Thursday, October 17, 2013

Dow declines after debt deal agreed to

Dow fell 73, advancers over decliners 2-1 & NAZ inched up 1.  The MLP index rose 3 to the 446s & the REIT index was up 1+ to go over 280.  Junk bond funds were mixed & Treasuries rallied with the debt deal is seen as temporary.  Oil dropped after an industry group reported an increase in US inventories last week & as more Americans than forecast filed applications for unemployment benefits.  Gold rose after the debt deal agreed to last night.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLX13.NYM...Crude Oil Nov 13...101.00 Down .....1.29  (1.3%)

GCV13.CMX...Gold Oct 13........1,316.00 Up ...34.00 (2.7%)

Jobless Claims in U.S. Fall Less Than Forecast on California

Photo:   Bloomberg

More Americans than forecast filed for unemployment benefits last week as California continued to work thru a backlog, indicating it will take time to gauge the impact of the federal shutdown.  Jobless claims decreased 15K to 358K from a revised 373K in the prior period, according to a Labor Dept.  The forecast called for a decrease to 335K.  Applications in California remained elevated & last week’s total also included some non-federal workers dismissed due to DC gridlock.  Federal workers filed about 70K claims for jobless benefits 2 weeks ago.  Those were tallied in a separate category & didn’t influence the headline reading, though contractors’ furloughs will count.

Jobless Claims in U.S. Fall Less Than Forecast on California

IBM New York Offices

Photo:   Bloomberg

IBM stock, a Dow company, tumbled when the market opened, after the company reported a better-than-expected profit, but revenue again fell short of expectations.  Excluding one-time charges, EPS was $3.99, above expectations of $3.96.  But revenue dropped 4% to $23.7B from $24.7B, short of the $24.8B expected.  Adjusted for the effects of foreign currency exchange rates, revenue fell 2%.  IBM results provide a gauge of businesses' appetite for technology spending.  IBM has grown its earnings each qtr in the past decade, a streak that likely extended thru the first qtr of this year.  But the revenue shortfall prompted analysts to cut price targets for the stock.  Jefferies analyst Peter Misek backed his "Hold" rating, but cut his price target $20 to $190.  He noted that the only reason profit managed to beat expectations was because it got a boost from a lower-than-expected tax rate.  Citi's Jim Suva kept his rating at "Buy," but lowered his price target $15 to $235.  He said he doubts that the stock will fall much further & said it should eventually get a boost from improved visibility in regards to China & improvements in other markets, along with the company's own restructuring. The stock slumped more than 10.

IBM Shares Tumble After Sixth Quarterly Sales Decline

International Business Machines (IBM)

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  • A Verizon Wireless store is shown in Del Mar, California in this June 6, 2013 file photograph. REUTERS/Mike Blake /Files
Photo:   Yahoo

Verizon, another Dow stock, posted stronger- than-expected Q3 earnings & revenue on strong wireless growth.  While the wireless customer growth numbers were slightly below, its Verizon Wireless venture with Vodafone posted good profit & revenue growth as customers spent more on their services.  Verizon Wireless added 927K net retail subscribers in Q3, compared with expectations of about 1M.  VZ has agreed to buy Vodafone's 45% share of the mobile venture.  VZ expects wireless customer growth to improve sequentially in Q4.  Q3 EPS was 78¢, compared with 56¢ a year ago.  Excluding unusual items, EPS was 77¢, compared with expectations of 74¢.  The wireless profit margin was 51.1%, based on earnings before interest, taxes, depreciation & amortization (EBITDA) as a percentage of service revenue, & above its target range of 49-50% for the full year.  The company said profit margin would likely come down in Q4 due to steep holiday season costs, since the company kept its wireless margin target for the year despite the strong Q3 number.  Revenue rose 4.4% to $30.28B from $29B & beat the $30.16B forecast.  A 7.2% increase in wireless revenue was offset by a slower 4.3% rise in wireline revenue.  The stock jumped 1.61.

Verizon Communications (VZ)

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Stocks aren't sure what to do.  Dow is down, but that is largely related to IBM's decline.  The rest of the markets are really mixed.  After agreement to raise the borrowing ceiling, fiscal problems have not gone away.  This is only a temp fix which will require another last minute Ban-Aid fix in a couple of months.  That won't be easy.  Meanwhile earnings are coming in & they are getting a mixed response which is likely to continue over the next few weeks.
Dow Jones Industrials

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