Monday, October 21, 2013

Markets drift lower on slower home sales

Dow lost 28, decliners just ahead of advancers & NAZ inched up 3.  The MLP index rose to 2+ to the 453s but the REIT index pulled back 2+ to 271.  Junk bond funds were mixed to higher & Treasuries lost ground.  Oil was lower, hanging in above 100, & gold clawed its way higher.

AMJ (Alerian MLP Index tracking fund)

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CLX13.NYM...Crude Oil Nov 13...100.14 Down ...0.67  (0.7%)

GCV13.CMX...Gold Oct 13........1,317.10 Up ...2.70 (0.2%)

  • An existing single family home which is up for sale is pictured in Burbank, California December 15, 2011. REUTERS/Fred Prouser
Photo:   Yahoo

Home resales in the US fell in Sep & prices rose at their slowest pace in 5 months, the latest signs higher mortgage rates were taking some edge off the housing market recovery.  The National Association of Realtors (NAR) said home sales fell 1.9% to an annual rate of 5.29M.  The Aug sales pace was revised down to 5.39M units from the previously reported 5.48M.  The estimate expected home resales to fall 2.9% to a 5.30M rate.  NAR said a combination of high home prices, barely rising salaries & higher mortgage rates was weighing down on affordability, which hit a 5 year low in Sep.  The Realtors group said home resales had probably peaked in Jul & Aug.  The drop in homes resales adds to other data that have suggested the high borrowing costs are starting to slow the housing market recovery.

Sales of Existing U.S. Homes Fall as Affordability Drops

  • A McDonald's restaurant sign is seen at a McDonald's restaurant in Del Mar, California April 16, 2013. REUTERS/Mike Blake
Photo:   Yahoo

McDonald's, a Dow stock & Dividend Aristocrat, reported quarterly revenue that missed estimates & warned that global comparable sales for Oct are expected to be relatively flat.  Sales at stores opened for at least 12 months rose 0.9% in Q3, missing expectations of a 1% rise.  In the US, comparable sales increased 0.7%, but missed the forecasted 0.9% rise.  Comparable sales in its Asia/Pacific, Middle East & Africa business declined a steeper-than-expected 1.4%.  The company is fighting to accelerate sales in the US after the competition rolled out new menu items & limited-time offers.  Previously it got a sales bump from new products such as oatmeal, sandwich wraps & lattes, but its more complicated menu has slowed service at the drive-thru.  Q3 EPS rose to $1.52 from $1.43 a year earlier.  Revenue rose 2.4% to $7.32.  Analysts expected EPS of $1.51 on revenue of $7.34B.  Restaurant margins at both franchised & company-operated stores slipped in Q3.  The stock fell fell 84¢.

McDonald’s Revenue Trails Estimates on Slowing U.S. Gains

McDonald's (MCD)

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China Urges Economic Policy Implementation to Spur Rebound

Photo:   Bloomberg

China's gov called for “unrelenting” implementation of its economic policies & reform measures to consolidate the nation’s recovery from a 2 qtr slowdown & improve the quality of growth.  While the economy is “stable and trending for the better,” & the nation has the ability to achieve this year’s targets, the foundations of the rebound are “not yet firm,” the State Council said after a meeting led by PremierLi Keqiang.  China’s economic expansion accelerated to 7.8% in Q3 from a year earlier, the statistics bureau said, reversing a slowdown that put the gov at risk of missing its 7.5% growth target for 2013.  Its top leaders will meet next month to map out policies to reform the economy & sustain long-term growth at about 7%.  “When downward pressures on the economy are relatively big, we should harden our confidence; when the economy stabilizes and trends for the better, we should keep a sober mind,” the State Council said.  Local authorities & state agencies should quicken implementation of gov policies to “further stabilize hard-earned expectations for improvement and for public confidence,” it said.   China’s CPI rose 3.1% in Sep from a year earlier, the first increase above 3% since Feb.  At the same time, inflation has been below the gov 2013 target of 3.5% every month this year.

China Urges Economic Policy Implementation to Spur Rebound

Markets are plodding along, not sure where to go next.  News, while not decisive, is on the drab side & uninspiring.  Initial reports about Obamacare look like it is a disaster besides being a drag on the economy.  Estimates for Q3 GDP growth are being reduced.  In the meantime, S&P is at a record & Dow is just below its recent record.  Uninspiring data may takes its toll on these lofty levels.

Dow Jones Industrials

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