Wednesday, October 9, 2013

Markets crawl higher as Yellen is picked to succeed Bernanke

Dow rose 26, decliners ahead of advancers by 20% & NAZ fell 17.  The MLP index was down pennies in the 439s & the REIT index was up pennies in the 265s.  Junk bond funds were mixed as were Treasuries.  Oil declined after a gov report showed US inventories grew by the most in a year as refineries reduced crude processing.  Gold was lower, but held above the important 1300 support level. 

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.NYMCrude Oil Nov 13101.66 Down 1.83 (1.8%)

Live 24 hours gold chart [Kitco Inc.]

Most Fed Policy Makers Saw QE Tapering This Year, Minutes Show

Photo:   Bloomberg

Many of the Federal Reserve (FED) policy makers said the central bank was likely to taper its bond purchases this year, even as they unexpectedly refrained from such a move in Sep, from the minutes of the last meeting show.  “Most participants viewed their economic projections as broadly consistent with a slowing in the pace of the committee’s purchases of longer-term securities this year and the completion of the program in mid-2014,” according to the record of the FOMC Sep 17-18 gathering.  The minutes show a lengthy debate over whether the economy had improved sufficiently to warrant a reduction in the $85B in monthly bond buying, with several members saying the decision was “a relatively close call.”  The FOMC held off tapering bond purchases & indicated that budget cuts & an increase in borrowing costs were drags on the expansion.  They wanted to see more evidence of steady growth to combat 7.3%.  “With the markets apparently viewing a cut in purchases as the most likely outcome, it was noted that the postponement of such an announcement to later in the year or beyond could have significant implications for the effectiveness of committee communications,” the minutes said of members who favored reducing purchases.  If the FED “did not pare back its purchases in these circumstances, it might be difficult to explain a cut in coming months, absent clearly stronger data on the economy and a swift resolution of federal fiscal uncertainties,” according to the minutes.

Most Fed Officials Saw QE Tapering This Year, Minutes Show

Hewlett-Packard is upbeat about 2014, saying it will be a year of "recovery and expansion."  The company projected EPS for the fiscal year starting in Nov that exceeded forecasts & predicted "stabilizing revenue declines."  HPQ has been trying to ease the pain of a declining PC market by cutting costs & focusing on more profitable areas.  In a presentation to analysts, CEO Meg Whitman said the company will focus on new products & services next year while controlling costs under a stable leadership.  "While there is a lot more work to be done, I am confident about the progress we are making," Whitman said.  The company expects EPS, excluding one-time items, of $3.55-$3.75 in fiscal 2014.  The midpoint is 3¢ higher than the $3.62 analyst forecast.  The company said it would also return at least half of its $6-$6.5B in free cash flow next year to shareholders through divs & stock repurchases, which can support EPS.  The stock shot up 1.85.

HP issues upbeat guidance for 2014 Associated Press

Hewlett-Packard (HPQ)

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Costco Wholesale Corp. Store

Photo:   Bloomberg

Costco posted fiscal Q4 profit that trailed estimates, hurt by higher costs & lower gasoline prices that crimped sales.  EPS was $1.40 which compares with $1.39 a year earlier.  Analysts projected EPS of $1.46.  COST joins retailers in reporting sales that trailed projections for their most recent qtrs as US consumers restrain spending.  The profit miss, the first in 8 qtrs, came as SG&A expenses rose faster than some expected while revenue climbed at the slowest pace since 2009.  Revenue rose just 0.8% to $32.5B, trailing the $32.7B estimate.  The gain was the smallest increase since sales fell in the qtr ended Aug 2009.  SG&A expenses rose 1.8% to $3.1B.  Sales at stores open for more than a year increased 5% in the period, excluding changes in gasoline prices and foreign-currency exchange rates.  That compared with an increase of 7% on that basis in fiscal Q3.  The stock rose 2.38.

Costco Profit Trails Analysts’ Estimates as Wharehouse Sales Growth Slows

Costco (COST)

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The politicos are working on a solution to the fiscal chaos in DC.  Nobody there or on the outside has a clue where this mysterious solution will lead.  But Dow has held during all this uncertainty.  Hard to believe, but the bulls have been selling a line of goods that has been well received.  Dow is only 340 below its starting point in Oct.  With the politicos trying to come up with magic, more damage can be done before the month is over.

Dow Jones Industrials

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