Ramnarayan 
Reuters
January 5, 2017

World stocks hit their highest level since mid-2015 on Thursday after strong Chinese data added to the optimism about global growth and inflation that has been driving markets since the start of the new year.

Growth in China's services sector accelerated to a 17-month high in December, a private sector survey showed, adding to upbeat factory and service sector surveys out of the United States, Europe and Asia released this week.

In addition, minutes from the U.S. Federal Reserve's December meeting showed that many of the central bank's policy makers are expecting a pick-up in economic growth and inflation in the world's biggest economy as a result of fiscal, regulatory or other policies.

The MSCI world equity index .MIWD00000PUS, which tracks shares in 46 countries, was up 0.4 percent at one stage to hit its highest level since July 2015. At that level it was up over 1.5 percent for the year so far.

The index was pushed up by Asian shares, which rose for the eighth consecutive day on Thursday .MIAPJ0000PUS.

"Risk-On Mode"


European shares held steady near recent highs .

"Recent economic data is pretty good so markets are in risk-on mode overall," said Yukio Ishizuki, currency strategist at Daiwa Securities. "But U.S. bond yields are being capped so the dollar is losing the driver behind its rally."

Stocks and bond yields have been rising ever since the election of Republican Donald Trump as U.S. president on expectations that fiscal stimulus will boost growth and inflation. Trump's inauguration takes place on Jan. 20.

"The FOMC's minutes to its Dec meeting released post yesterday's European close could best be characterized as perhaps tilted toward the hawkish side but tempered by a heavy dose of uncertainty," said Rabobank strategist Richard McGuire.

"All the policymakers emphasized the uncertainty of the outlook, reminding investors that the outlook is more nuanced than the market seems to think," he said.

With just two weeks to go before Trump takes over, investors and policymakers are waiting to see if his actions match his rhetoric and if his policies will be approved by Republican lawmakers.

The dollar extended its losses on Thursday, falling 0.42 percent against a basket of six major currencies .DXY - though still near the 14-year high hit on Tuesday - following losses against the Chinese yuan.

China stepped into both its onshore and offshore yuan markets to shore up the faltering yuan for a second day on Wednesday, sparking speculation that it wants a firm grip on the currency ahead of Trump's inauguration.


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Oil Rises As Saudi Arabia Discusses Supply Cuts

By Christopher Johnson
Reuters
January 5, 2017

Oil prices rose slightly on Thursday after reports Saudi Arabia had started talks with customers about a reduction of up to 7 percent in crude sales in February to support an attempt by OPEC to reduce global supply.

The Organization of the Petroleum Exporting Countries promised in November to cut output to help prop up prices.

Under the deal, Saudi Arabia agreed to cut output by 486,000 barrels per day (bpd), or 4.61 percent of its October output of 10.544 million bpd.

"Aramco is approaching all its customers for possible cuts from February and discussing likely (supply) scenarios," one source told Reuters. "Nothing is confirmed yet," the source said, adding the scenarios were for cuts of 3-7 percent.

Investors have been suspicious that OPEC may not cut as much as promised, but several sources told Reuters on Thursday that the world's biggest oil exporter would comply with the OPEC cuts.

Benchmark Brent crude oil LCOc1 was up 20 cents a barrel at $56.66 by 1110 GMT (6:10 a.m. ET). U.S. light crude oil CLc1 was up 20 cents a barrel at $53.46. Both contracts rose by around 2 percent on Wednesday.

"There remains a question mark over whether OPEC, with a long history of non-compliance, will actually follow through (with the cuts). Very few respondents expect full compliance," Singapore Exchange (SGX) said on Thursday, citing results from a survey of its participants.

"Three-quarters of those surveyed went for (crude) prices averaging within the current $50-$60 a barrel range (for 2017)," SGX added.

Analysts at U.S. bank Goldman Sachs said even if OPEC reduced production as promised, there was "only moderate oil spot price upside given the expected supply response to higher oil prices and new production".

The U.S. bank said it expected Brent prices to peak at $59 a barrel by mid-2017.

In another sign of compliance with the cuts, Abu Dhabi National Oil Company (ADNOC) has scheduled maintenance at oilfields for March and April, although it was not immediately clear how much exports might fall.

Oil prices also found support from an American Petroleum Institute (API) report showing U.S. crude inventories fell 7.4 million barrels last week.

U.S. government figures on inventories were due to be published at 11 a.m. EST (1600 GMT) on Thursday.

A Reuters survey forecast the EIA report would show U.S. crude stocks declined by about 2.2 million barrels in the week to Dec. 30. [EIA/S]


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