Tuesday, August 20, 2013

Higher markets on earnings reports

Dow rose 36, advancers ahead of decliners 2-1 & NAZ climbed 20.  The MLP index went up 3+ to the 437s & the REIT index rose 5 to the 261s.  Junk bond funds were higher & Treasuries are having a good day after recent selling.  Oil pulled back but gold gained for the 4th time in 5 sessions as a weaker dollar increased demand for the precious metal as an alternative investment.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLU13.NYM...Crude Oil Sep 13...105.28 Down ...1.82 (1.7%)

GCQ13.CMX...Gold Aug 13......1,367.70 Up ...1.50 (0.1%)

People walk outside a Home Depot store in Washington February 20, 2012. REUTERS/Jonathan Ernst

Photo:   Yahoo

A recovery in the housing market helped Home Depot, a Dow stock, beat the estimates for quarterly profit & sales, prompting it to raise its outlook for the fiscal year.  The results, which came after data showed that US home prices rose in May, gave more evidence that the housing market was healing after years of weakness.  EPS rose to $1.24 from $1.01 a year earlier.  Analysts were expecting $1.21.  Sales rose 9.5% to $22.5B, topping the estimate of $21.8B.  For the year, the company raised its EPS forecast to $3.60 a share from $3.52 & expects a sales rise of about 4.5%, up from previous expectations of a 2.8% increase.  HD has also benefited from its own efforts to improve customer service & attract shoppers with more compelling prices than its rivals.  Sales at stores open at least a year rose 10.7%, including an 11.4% increase in the US.  The stock was up pennies.

Home Depot (HD)

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<p> In this Monday, Aug. 19, 2013 photo, shoppers walk toward the parking lot at a Best Buy store in Hialeah, Fla. On Tuesday, Aug. 20, 2013, Best Buy releases quarterly financial results. (AP Photo/Alan Diaz)

Photo:   Yahoo

Best Buy net income rose sharply in Q2, as it slashed costs & worked to make its website more competitive.  The company beat expectations & its shares jumped to a 2-year high.  BBY has been shuttering underperforming stores & revamping others to offset tough competition from discounters & online retailers.  Under CEO Hubert Joly, the company has instituted a price-matching policy, opened more in-store areas for manufacturers & invested more to train employees.  Joly noted the various measures BBY has taken to make its website more competitive, such as an improved search platform & more product reviews by customers.  Product reviews are a "powerful tool" for helping attract customers.  "We expect to quadruple the number of reviews we have on our site by year-end," Joly said.  Looking forward, he said the site improvements will continue with measures such as better site navigation & the introduction of new product buying guides in time for the critical holiday season.  Online sales rose 10.5% while revenue in stores open at least a year slipped 0.6%.  But that slippage is much better than the 3.3% decline last year at this time.  In the US EPS was 77¢, for the period ended Aug 3.  A year earlier EPS was only 4¢.  EPS was 32¢ excluding one-time items, much better than the 12¢ forecast.  Revenue fell slightly to $9.3B, from $9.34B last year.  Analysts expected $9.13B.  The stock shot up 2.99 (10%).

Best Buy Profit Gains as Joly Trims Costs

Best Buy (BBY)

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A worker walks past oil pipes at a refinery in Wuhan, Hubei province March 23, 2012. REUTERS/Stringer

Photo:   Yahoo

China will overtake the US as the world's biggest crude oil importer by 2017 as Chinese motorists drive domestic oil demand higher, according to Wood Mackenzie.  China is on track to spend $500B on oil imports by 2020, far outstripping the peak by the US at $335B.  It is forecasted the US crude oil import bill will fall to $160B by 2020 as US tight oil output from shale resources replaces imports from the Middle East & Africa.  The consultancy said the turning point for Chinese crude imports to surpass US imports would be around 2017.  It forecasts China's oil imports will rise to 9.2M barrels per day (bpd) by 2020 from 2.5M bpd in 2005.  US oil imports, meanwhile, will fall to 6.8M bpd from a peak of 10.1M bpd.  Between 2005-2020, OPEC's share of Chinese oil imports is expected to rise to 66% from 52%.

After 4 down days, buyers have returned.  But little has changed.  Trading is light with many away on holiday, so it doesn't take much to move stocks one way or the other.  Without new developments, the rest of the day may be more of the same.

Dow Jones Industrials

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