Tuesday, September 24, 2013

Markets crawl higher on mixed economic news

Dow dropped 66, but advancers ahead of declines about 3-2 & NAZ added 2.  The MLP index slipped a fraction to the 442s & the REIT index was off 2 to 270.  Junk bond funds went up as did Treasuries.  Oil slid lower & gold fell for the 3rd straight session on concern that the Federal Reserve will slow the pace of US fiscal stimulus, eroding demand for the metal as a store of value.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

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U.S. 2-year


U.S. 10-year


CLX13.NYM...Crude Oil Nov 13...102.86 Down ...0.73  (0.7%)

Live 24 hours gold chart [Kitco Inc.]

Uncertainty over the Federal Reserve's next step & a looming US budget showdown kept a lid on stocks.  Even though Asian indexes closed lower, stocks in Europe & the US managed to eke out gains despite underwhelming US economic data.  Attention in the markets is very much on the US.  Investors are monitoring a run of economic data & comments from Fed officials to see when the central bank will begin to reduce its monetary stimulus.  Last week's unexpected decision to refrain from reducing its $85B in monthly asset purchases was initially cheered, particularly in stock & commodity markets, which have grown used to the stimulus over the past few years.  The Fed is, however, still expected to scale back its purchases at one of its upcoming meetings, so "tapering" isn't off the table.  Economic indicators & Fed policymakers' comments will likely continue to drive sentiment.  The approaching budget battle between the administration & Reps has also thrown an element of uncertainty into markets.  The gov will reach its debt ceiling in early Oct.  If Congress doesn't raise that limit, the gov won't be able to pay all its bills.  Reps are demanding that any increase must result in expenditure cuts of an equal amount while the pres is demanding a debt limit increase with no conditions attached.

Markets constrained by Fed, US budget concerns Associated Press

German Business Confidence Rises for Fifth Month on Recovery

Phoro:   Bloomberg

German business confidence rose less than forecast in Sep amid caution over the recovery in the euro area, the nation’s biggest trading partner. The Ifo institute business climate index inched up to 107.7 from a revised 107.6 in Aug.  That compares with a median forecast of 108.  The gauge has still gained for 5 months to its highest level since Apr 2012.  Germany is benefiting from unemployment near a 2-decade low & the end of the euro area’s longest-ever recession which helped Chancellor Merkel's Christian Democrats take the largest share of the vote in Sun & set her up for a 3rd term as leader.  The ECB has pledged to keep interest rates low to support what it calls a fragile euro-area recovery. 

German Business Confidence Increases Less Than Forecast

McDonald’s Corp. McCafe

Photo:   Bloomberg

McDonald's, a Dow stock & Dividend Aristocrat, is adding pumpkin-spice lattes to lure the Starbucks crowd & boost traffic.  MCD has been introducing pricier items such as chicken wings, McWraps & steak breakfast sandwiches to maintain profitability in the face of higher labor, occupancy & operating costs.  At the same time, the company is expanding its value menu to draw bargain-seeking diners.  The McCafe pumpkin latte, a mix of espresso, milk & flavored syrup, comes in 3 sizes & are available with whole or non-fat milk.  A 16-ounce latte with whole milk has 340 calories & costs $2.89 while a regular coffee is $1.  The lattes are being introduced this month & will sell thru mid-Nov.  SBUX has sold 200M pumpkin spice lattes in the 9 years since they were introduced.  The drink has the same number of calories as McDonald’s offering & a 16-ounce one sells for $4.55 (on average).  The Seattle-based company, which has about 11,200 US cafes, also sells salted-caramel mochas, hazelnut lattes & is introducing new bakery items nationwide.  MCD went up 53¢ & SBUX gained 1.20.

McDonald’s to Attract Starbucks Crowd With Pumpkin-Spice Lattes

McDonald's (MCD)

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Starbucks (SBUX)

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Stocks are adrift again.  Economic news is only mildly supportive (at best).  The UN is back in session with biggies giving speeches that don't say much in a world filled with conflict.  But the goings in DC are more important for the stock market & nobody has a clue what will happen with the budget mess & raising the debt ceiling.  So far, stocks are taking all this uncertainty very well.  The bullish attitude may not last.  Earnings are coming in few weeks which should help define where stocks want to go.

Dow Jones Industrials

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