Stocks gain momentum ahead of Bernanke testimony


WASHINGTON, May 22, 2013 – The price of oil was little changed above $96 a barrel Wednesday as investors waited confirmation of a rise in U.S. crude stocks and the Federal Reserve’s latest views on the U.S. economy. By early afternoon in Europe, benchmark crude for July delivery was down 3 cents to $96.15 a barrel in electronic trading on the New York Mercantile Exchange. The June contract fell 55 cents to settle at $96.16 a barrel on Tuesday.

Just before this morning’s opening bell, that contract has dropped further to $95.51 bbl., perhaps reflecting less supply anxiety as Oklahoma, home of the largest American oil storage facilities in Cushing, begins to dig out from the massive tornado activity it recently sustained. There is no evidence that the Cushing storage system sustained any damage from the megastorm.

Ric Spooner, chief market analyst at CMC Markets in Sydney, said traders there were keeping tabs on the U.S. Fed, whose chairman is to appear before Congress later today. Traders will be scrutinizing Ben Bernanke’s remarks for any hints of a change in monetary policy by the U.S. central bank.

Even after the recent market furor over some Fed officials’ remarks hinting at a “tapering” of QE infinity, Bernanke’s comments will likely not provide further insight. The comments may have been a trial balloon, and positive Wall Street futures are reflecting that with the market just opening on a slightly positive note.

Spooner also said that an increase in crude inventories of roughly 530,000 barrels reported by The American Petroleum Institute on Tuesday put downward pressure on prices. Analysts were expecting a decline of 1.2 million barrels in crude, according to a survey by Platts, the energy information arm of McGraw-Hill.

“Although we are into the driving season, it is still the case that inventory levels are high and production capacity is high, so I think there is a bit of risk to the downside,” Spooner said.

A report by the U.S. Energy Department’s Energy Information Administration, which is the market benchmark, will be out later Wednesday.

Supply risks like the escalation of the conflict in Syria and the slow pace of return of South Sudan’s oil output to the international markets — now blamed on a pipeline closure and earlier affected by a transit fee dispute with Sudan — “are currently preventing a more pronounced price slide,” said a report from Commerzbank in Frankfurt.

Brent crude, a benchmark for many international oil varieties, was down 23 cents to $103.68 a barrel on the ICE Futures exchange in London.

–AP contributed to this report

Today’s trading action:

We still advise holding the line on enthusiasm today, at least until the Fed’s remarks come out later in the day. Even when these remarks are viewed as positive, the market has a way of going negative once Fed statements are released. Added to today’s likely light, pre-holiday trading volume, things could get volatile this afternoon.

We continue to focus on last minute research regarding three IPOs that may be available to us (see yesterday’s column), and have also put in for shares of Blackstone Mortgage Trust (BXMT), which is pricing a secondary after the close. BXMT is a bit difficult to parse. One of many stepchildren of the massive Blackstone financial juggernaut (BX), the pieces of BXMT have been around for nearly a decade, with most of its recent assets having been part of the publicly traded Capital Trust (CT).

In a transaction earlier this month, the inexpensively-priced stock of CT, trading at less than $3 per share, underwent a one-for-ten reverse split, with the newly issued shares of CT trading under its new name, Blackstone Mortgage Trust. Organized as a REIT, CT and its successor have not paid a regular dividend, although CT issued a huge “special dividend” of $2 per share in Q4 2012.

As usual for a REIT secondary that occurs early in the game, BXMT hasn’t indicated what if any dividend can be expected in FY 2013, so this will likely (but not certainly) result in a dip after the secondary begins to trade tomorrow which means the issue may prove unattractive. That said, currently owned or anticipated property purchases, plus BXMT’s intention to participate in commercial loan origination and servicing in addition to purchases and sales of complicated debt obligations may ultimately result in returns that could rival those of current yield kingpin American Capital Agency (AGNC).

But speculation is speculation. In this frothy market, it’s likely a better idea to invest in REITs that already have a proven yield track record that’s likely to continue positive for at least the next four quarters. Without an initial dividend to stabilize it, BXMT may be iffy on this secondary. That said, Blackstone is not generally known for creating losers.

The attractiveness of the secondary will likely be determined by the pricing, currently pegged at $28.20 per share as of this writing. Depending on that, we may or may not enter when we learn final pricing later tonight. At the moment, though, we’re disinclined to pick up any shares as we think we might find a better price after the offering is completed. But in this market, you never know.

Have a good Wednesday.


Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate.

Positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.

Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.

References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.

Follow Terry on Twitter @terryp17


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Terry Ponick
Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17