Wednesday, July 23, 2014

Higher markets on Apple results

Dow dropped 26, advancers over decliners 4-3 & NAZ advanced 17.  The MLP index lost steam in the PM, finishing up fractionally to the 526s (inches below the prior record), & the the REIT index rose fractionally to the 309s.  Junk bond funds gained & Treasuries inched higher, with the lowest yields in almost 13 months.  Oil rose after a gov report showed stockpiles dropped at Cushing, Oklahoma, the contract’s delivery point, & gold was flattish.

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CLU14.NYMCrude Oil Sep 14103.03 2:53PM EDTUp 0.64 (0.63%)

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The Federal Reserve (FED) may have scope to keep interest rates at zero for longer than investors anticipate as inflation stays muted & a 2014 slowdown prolongs the labor-market recovery, the IMF said.  The IMF cut its US growth forecast for this year to 1.7% from 2% predicted in Jun, citing a Q1 contraction, after a 1.9% advance last year.  The fund left its 2015 forecast at 3%, the fastest expansion since 2005.  “Even with that relatively good growth outlook, we still see there’s a lot of slack in the economy,” Nigel Chalk, deputy director of the IMF’s western hemisphere department, said.  The nation’s jobless rate fell to 6.1% in Jun, down from 6.6% in Jan, even as harsh winter weather contributed to a 2.9% contraction in GDP in Q1.  While the job market is weaker than the unemployment rate implies, there’s “meaningful rebound” under way, the staff report said.  “With better growth prospects, the U.S. should see steady progress in job creation but headline unemployment is expected to decline only slowly.”  For the rest of this year, the IMF predicts growth will accelerate 3-3.5%.  The projected rebound will “well exceed potential for the foreseeable future,” the IMF said in its Article IV report.  The fund said potential growth is about 2%, down from more than 3% in the decade before the 2008 global financial crisis.  Still, stagnant wages, elevated long-term unemployment rates & weak labor participation may limit growth, the report said, forecasting the US will reach full employment by the end of 2017 as inflationary pressures stay “muted.”  “If true, policy rates could afford to stay at zero for longer than the mid-2015 date currently foreseen by markets.”  The IMF urged the FED to improve its communications to help alleviate uncertainty about the direction of policy, saying officials should consider more press conferences & releasing a quarterly monetary policy report.

IMF Says Fed May Have Scope for Zero Rate Past Mid-2015

PepsiCo, a Dividend Aristocrat, reported better-than-projected profit & raised its annual forecast after reducing costs, giving the company more leverage in a looming fight with activist investor Nelson Pelz.  Excluding some items, EPS was $1.32, topping the $1.23 estimate.  PEP expects to increase EPS 8% this year, excluding the effects of currency fluctuations, up from a previous target of 7%.  The results may help CEO Indra Nooyi ward off an attack from Peltz who has lobbied to break up the company’s snack & beverage businesses.  The latest results were helped by cost cutting & better-than-expected performance in Europe.  Organic revenue grew 5% in Europe, lifted by higher pricing & a 1% volume sales gain in both snacks & drinks.  Q2 EPS was $1.29, compared $1.28 a year earlier.  Revenue rose 0.5% to $16.9B, beating the $16.8B estimate.  Snack volume increased 1%, as did global beverage volume.  The company said it’s on track to deliver $1B in productivity savings this year.  The stock jumped 1.65.  If you would like to learn more about PEP, click on this link:

PepsiCo Profit Beats Estimates as Nooyi Turns to Cost Cuts to Thwart Peltz

Pepsico (PEP)

Apple signaled that the long wait for new products is nearing an end.  With bigger-screen handsets in development, AAPL said yesterday that shoppers are delaying buying new iPhones, which will weigh on sales in the current qtr.  Yet rather than dissuade buyers from procrastinating, the company stoked anticipation for new devices on a conference call, with CEO Tim Cook talking about an “incredible pipeline” that “we can’t wait to show you,” & finance chief Luca Maestri declaring it would be a “very busy fall.”  Looking ahead to new gadgets is the main reason investors barely reacted to fiscal Q3 results yesterday when the company posted a 12% rise in net income to $7.75B & a 6% revenue increase to $37.4B, with strong iPhone & Mac sales making up for a drop in iPad demand.  AAPL has released new iPhones each Sep for the past 2 years.  Maestri, who took over as the CFO this year, said that the trend of customers waiting for new releases is especially pronounced in English-speaking countries where more rumors are spread online about the company’s product pipeline.  He said AAPL took that phenomenon into account when crafting its outlook for the current qtr.  The company projected sales of $37-$40B, slightly below the $40.6B estimated.  “We’re seeing some purchase delays and we’ve reflected that in our guidance,” Maestri said.  “It happens. We have to live with that.”  In the most recent qtr, iPhone sales rose 13% to 35.2M & Mac sales increased 18% to 4.4M, helping offset a 2nd-straight quarterly decline for the iPad, with sales dropping 9% to 13.3M as the tablet market becomes more saturated, especially in the US & Western Europe.  The results reinforced the importance of the iPhone, which accounts for more than half of revenue & about 70% of profit.  The company also continued to boost its quarterly div, to 47¢.  Thru divs & buybacks, AAPL has paid out $74B as part of a $130B capital return program that’s authorized for another 6 qtrs.  The stock went up 2.47.  If you would like to learn more about AAPL, click on this link:

Apple Signals New Products Are Near With Larger IPhones, Wearable Devices

Apple (AAPL)

Earnings were the story today & they were basically favorable although Dow had 20 stocks decline led by Boeing (BA), Caterpillar (CAT & Cisco (CSCO).   AAPL gave a boost to the NAZ.  While Dow has been edging higher, it's only up a little more than 100 since Jun 6.  This is another reminder that the recovery is less than robust, not to mention growing truobles around the world.
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Markets rise cautiously on earnings reports

Dow lost 11, advancers over decliners 3-2 & NAZ added 19.  The MLP index soared 4+ to 529 (yet another record) & the REIT index slid a fraction in the 308s.  Junk bond funds rose & Treasuries went up, bringing the yield on the 10 year Treasury near a 13 month low.  Oil & gold climbed higher.

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CLU14.NYM...Crude Oil Sep 14...102.58 Up ...0.19 (0.2%)

GCN14.CMX...Gold Jul 14.........1,313.40 Up ...7.30 (0.6%)

Separatists shot down 2 Ukrainian fighter jets in the same eastern region where MH17 was destroyed, the gov said.  Rebels downed 2 SU-25 fighters in the Donetsk region, Defense Ministry spokesman Oleksiy Dmytrashkovsky said.  They were hit from a rebel missile-defense system over the village of Dmytrivka.  The pilots ejected & their whereabouts are unknown.  The incident comes nearly a week after MH17 was hit by a missile that the US says was probably fired from a Russian-supplied launcher.  If verified, it raises the question of whether pres Putin’s military is still allowing the pro-Russian rebels access to weaponry capable of downing fighters.  Insurgents also have used less advanced anti-aircraft weapons, which could be used to target low-flying planes.  “This shoot-down shows the separatists are pressing ahead even as the Ukrainian army advances,” Joerg Forbrig, senior program officer for central & eastern Europe at the Berlin bureau of the German Marshall Fund said.  “The rebels are clearly determined to resist and Russia is determined to help them.”  The attacks bring the number of Ukrainian aircraft destroyed by rebels to at least 16 during the conflict.  This is a very tense situation.

Two Ukraine Fighter Jets Downed by Rebels Near MH17 Site

Boeing, a Dow stock, raised its full-year profit forecast as it reaps gains from faster production that is driving jetliner deliveries to record levels.  EPS for 2014 excluding some pension expenses will be $7.90-$8.10, compared with a previous projection for $7.15-$7.35.  Q2 EPS on that basis of $2.42 a share beat the $1.98 estimate.  BA expects to recover the losses over a contract to deliver 179 tankers to the US military by 2027, Chris Chadwick, who heads the defense unit, told reporters.  The company handed over 181 commercial jets to customers in Q2, the most ever.  Sales increased 1% to $22B, trailing the $23B projected.  Revenue in the commercial business rose 5% to $14.3B & slid 5.4% to $7.75B in the defense operations as the US gov pares military spending.  Results were boosted by 2 tax-related gains: $116M that had been previously announced as well as a $408M benefit disclosed today.  Since last year, BA has used a profit measure dubbed core EPS, a figure the company says gives a clearer picture by adjusting for market fluctuations in the pension cost.  EPS jumped to $2.24 from $1.41 a year earlier.  BA also spent $1.5B to repurchase shares in the period after committing $2.5B to a buyback in Q1.  BA is benefiting as its factories churn out 737, 777 & 787 aircraft at the fastest pace ever amid an order backlog valued at about $1T.  The stock fell 3.16.  If you would like to learn more about BA, click on this link:

Boeing Boosts 2014 Forecast as Jetliner Deliveries Surge

Boeing (BA)

Delta Air Lines Q2 profit beat estimates, buoyed by strong US demand & it said the domestic business would help boost margins in Q3.  EPS excluding some items were $1.04, beating the $1.03 estimate.  Revenue rose 9.4% to $10.6B.  Passenger unit revenue, a key measure of performance for the industry, increased 5.7%, driven by a 10% gain in the US.  The airline’s fuel bill, excluding regional carriers, declined 6.2% to $2.4B.  COO Paul Jacobson called Q2 pretax profit of $1.4B the largest “ever reported in the airline industry.”  EPS rose to 94¢ from 80¢ a year earlier.  The stock gained 1.26.  If you would like to learn more about DAL, click on this link:

Delta Quarterly Profit Tops Estimates on Domestic Demand

Delta Air Lines (DAL)

Inconsistant earnings reports are limiting what could have been a big day of gains for stocks.  Microsoft (MSFT), a Dow stock, reported good earnings last night (as expected) & Facebook (FB) is up1 today in anticipation of the earnings report after the close tonight.  But the world remains very troubled.  Shooting down 2 jets in Ukraine is making a bad situation worse, Gaza fighting continues & ISIL (in northern Iraq) has given Christians a few days to convert or they will be killed.  No wonder stocks are having a difficult time moving ahead.
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