Wednesday, August 7, 2013

Lower markets on uncertainty about Fed's bond buying intentions

Dow fell 48, decliners over advancers 2-1 & NAZ was off 11.  The MLP index recovered a bit in the PM, closing down 5+ to 447, & the REIT index lost 1 to 275.  Junk bond funds inched higher & Treasuries rose.  Oil dropped for a 4th day as Federal Reserve officials indicated that they may pare bond purchases that have bolstered the economy & energy demand.  Gold clawed its way higher. 

AMJ (Alerian MLP Index tracking fund)

stock chart

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLU13.NYM...Crude Oil Sep 13....104.34 Down ...0.96  (0.9%)

Live 24 hours gold chart [Kitco Inc.]

Americans borrowed more in Jun to buy cars & attend schools, but they were frugal again with their credit cards.  Many are still wary of taking on high-interest debt.  The Federal Reserve says borrowing rose $13.8B in Jun from May to a $2.85T, the highest ever.  The gain followed a $17.5B increase in May.  The category that includes credit card use dropped $2.7B in Jun, following a gain of $6.4B in May (the largest in a year).  Still, overall credit card debt has fallen 16.5% from its Jul 2008 peak.  Borrowing for autos & student loans rose $16.5B in Jun, driven by loans to pay for college.

US consumer borrowing rose $13.8 billion in June Associated Press

Research firm IDC says the iPhone continued to lose market share to Android phones in Q2.  IDC says the iPhone remains #2 behind Android, even without new Apple (AAPL) products driving purchases.  Its market share is expected to grow again when a new iPhone comes out, likely this fall.  In Q2, Android phones accounted for 79% of worldwide shipments, up from 69% a year ago.  The number of Android phones shipped grew nearly 74% to 187M.  IDC says shipments of iPhones also grew, by 20% to 31M, but market share fell to 13% from nearly 17%.  The Microsoft (MSFT), a Dow stock, Windows Phone was 3rd, with a nearly 4% share, followed by BlackBerry, with almost 3%.

IDC: Android extends lead over iPhone in 2Q Associated Press

Ralph Lauren fell the most in more than a year after its forecast for the current quarter implied profit would trail estimates.  RL said that revenue in Q3 would rise at a low single-digit percentage rate & that its operating margin would narrow by as much as 350 basis points.  The forecast implies EPS of $2.28.  Analysts were forecasting $2.60.  Net income in Q2 fell 6.2% to $181M because of costs from assuming direct control of the Chaps brand & unfavorable foreign-currency trends.  Revenue gained 3.8% to $1.65B, matching the estimate.  The shares tumbled 16.38 (9%).

Ralph Lauren Falls as Forecast Implies Profit Trailing Estimates

Ralph Lauren (RL)

stock chart

Spain Bond Returns Double Italy’s on Rajoy Recovery

Photo:   Bloomberg

Spanish gov bonds have returned almost twice as much as Italy's this year, reflecting investor bets that Spain’s recovery from recession will outstrip the larger Italian economy.  At the same time, both countries’ govs are embroiled in political turmoil, Spanish Prime Minister Mariano Rajoy’s parliamentary majority probably will enable him to ride out corruption allegations.  10-year Spanish bond yields dropped to the lowest level in 6 weeks on Mon as evidence of a recovery in the euro region bolstered demand for higher-yielding assets.  The bonds also rallied after ECB President Mario Draghi said last month that interest rates will remain low for an “extended period” to support the economy.  Spain’s 10-year rate was little changed at 4.57% today.  The yield was 5.27% at the start of the year.  Italy’s 10-year yield is 4.26%, while Germany's is 1.68%.  The 10-year Spanish yield is down 70 basis points this year, compared with a 24 basis-point drop for the rate on similar-maturity Italian bonds.  Spanish borrowing costs slid as Rajoy defended himself in parliament last week against demands he resign over allegations he received undeclared funds from a party slush pool.  Rajoy denied any wrongdoing, saying that he’d “made a mistake in continuing to trust someone who we now know didn’t merit it.” 

Spain Bond Returns Double Italy’s on Rebound: Euro Credit

Stocks continue to meander with little outside news to inspire much of anything.  But Dow remains near its lofty record levels, largely because of the Federal Reserve's low interest rate environment.  Bond traders are uneasy & have sold Treasuries, driving up interest rates (which in turn raised mortgage rates).   The yield on the Treasury 10 year bond has risen 1 percentage point in the last 3 months.  It seems like every comment about the Federal Reserve taping its bond buying program brings on selling in the stock market.  Stocks could have a very rough time when the real thing begins.

Dow Jones Industrials

stock chart

Like many of you, I’m a huge fan of INO, and from what I have seen so far, their service Marketclub!
This isn’t a stripped down version, everything in MarketClub is available to you. I don’t want to give everything away, but you’ll have unlimited access to my favorite three tools: Trade Triangles, Smart Scan, and Alerts!  The best part is that the MarketClub customer support team will be providing UNLIMITED support!  You can call or email for an instant response to any question, comment or concern.

Here’s that link:

No comments: