US stocks waver, Aug. 15-19

Qualms that Federal Reserve chair Janet Yellen would hike rates this year during a speech on Aug. 26 at the Federal Reserve Bank of Kansas City’s annual economic policy symposium in Jackson Hole, Wyo., dampened enthusiasm for stocks. The Dow Jones Industrial Average slid 0.1% to 18,552.57 and the S&P 500 Index shed 0.01% to 2,183.87. Spot gold advanced US$5.40 per oz. to finish at US$1,341.10 per oz., while the Philadelphia Gold & Silver Index dropped 3.6% to 107.69. On a more positive note, Moody’s Investors Service changed its outlook for base metals to stable from negative. “The extreme price deterioration for major base metals — aluminum, copper, nickel and zinc — seen in late 2015 and early 2016 has likely bottomed,” it noted, while cautioning that “we do not expect material improvement from current levels over the next 12 to 18 months.”

Shares of Rio Tinto rose US98¢, or 3% to US$32.06, after comments from Moody’s. The New York-based rating agency changed its rating outlook on the company to stable, saying it anticipates that Rio “will continue to focus on balance sheet strength,” and that the company’s “cost position and volume levels are expected to generate acceptable earnings.” Moody’s also said the outlook “considers the company’s ongoing ability to drive out costs, reduce capital expenses and reduce dividend payout going forward.” Rio  would be “free cash-flow generative, given actions taken to date,” Moody’s said, adding that its “liquidity position will continue comfortably above ongoing requirements.” The ratings agency pointed out that iron ore prices “are up off the lows of late 2015,” and that the slide in copper and aluminum prices “has likely bottomed.”

Rumors reported by Bloomberg News on Aug. 18 that China Investment Corp. is in talks with Vale for a multibillion-dollar, iron ore streaming deal sent the Brazilian miner’s shares up 6%, or US33¢ to US$5.97 apiece. The Chinese sovereign fund “is negotiating the potential purchase of a portion of Vale’s future iron-ore output for as long as 30 years,” the news agency said, quoting two unnamed sources. Vale “could fetch $9 billion upfront from the sale … a so-called streaming transaction would allow CIC … to profit from a recovery in commodity prices, without bearing all the operational risk.”