Wednesday, August 28, 2013

Markets edge higher in cautious trading

Dow rose 41, advancers over decliners 4-3 & NAZ was up 17.  The MLP index slid a fraction to 441 & the REIT index was off 1 to the 262s.  Junk bond funds did little & Treasuries fell back.  Oil surged to the highest level since May 2011 on concern that conflict in Syria may spread & threaten oil supplies from the MidEast.  Gold was flat. 

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLV13.NYM...Crude Oil Oct 13...109.98 Up ...0.97 (0.9%)

GCQ13.CMX...Gold Aug 13......1,420.60 Up ...3.10 (0.2%)

Pending Sales of Existing Homes in U.S. Decreased 1.3% in July

Photo:   Bloomberg

Fewer Americans signed contracts to buy homes during July but the level stayed close to a 6½ year high. The modest decline suggests higher mortgage rates have yet to slow sales sharply.  The National Association of Realtors says its index for pending home sales declined 1.3% to 109.5, close to May's reading of 111.3 (the highest since Dec 2006).  The small decline suggests sales of previously owned homes should remain healthy in the coming months.  There is generally a 1-2 month lag between a signed contract & a completed sale.  Sales jumped to an annual pace of 5.4M in Jul, the highest in 3½ years.  Mortgage rates at a 2 year high & a limited number of existing homes are pushing some prospective buyers out of the market, threatening to slow the pace of the recovery in real estate.  Improvements in employment & income growth would help provide additional fuel for housing, which has been a source of strength for the economy.

Pending Sales of Existing Homes in U.S. Dropped 1.3% in July

Microsoft Seen Boosting Dividend as CEO Exits Amid Push for Cash

Photo:   Bloomberg

Microsoft, a Dow stock, within weeks of announcing plans by CEO Steve Ballmer to retire, will probably boost its div amid calls to return more money to investors.  ValueAct Holdings, which in Apr disclosed a stake of about $1.9B, has been seeking a return of more money.  MSFT policy for the last several years has been to boost the div in Sep in line with increases in operating income, which rose 23% in the latest fiscal year.  While too big a payout might require the company to incur a tax on cash held overseas, a modest increase would put it at odds with investors clamoring for more.  The company, with $77B in cash & investments, will probably raise its div 3¢ to 26¢, although some analysts are less bullish, predicting an increase to 25¢.  The stock rose 13¢.

Microsoft Seen Raising Dividend Payouts

Microsoft (MSFT)

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China will widen the scope of its consumption tax to include more luxury goods, the official Xinhua News Agency reported, a sign that some high-end brands may become more expensive for purchasers on the mainland.  It is also targeting goods that cause heavy pollution or use excessive levels of energy for consumption tax adjustments, Xinhua said.  High consumption & import taxes are already driving Chinese buyers to make luxury purchases overseas rather than at home, propping up European sales for luxuryt brands.  It has been estimated that close to 1/3 of Chinese luxury buyers will shop in Europe in 2013 (up from 1/5 last year).  The country already has consumption taxes on a variety of products, including taxes of as much as 20% for high-end watches & 5% on gold, silver, platinum & diamond jewelry.  Gem sets are subject to a 10% consumer tariff.  Chinese consumers are set to make up 1/3 of luxury consumption globally by 2015, up from 27% in 2012, according to McKinsey.

China to Place Consumption Tax on More Luxury Goods, Xinhua Says

This is another listless day for stocks, going into the long holiday weekend.  All eyes are watching what will be done to Syria.  Meanwhile there is little for investors to do.  Some have already begun very long holidays.

Dow Jones Industrials

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