Tuesday, July 9, 2013

Higher markes on expectatons for Q2 earnings

Dow rose 48, advancers over decliners 2-1 & NAZ climbed 10. The MLP index was off a smidgen in the 456s & the REIT index added 1+ to 280.  Junk bond funds were mixed to lower & Treasuries went up.  Oil was about even & gold rose, remaining bogged down in the 1200s.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLQ13.NYM...Crude Oil Aug 13...102.75 Down .....0.39  (0.4%)

GCN13.CMX...Gold Jul 13.........1,248.40 Up ...13.50 (1.1%)

IMF Reduces Global Growth Projections as U.S. Expansion Weakens

Photo:   Bloomberg

The IMF forecast slower global growth for 2013 & 2014, citing expectations of a more protracted recession in Europe & a slowdown in key developing countries such as China & Brazil.  The update of the IMF's World Economic Outlook issued 3 months ago now projects the world economy will grow at 3.1% this year, the same rate as last year & down from a forecast of 3.3% 3 months ago.  The 2014 forecast was cut to 3.8% from 4.0%.  The IMF said new risks had emerged since Apr, including the possibility of a more drawn-out slowdown in developing country economies.  Another potential drag on global growth is the possibility that the US will scale back its injections of cash to stimulate the economy in coming months.  A recession in the 17 countries that use the € is shaping up to be deeper than expected, another factor pulling down the forecast.  The eurozone is now expected to contract by 0.6% this year, compared to the Apr forecast for a 0.4% decline.  The US economy also looks weaker than previously expected, the IMF said, citing tight fiscal & financial conditions.  The IMF lowered forecasts for US growth to 1.7% in 2013, down from 1.9% in April, & to 2.7% for 2014 down from 2.9%.  One reason cited was the sequester remaining in place until 2014, longer than previously projected.

IBM fell after a Goldman Sachs analyst lowered his rating & cut his price target on the stock, saying the company may face more pressure in the near term in emerging markets.  Bill Shope said that IBM may start to face more pressure in emerging markets, which the company is counting on to contribute $17B in revenue as part of its 5-year growth plan.  He lowered IBM to "Neutral" from "Buy" & reduced its price target to $200 from $220.  While emerging markets now comprise almost 1/4 of revenue, Shope says that they seem to be stagnating.  Q1 weakness was recognized by investors & the softness may continue thru much of the year.  Weakness in China seems to be expanding beyond the technology sector as credit conditions tighten. This is a concern for IBM because the country is a key part of its growth plan, having announced expectations for business in China to double between 2010 & 2015.  IBM is also dealing with more softness in its higher-margin software & services categories.  The stock lost 3.20 & is near its low for the last 12 months.

IBM off after analyst lowers rating, price targetAP

International Business Machines (IBM)

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US job openings rose in May as employers grew more optimistic demand will strengthen as the effects of payroll tax increases & federal budget cuts wane.  The number of positions waiting to be filled grew 28K to 3.83M from a revised 3.8M the prior month, according to the Labor Dept.  The pace of hiring also increased.  Companies are taking on workers as stronger home & automobile sales signal demand will pick up in H2.   Today’s data put the labor market picture in sharper focus after the Jun employment report, which showed payrolls rose more than forecast & the biggest year-over-year gain in hourly earnings since Jul 2011.

Job Openings in the U.S. Climbed in May as Hiring Picked Up

Stocks are taking it easy.  The downgrade by the IMF on global growth is not encouraging.  But bulls view that as a sign that Big Ben will take a more cautious approach on reducing monthly bond purchases.  This is not a strong market when the big driver is a hope that sluggish growth will keep interest rates at historical lows.  In the old days, higher sales & profits drove markets.  Speaking of sales, that data will prove more meaningful than usual in the next few weeks.  Good earnings recently have been propelled more by stock buybacks, etc. than higher revenue.  

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