Wednesday, September 11, 2013

Markets drift lower amid Syria delay

Dow went up 41, but decliners over advancers 3-2 & NAZ sank 22, hurt by a big decline at Apple (AAPL).  The MLP index fell 3+ to the 439s & the REIT index was off fractionally in the 267s.  Junk bond funds were mixed & Treasuries found buyers.  Oil & gold slipped lower.

AMJ (Alerian MLP Index tracking fund)

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Treasury yieles:

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CLV13.NYM...Crude Oil Oct 13...107.31 Down ...0.08 (0.1%)

GCU13.CMX...Gold Sep 13......1,363.20 Down ...0.90  (0.1%)

Phil Schiller, senior vice president of worldwide marketing for Apple Inc, talks about the pricing of their new products at Apple Inc's media event in Cupertino, California September 10, 2013. REUTERS/Stephen Lam

Photo:   Yahoo

The higher-than-expected price of a new cheaper iPhone eased some worries about gross margins, while arousing concerns the company was not being aggressive enough in its fight against the market-dominating Android operating system.  AAPL shares were down after it unveiled the 5S, a high-end iPhone with a fingerprint scanner as well as a cheaper 5C model targeted at emerging markets.  In a break with the past, when the company introduced one iPhone a year, it unveiled 2 new models.  The iPhone 5C will cost $99-$199 with a wireless contract & comes in 5 different colors.  A high-end iPhone 5S with fingerprint-security features, a speedier processor & better camera will cost $199-$399, available in 3 colors.  The devices underscore the new normal in the $280B smartphone industry, as the novelty of internet-connected handsets wears out & the gadgets share many of the same basic features.  The stock sold off because of questions regarding sales growth & high margins.  The stock tumbled a whopping $24.

Apple (AAPL)

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Verizon, a Dow stock, launched a $49B eight-tranche bond that will partly finance its $130B buyout of its wireless operations Verizon Wireless from Vodafone, setting a new record for the largest corp bond issue in history.  The final size was at the top end of the $45-$49B range that market flagged late on Tues, followed overwhelming demand in excess of $100B.  That eliminated the need for the company to tap the € & £ markets too, as originally planned, leaving some investors disappointed.  The bond offering will partly refinance a $61B one-year bridge loan it has taken out to pay for the debt-funding portion of the acquisition.  The rest of the $61B bridge will be replaced with about $12B of 3-5 year term loans.  The stock barely budged.

Verizon Launches Record-Breaking $49B Bond Offering Reuters

Verizon (VZ)

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U.S. President Barack Obama

Photo:   Bloomberg

The Pres postponed a decision on military strikes against Syria, sparing him a political defeat at home & plunging the US into potentially protracted negotiations with a global rival.  After telling the nation 10 days ago he would ask Congress to authorize using military force, Obama reversed course last night & said he would pursue a proposal by Russia to have Syria surrender its stockpiles of chemical arms to intl authorities.  By doing so, the pres is casting his lot with Russian pres Putin, Syrian pres Assad’s primary patron, who has emerged as Obama’s chief foreign antagonist in his 2nd term.  “It’s too early to tell whether this offer will succeed, and any agreement must verify that the Assad regime keeps its commitments,” Obama said in remarks last night.  The initiative “has the potential to remove the threat of chemical weapons without the use of force, particularly because Russia is one of Assad’s strongest allies.”  Obama’s speech underscores how conflict in the region continues to dominate his foreign policy even as the pres has said he wants the nation to move on from years of armed conflict.  “I have resisted calls for military action because we cannot resolve someone else’s civil war through force, particularly after a decade of war in Iraq and Afghanistan,” Obama said.  The Syrian regime’s use of chemical weapons “profoundly changed” that stance.

Obama Delays Syria Strike, Heading off Fight in Congress

The 6 day rally in the stock market is coming to an end.  There was no real reason for stocks to go up & this is Sep, the worst month for the stock market.  It's difficult to believe that an ex KGB guy is coming up to a simple solution about solving a complex problem in Syria.  One important fact, he is now the #1 guy in this dispute.  Meanwhile AAPL has a tough time finding ways to grow what has become an enormous company with very high margins.  The iPhone, its #1 product, has become a toy who's popularity will ebb & flow over time.

Dow Jones Industrials

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