Tuesday, October 29, 2013

Dow reaches a new record high

Dow climbed 111, advancers over decliners 4-3 & NAZ rose 12.  The MLP index was up fractionally in the 457s & the REIT index lost 2 to the 283s.  Junk bond funds & Treasuries were mixed. Oil slid back & gold declined from a 5-week high as the dollar’s rally curbed demand for the metal as an alternative investment before Federal Reserve policy makers meet on US monetary policy.   

AMJ (Alerian MLP Index tracking funds)

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Treasury yields:

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CLZ13.NYM...Crude Oil Dec 13...98.13 Down ...0.55  (0.6%)

Live 24 hours gold chart [Kitco Inc.]

  • FILE - In this Jan. 30, 2012 file photo, boxes of the drug Relpax, made by Pfizer, are displayed in Surfside, Fla. Pfizer reports quarterly results before the market open on Tuesday, Oct. 29, 2013. (AP Photo/Wilfredo Lee, File)
Photo:   Yahoo

Pfizer, a Dow stock, Q3 profit dropped 19% as competition from generic drugs continued to cut sales, while lower operating expenses failed to offset higher taxes & charges.  Cheaper generic versions erode sales of older drugs that once brought in billions annually, costing the company $3-$4B a year.  Those are led by cholesterol fighter Lipitor, which lost patent protection in Nov 2011 after nearly a decade as the world's top-selling drug.  In addition, unfavorable currency exchange rates cut revenue, 2 percentage points.  However, PFE has several promising experimental drugs in mid- or late-stage patient testing.  The company also is developing drugs similar, but not identical, to 5 pricey biologic medicines.  EPS was 39¢ versus 43¢ a year earlier.  Excluding $1.27B in one-time items, EPS was 58¢, above the 56¢ estimate.  Revenue declined 2% to $12.64B.  Analysts expected $12.69B.  3 of the business segments, primary care & specialty care drugs & off-patent medicines, had lower sales. Cancer drug sales rose 26% to $407M, a relatively new area that could turn into a huge franchise.  US prescription drug sales were flat at $4.75B.  But intl sales fell 5%, including the effect of exchange rates, to $7B.  Top seller Lyrica posted a 10% sales jump, to $1.14B & sales of immune disorder treatment Enbrel, painkiller Celebrex & several other drugs all climbed 5% or more.  PFE lowered its 2013 profit forecast to $3.05-$3.15 per share, down from $3.07-$3.22, but raised the lower end of its adjusted forecast, which excludes one-time items, by a nickel & now expects $2.15-$2.20 per share.  The company also reduced the top end of its revenue forecast for the year by $1B, anticipating $50.8-$51.8B.  The stock rose 51¢.

Pfizer Tops Estimates as Investors Await Possible Breakup

Pfizer (PFE)

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Housing Prices in U.S. Cities Rise by Most Since Early 2006

Photo:   Bloomberg

Home prices in 20 US cities rose in Aug from a year ago by the most since Feb 2006 as stronger demand boosted values.  The S&P/Case-Shiller index of property prices in 20 cities increased 12.8% from Aug 2012, more than forecast, after a 12.3% gain in the year ended in Jul.  The projection called for a 12.5% advance.  Tight inventories have boosted prices as buyers compete for a limited number of properties for sale.  As of Aug, average home prices in the US were back to mid-2004 levels, & the 20-city index was up 22.7% from its Mar 2012 low.  Home prices rose 0.9% in Aug from the prior month after a 0.6% increase.  Month-over-month price gains were led by Las Vegas, followed by Los Angeles & San Diego.  Property values rose in all 20 metropolitan areas.

Housing Prices in U.S. Cities Rise by Most Since Early 2006

IBM Offices

Photo:   Bloomberg

IBM, a Dow stock, added $15B to its buyback plan as it reduces stock in circulation to increase EPS as sales continue to decline.  With the addition, the company now has $20.6B in its repurchase program, & it will request more next Oct.  The market value is about $197B.  CEO Ginni Rometty is rewarding shareholders who held on as the stock fell 7.4% this year, compared with the 24% gain in the S&P 500 Index.  With sales dropping, the company is counting on the buyback to help reach its goal of $20 in adjusted EPS by 2015, up from $15.25 last year.  Sales have fallen for 6 straight qtrs, & IBM’s hardware unit reported a loss for Q3.  At the same time, earnings have continued to climb. In addition to buying back shares, IBM has sold less-profitable businesses, acquired more lucrative software companies & lowered its tax rate.  The stock rose 4.78.

IBM Adds $15 Billion Buyback After Six-Quarter Sales Slump

International Business Machines (IBM)

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While there wasn't much happening in the stock market, the bulls were back in action, taking the Dow to a new record close (barely).  Obamacare looks to be a disaster that will be a negative for the economy.  But the bulls figure mediocre economic news will encourage the Federal Reserve (FED) to continue its bond buying program.  Other second-rate economic news will contribute to that thinking.   Success in the stock market has a lot riding on the announcement tomorrow from the FED.  The bets are that it will keep buying bonds.

Dow Jones Industrials

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