Wednesday, May 29, 2013

Dow retreats from record high

Dow fell 106 (off the lows), decliners over advancers 3-1 & NAZ was 21 lower.  The MLP index plunged a massive 8 to the 456s & the REIT index pulled back 6+ to the 292s.  Junk bond funds sank 2-3% (big by their standards) & Treasuries had a volatile day with the yield on the 10 year Treasury finishing down all of 1 basis point.  Oil fell to near $93 on concerns that the Federal Reserve may ease up on its stimulus measures.  Gold advanced for the first time in 3 sessions as lower prices lured buyers of the physical metal.  

AMJ (Alerian MLP Index tracking fund)

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CLN13.NYM...Crude Oil Jul 13....93.19 Down ...1.82  (1.9%)

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<p> European Commission President Jose Manuel Barroso gestures while speaking during a media conference at EU headquarters in Brussels on Wednesday, May 29, 2013. The European Union announced Wednesday to grant France, Spain and four other member states more time to bring their budget deficits under control to support the bloc’s shrinking economy. (AP Photo/Virginia Mayo)

Photo:   Yahoo

The EU softened its demands for austerity when it gave France, Spain & 4 other members more time to bring their deficit levels under control so that they can support their ailing economies.  The EU Commission said the countries must instead overhaul their labor markets & implement fundamental reforms to make their economies more competitive.  Issuing a series of country-specific policy recommendations, Commission President Jose Manuel Barroso said that the pace of reform needed to be stepped up across the EU to kick-start growth and fight record unemployment.  "We need to reform, and reform now. The cost of inaction will be very high," Barroso said.  "There is no room for complacency."  After Europe's crisis over too much debt broke in late 2009, govs slashed spending & raised taxes as a way of controlling their deficits.  But austerity has also inflicted severe economic pain.  Slashing spending & raising taxes have proved to be less effective at reducing deficits than initially thought.  As economies shrink, so do their tax revenues, making it harder to close those budget gaps.  Besides France & Spain, the Commission is also granting the Netherlands, Poland, Portugal & Slovenia more time to bring their deficits below the EU ceiling of 3% of annual economic output.  They will be allowed to stretch spending cuts over a longer time as they try to fight record unemployment & recession.  But some critics insisted the Commission's softening of austerity wasn't enough to kick-start growth & fight unemployment.

EU eases pace of austerity to help economy AP

Michael Kors reported that its profit more than doubled on surging sales in Q4, capping another strong year for the upscale handbag & clothing maker, & it also offered a solid outlook.  Q4 EPS was 50¢, up from 22¢ in the year-ago period.  Revenue surged 57% to $597M from $380M a year ago.  Revenue at stores open at least a year rose an eye popping 40%.  Analysts had expected EPS of 39¢ on revenue of $556M.  For the year ended Mar 30, EPS nearly tripled to $1.97 versus 78¢ a year ago.  Revenue rose 67% to $2.2B from $1.3B.  "Fiscal 2013 was another outstanding year for Michael Kors with continued momentum into the fourth quarter reflecting advances on our key growth strategies," said CEO John D. Idol.  "Our jet set luxury accessories and ready to wear are resonating with consumers worldwide and we are excited by our prospects for future growth."  Sales at stores opened at least a year surged 35% in North America.  Sales in the North American's wholesale segment increased 57%, while in Europe, sales nearly doubled during Q4.  In the company's licensing segment, revenue increased 16%, fueled primarily by the ongoing strength in watches & eyewear.  For this qtr, KORS expects revenue to be $555-$565M, assuming an increase in revenue at stores opened at least a year to rise 20%.  EPS is guided to be 46-48¢.  Analysts are forecasting 47¢ on revenue of $564B.  For the full year, KORS expects revenue of $2.65-$2.75B  assuming an increase in revenue at stores opened at least a year to rise 15-20%.  EPR is expected to be $2.43-$2.47.  Analysts are looking for EPS of $2.42 on revenue of $2.8B.  The stock rose 1.97.

Michael Kors 4th-quarter profits more than double AP

Michael Kors (KORS)

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McDonald’s Pushing Burgers as Salads Fail to Lure Enough Diners

Photo:   Bloomberg

McDonald's, a Dow stock & Dividend Aristocrat, is struggling to project a healthier image amid complaints about its high-calorie food & is having a hard time persuading customers to buy salads.  Even with such names as Bacon Ranch & Southwest with Crispy Chicken, salads make up only 2-3% of US restaurant sales, CEO Don Thompson said.  By contrast, the Dollar Menu generates 13-14% of sales.  “I don’t see salads as being a major growth driver in the near future,” Thompson said.  Instead of advertising salads, the company may push hamburgers & chicken sandwiches, said Thompson, who added that there are other ways to sell more fruits & vegetables.  For example, some of the chain’s new McWraps have tomato & cucumber slices, as well as shredded lettuce.  The world’s largest restaurant chain is struggling to revamp its menu & draw customers from competitors after failing to introduce enough new products last year.  It's also trying to introduce such lower-calorie options as egg-white sandwiches, as Americans try to eat healthier.  The stock lost $2.19 in a down market.

McDonald’s Pushing Burgers as Salads Fail to Lure Diners

McDonald's (MCD)

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Bulls are happy that the markets rebounded from their early AM lows to limit losses for the day.  But it was still a substantial loss.  More importantly, high yield sectors were hit hard.  The MLP index is down 9 from its record high made last week & the REIT index fell 22 for the interim high made last week.  Today's sell-off in junk bond funds was substantial where a 1% daily move is considered large.  Actions by the Federal Reserve have a bigger influence on the markets than drab economic data or confusion in DC.  Dow is still vastly overbought & today's decline hardly qualifies as a correction.

Dow Jones Industrials

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