Friday, May 24, 2013

Weak markets on worries over Fed bond buying program

Dow dropped 55, decliners over advancers almost 4-1 & NAZ fell 18.  The MLP index was off a fraction to 464 & the REIT index fell 3 to 299 (down a whopper 16 in just 3 days).  Junk bond funds were lower & Treasuries gained.  Oil fell, heading for its biggest weekly drop in a month, amid ample US fuel stockpiles & concern that the Chinese economy will slow.  Gold was also weak.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLN13.NYM...Crude Oil Jul 13....93.48Down ....0.77  (0.8%)

GCK13.CMX...Gold May 13...1,389.30 Down ...2.70  (0.2%)

<p> In this photo taken Friday, Apr. 26, 2013, Miele Account Manager Natasha Feldman showcases Miele washer and dryer energy efficient appliances at the Pacific Sales at the Best Buy store in Glendale, Calif. The Commerce Department reports on business orders for durable goods in April on Friday, May 24, 2013. (AP Photo/Damian Dovarganes)

Photo:  Yahoo

US orders for long-lasting manufactured goods rebounded in Apr, buoyed by more demand for aircraft & stronger business investment.  Orders for durable goods rose 3.3% from Mar, according to the Commerce Dept, following a 5.9% decline in Mar.  A measure of business investment plans increased 1.2% & the gov revised the Mar figure to show a 0.9% gain, instead of a slight decrease.  Companies ordered more machinery & electronic products last month, typically signs of confidence.  Factories had been seeing fewer orders at the start of the year, in part because slower global growth had reduced demand for US exports.  Also, federal spending cuts & higher taxes might prompt businesses to cut back on orders.  The Apr increase pushed total orders to $222B, 6.5% above the level of a year ago.

Orders for U.S. Durable Goods Increase More Than Forecast

Abercrombie & Fitch reported a Q1 EPS loss of  9¢, narrower than the loss 25¢ from a year earlier & revenue fell 9% to $838M from $921M.  Analysts had expected an EPS loss of 5¢ on revenue of $938M.  The retailer said it expects Q2 EPS of 28-33¢ & full-year EPS of $3.15-$3.25, citing a "modestly more cautious view for the remainder of the year." “The first quarter proved to be more difficult than expected on the top-line due to more significant inventory shortage issues than anticipated, added to by external pressures,” CEO Mike Jeffries said.  The stock tumbled 5.59 (10%).

Abercrombie & Fitch Drops After Cutting Profit Forecast

Abercrombie & Fitch (ANF)

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The Gap fell the most in a month after forecasting annual profits that were less than estimated.  CEO Glenn Murphy is working to keep sales rising with discounts meant to draw shoppers that still are holding back amid elevated unemployment & slower economic growth.  While Q1 profit rose to 71¢, exceeding the 69¢ top end of its forecast, the company maintained its projection that EPS this year would be $2.52-$2.60.  Analysts estimated $2.72.  Net income was 71¢, versus 47¢ a year earlier & analysts projected 69¢.  Same-store sales at the Banana Republic brand were little changed while the Gap & Old Navy brands gained 3% each.  “For the first time if felt like, to us, the consumer was moving in a positive direction,” Murphy said.  “I like to think that’s a good sign as we move forward.”  The stock slumped $1.04.

Gap Falls After Forecast Trails Analysts’ Estimates

Gap (GPS)

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Actions by the Federal Reserve are getting a lot of attention while drab retail sales reports are not.  A stellar performance by the stock market can be largely attributable to bond buying by the FED.  Recent sluggish performance for the Dow suggests that there may not be much else propping up stocks.  The retail sales story gives a better picture of what is going on in the economy & that is not encouraging.  Even with unsettled markets in the last 3 days, Dow has only pulled back 140.  This does not qualify as a meaningful correction which is sorely needed if stocks want to go higher to new records.

Dow Jones Industrials

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