|Bid||257.84 x 1100|
|Ask||257.79 x 1000|
|Day's Range||254.67 - 258.02|
|52 Week Range||230.52 - 269.28|
|PE Ratio (TTM)||N/A|
|Beta (3Y Monthly)||1.07|
|Expense Ratio (net)||0.15%|
The EIA (U.S. Energy Information Administration) reported an increase of 6.5 MMbbls (million barrels) in US crude oil inventories to 416.4 MMbbls for the week ended October 12. A Reuters poll had indicated a potential rise of ~2.16 MMbbls.
Cleveland-Cliffs (CLF) has come a long way with respect to its debt levels. The company’s change in management in 2014 and its focus on debt reduction have somewhat allayed investors’ concerns. During the Q2 2018 earnings call, Cleveland-Cliffs maintained that bringing its net debt below $1 billion is its second priority, after the focus on the HBI (hot-briquetted iron) plant.
According to the latest BAML (Bank of America Merrill Lynch) survey, investors’ outlook for economic growth has worsened further. In August, a net 7% of the managers surveyed expected global growth to slow down next year. In September, a net 24% of the managers surveyed expected global growth to slow down in the next 12 months.
BAML (Bank of America Merrill Lynch) conducted a survey that polled 231 global investors with $646 billion in total assets under management from October 5–11. The sell-off and concerns of peaking growth in the US might have tempted investors to shift into emerging markets (EEM). The emerging market currencies were in a free fall with many countries like Argentina, Turkey, India, Indonesia, and Brazil bearing the brunt.
The greenback's gains against emerging market currencies have been steeper. The MSCI Emerging Markets Currency Index, which tracks the performance of 25 emerging market currencies against the U.S. dollar, has declined 5.5 percent.
Freeport-McMoRan (FCX) is having a rough year, losing 32.2% of its market capitalization based on its October 12 closing price. Among the other copper miners, Rio Tinto (RIO) and Southern Copper (SCCO) have lost 1.5% and 10.9%, respectively, this year.
In the week ending October 5, US crude oil inventories were at their five-year average—the same as the previous week. Oil prices and the inventories spread usually move inversely, as you can see in the following chart. If the inventories spread expands into the positive territory, it might drag oil prices in the coming weeks. The inventories spread is the difference between inventories and their five-year average.
The market continues to try and bounce back from its route the last couple of weeks. All three indices, (QQQ)(SPY)(DIA) are up about a percent so far this morning, but all three are down solidly from almost 4% for the Dow to almost 7% for the Nasdaq. Jittery investors want to know if the rally can hold up. Let’s look under the hood at some of the movers including BLK, GWW, MS, GS, UNH, JNJ, DPZ, and ADBE. Blackrock (BLK) continues its slide down about 4% today ($408) and now over 25% from its peak ($550) in June. Larry Fink said they saw people dumping investments even before the downturn. This name has a huge earnings cliff that may get worse. The NTM earnings multiple is still 16x while it dropped to close to 10x in 2011. Morgan Stanley (MS) had a sold quarter and is up 3%+, but wow, look at the earnings cliff. It goes from 33% earnings growth this year to 7% (that will probably go up) next year. Luckily it is only 9x 2019 earnings. It is pretty cheap and could likely bounce for a bit, but don’t get too excited about next year.
To most Americans, a $21-trillion national debt and a $779-billion federal deficit may seem like they have no impact on day-to-day life. The latest U.S. budget deficit numbers are enough to keep any fiscally minded American up at night. The numbers out of Washington indicate the national debt could rise by $1 trillion in 2019 alone.
On October 15, the EIA (U.S. Energy Information Administration) released its Drilling Productivity Report. According to the report, US crude oil production from major US shale regions could reach 7.7 MMbpd (million barrels per day) in November—a rise of 24.9% on year-over-year basis.
Cleveland-Cliffs (CLF) reported volumes of ~6 million long tons for its US (DIA) iron ore (or USIO) division for Q2 2018. The volumes during the quarter reflect a YoY (year-over-year) increase of 38%. The primary reasons for the increase in volumes were increased customer demand and change in the method of sales recognition.
Verizon Communications Inc. ( VZ) has been one of the market’s perennial laggards, underperforming both the S&P 500 and Dow Jones Industrial Average over the past five years. “I don’t think that most people, or institutions, or money managers, have grasped, yet, just what is happening,” wrote Mark Grant, the chief global strategist at investment bank B. Riley FBR, as reported by Barron’s.
Cleveland-Cliffs (CLF) is slated to release its third-quarter results before the market opens on October 19. It will have a conference call with analysts and investors on the same day at 10:00 AM EDT. CLF’s second-quarter results were a solid beat on expectations.
On October 5–12, US equity indexes fell. Last week, the S&P 500 (SPY), the the Dow Jones Industrial Average (DIA), and the S&P Mid-Cap 400 (IVOO) fell 4.1%, 4.2%, and 4.9%, respectively. Energy stocks form ~5.9%, 5.2%, and 5.1%, respectively, of these equity indexes.
On October 5–12, US crude oil November futures fell 4% and closed at $71.34 per barrel on October 12. Bearish inventory data might have pulled oil prices in the last week.
Weaker-than-expected Retail Sales numbers for September, with a headline of +0.1% growth, was well beneath the +0.7% analysts had been looking for.
3M Company (MMM) remained busy last week, launching two new products in different segments. On October 9, 3M launched SoluPrep Film-Forming Sterile Surgical Solution, a solution containing 2% chlorhexidine gluconate and 70% isopropyl alcohol, to fight surgical site infections caused by infectious bacteria around the surgical incision area.
On October 11, US crude oil’s implied volatility was 26.2%, which is ~3% above its 15-day average. The inverse relationship between oil prices and oil’s implied volatility is illustrated in the following graph. Since reaching a 12-year low in February 2016, US crude oil active futures have risen 170.8%. Crude oil’s implied volatility has fallen ~65.2% since February 11, 2016.
Rising interest rates tend to draw capital from equities to bonds, and these trends are reinforced by a flight to safety. The RSI appears very oversold at 16.95, but the MACD remains in a long bearish downtrend.
Today, October 12, the broader market is bouncing back after falling for six consecutive sessions. As of October 11, the S&P 500 index (SPY) has fallen 6.4% MTD (month-to-date). The Dow Jones Industrial Average (DIA) and the Nasdaq Composite index (QQQ) have fallen 5.3% and 8.7%, respectively.
On October 4–11, US equity indexes had the following correlations with US crude oil November futures: the S&P 500 (SPY): 87.7% the Dow Jones Industrial Average (DIA): 87.7% the S&P Mid-Cap 400 (IVOO): 87.3%