Tuesday, October 29, 2013

Markets creep higher on retail sales

Dow gained 42, advancers over decliners 4-3 & NAZ slid 1.  The MLP index lost 1 to 456 & the REIT index was off 2+ to the 283s.  Junk bond funds slide lower & Treasuries were pretty much even.  Oil was down pocket change while gold was about even.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLZ13.NYM....Crude Oil Dec 13...98.21 Down ...0.47  (0.5%)

GCV13.CMX...Gold Oct 13......1,359.70 Up ...7.70 (0.6%)

Retail Sales

Photo:   Bloomberg

US retail sales (outside auto dealers) climbed in Sep, indicating households were sustaining the economic expansion before the gov shutdown shook confidence.  The 0.4% gain in purchases excluding vehicles followed a 0.1% increase in Aug & matched the forecast, according to the Commerce Dept.  Total sales dropped 0.1%, restrained by the biggest decrease at auto dealers in a year, as purchases early in the month were included in the Aug data.  Americans snapped up the newest cellular phones & video games last month as low borrowing costs & rising household wealth backed by improving home & stock prices gave them the wherewithal to sustain demand.  At the same time, the 16-day shutdown may have upended spending this month as consumers grew increasingly concerned it would hurt the world’s largest economy.  Total retail sales were projected to be unchanged.  9 of 13 major categories showed increases last month, led by a 0.7% advance at electronics dealers, the biggest since Apr, & 0.9% gains at grocery stores & restaurants.  Sales dropped 2.2% at automobile dealers, after a 0.7% increase the prior month.

Retail Sales in U.S. Climb Excluding Auto Dealers

U.S. Retail Sales

Photo:   Bloomberg

US consumer confidence fell sharply in Oct as consumers turned gloomier in their outlook for the future.  The Conference Board's index of consumer attitudes dropped to 71.2 in Oct from a revised 80.2 in Sep, previously reported as 79.7.  A reading of 75.0 was expected.  The expectations index also sank, down to 71.5 from a revised 84.7 in Sep.  Consumers were also less optimistic about their current standing, with the present situation index down to 70.7 from a revised 73.5 in Sep.  The partial shutdown of federal agencies for half the month pushed consumer expectations to a 7-month low as the economy shows signs of cooling.  Limited employment & wage gains, along with the prospect of another budget battle early next year, raise the risk of restrained holiday sales.

Consumer Confidence in U.S. Slumps by Most Since August 2011

Apple Forecasting Slower Holiday Sales Amid Samsung Gains

Photo:   Bloomberg

Apples's forecast for the slowest holiday sales growth in a half decade reflects how iPhones & iPads aren’t providing the growth surges they once did as competition accelerates in the saturated mobile market.  AAPL said revenue for the current qtr would be $55-$58B, up 0.9-6.4%, down from $54.5% a year earlier.  That would be the slowest holiday-sales rise since 2008, when revenue climbed 6%.  Profit will be about the same as last year, based on predictions for gross margins.  The forecast is a turnaround from previous years such as 2011 & 2012 when holiday sales jumped by more than 70%. The are signs 2014 may show more improvement.  The company generated $5.7B in China last qtr, up 5.6% from a year earlier, while sales in Japan rose 41% to $3.3B after it forged a deal with the country’s largest carrier to sell the iPhone.  The company is rolling out new iPhones & iPads for the end-of-year shopping season.  CEO Tim Cook said the new iPhone 5s is backlogged & that he expects new iPads to be similarly popular.  AAPL will begin selling a new iPad Air on Fri, followed later in the month by an updated iPad mini with a high-definition screen.  “It’s going to be an iPad Christmas,” Cook said.  He also hinted that products are in development for release next year, including new categories where the company doesn’t currently do business.  The stock slipped 2 after having a nice run in the last 4 months.

Apple Forecasting Slower Holiday Sales Amid Samsung Gains: Tech

Apple (AAPL)

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There is not much happening while the FOMC is having its meeting.  Major surprises are not expected, but fear of the unknown is keeping buyers hesitant about making major commitments.  AAPL earnings are getting mixed reviews.  Lower margins & so-so retail sales in Q4 are reasons for concern.  But traders are primarily concerned with what Big Ben will have to say.  Any reduction in the bond buying program by the Federal Reserve will not go over well in the stock market.

Dow Jones Industrials

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