Tuesday, August 13, 2013

Lower markets after July retail sales were reported

Dow retreated 70, decliners over advancers 5-2 & NAZ fell 15.  The MLP index sank 4+ to the 438s & the REIT index was off 3+ to 272.  Junk bond funds were weak & Treasuries pulled back.  Oil & gold saw selling.

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...106.03 Down ...0.08  (0.1%)

GCQ13.CMX...Gold Aug 13...1,327.80 Down ...6.90  (0.5%)

Retail Sales in U.S. Rose in July for Fourth Consecutive Month

Photo:   Bloomberg

Retail sales rose in Jul for a 4th consecutive month.  The 0.2% increase followed a 0.6% gain in Jun that was larger than previously reported, according to the Commerce Dept.  It was below the forecast which called for a 0.3% advance.  The reading for Jun was revised from an initially reported 0.4% increase.  The measure of demand that feeds into GDP climbed by the most this year.  Employment gains & rising household wealth tied to higher home values & stock prices are giving Americans the confidence to spend, triggering improving sales.  The pickup in household purchases would help counter the fiscal headwinds of taxes & gov cutbacks that have held back the world’s largest economy.  9 of 13 major categories showed gains last month, led by clothing & general merchandise stores.  Purchases excluding autos, gasoline & building materials, which are used to calculate GDP, advanced 0.5%, the most since Dec, after increases of 0.1% in each of the previous 2 months.  Spending advanced 0.9% at clothing chains & 0.4% at general merchandise stores.  Sales at automobile dealers fell 1% after rising 2.9% the prior month.  The figures don’t always track the industry data used to calculate economic growth because they can be influenced by prices.

U.S. Retail Sales Rose in July for 4th Consecutive Month

Eli Lilly said its potential lung cancer treatment necitumumab met a key research goal by helping to increase survival time for patients in a late-stage study.  Patients with an advanced form of lung cancer that has spread who received necitumumab & 2 different chemotherapies lived longer than patients who received just chemotherapy.  The initial results from the study did not detail the length of overall survival time.  It said it will present study results at a scientific meeting next year.  Necitumumab has no approved uses, but LLY plans to submit the drug to regulators for approval before the end of 2014.  The drugmaker is dealing with the expiration of patents protecting some key products from generic competition.  Top seller, the antidepressant Cymbalta, loses US patent protection later this year.  Necitumumab is a potential biologic drug that was developed by Bristol-Myers Squibb (BMY) & ImClone, which LLY bought in 2008.  Biologic drugs are produced from living cells instead of by mixing chemicals together.  The stock jumped 1.82.

Eli Lilly Lung Cancer Drug Raises Patient Survival in Trial

Eli Lilly (LLY)

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German investor confidence increased more than expected in Aug as the recovery in Europe’s largest economy helped pull the euro area out of its longest-ever recession.  The ZEW Center for European Economic Research index of investor & analyst expectations, which aims to predict economic developments 6 months in advance, rose to 42 from 36.3 in Jul.  That’s the highest level since Mar.  The forecast was for 39.9.  Growth in Germany may have exceeded forecasts in Q2, coaxing the 17-nation region out of a 6-qtr slump.  Paired with growth in the US & a pickup in Chinese exports & manufacturing, signs of a global economic recovery are increasing.  ZEW’s gauge of the current situation jumped to 18.3 from 10.6 in Jul, while an indicator of euro-area investor confidence increased to 44 from 32.8.  The group surveyed 252 investors & analysts from Jul 29 to Aug. 12.

Stocks are having a tough time in Aug.  The yield sectors are getting hit hard.  With one minor exception, the MLP index is at its lowest level in almost 5 months & the REIT index is off 40 from its yearly highs.  Today the yield on the 10 year Treasury soared 10 basis points to 2.7%.  That's a very big jump, generally 2-basis points is considered a significant move.  Higher returns in these areas will bring more selling to the stock market.

Dow Jones Industrials

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