U.S. equities mostly finisher higher on Tuesday, recovering from Monday’s post-holiday weakness. Headlines focused on OPEC ahead of a minister-level meeting on Wednesday where expectations are heightened for an oil production freeze that’s been teased in various forms since February.
In the end, the Dow Jones Industrial Average gained 0.1%, the S&P 500 Index wafted up 0.1%, the Nasdaq Composite added 0.2% and the Russell 2000 gave back 0.1%. Treasury bonds were mostly stronger, the dollar was higher, gold lost 0.3% and crude oil fell 3.9%. The dollar’s rise boosted the ProShares UltraShort Yen (NYSEARCA:YCS) recommended to Edge subscribers to a gain of 12% since recommended on Nov. 10.
Energy was hit on a ramp in skepticism surrounding the ability of Saudi Arabia, Iraq and Iran to agree to cap production — let alone reduce output from current levels — amid fiscal budget pressures, military engagements, ongoing desire to recapture market share from U.S. shale producers and the fact that these countries don’t really like each other.
The latest hang up is over where Iran’s production should be capped. Iran reportedly proposed a deal to freeze at 3.975 million barrels per day, about 200,000 above current levels. The Saudis countered for the cap to happen at current levels and continues to push for an output cut from Iraq. And Iraq, for their part, wants an exemption because of its ongoing fight against the so-called Islamic State.
Given the ongoing differences, Goldman Sachs assigns a 30% chance to a deal being hammered out tomorrow. I believe they are somewhat higher, since some type of face-saving deal as a fallback plan.
No surprise then that energy stocks led the decliners with a 1.2% loss. REITs and healthcare names were strong with gains of 0.7%.
RV maker Thor Industries, Inc. (NYSE:THO) gained 12.6% on a top- and bottom-line beat driven by strength in both the towable and motorized segments. Backlogs in both segments are up 100% from last year as the company continues its integration of Jayco.
In retail, Tiffany & Co. (NYSE:TIF) gained 3.2% on an earnings beat on better sales and lower expenses, as management flagged “early signs” of improving sales trends.
Jewelry and fifth wheels. Consumer sentiment is looking good.
And finally, on the economic front, there was a stronger-than-expected upward revision to Q3 GDP growth and a new post-recession high in consumer confidence and home prices.
GDP growth increased to a 3.2% annualized rate from an initial estimate of 2.9%, beating the 3.0% consensus estimate for the best result in three years. Consumer confidence increased to 107.1 in November, up from 98.6 in October and ahead of the 101.1 consensus estimate (Trump effect?).
And the September Case-Shiller Home Price Index gained 0.4% from August for a 5.5% gain from last year, pushing prices above the July 2006 peak of the housing bubble for the first time.