Friday, October 18, 2013

Markets mixed after strong China growth data

Dow fell 14, advancer ovcer decliners 3-2 & NAZ gained 30.  The MLP index was up 1 to 449 (but little changed for more than half a year) & the REIT index was off 1 to the 282s.  Junk bond funds were mixed as were Treasuries.  Oil advanced after economic growth accelerated in China & on speculation that economic stimulus will continue in the US.  Gold pulled back after yesterday's gains.

AMJ (Alerian MLP Index tracking fund)

stock chart

Treasury yieldes:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLX13.NYM...Crude Oil Nov 13...101.14 Up ...0.47 (0.5%)

GCV13.CMX...Gold Oct 13........1,317.00 Down ...5.70  (0.4%)

China’s Economy Grew 7.8% in Third Quarter, Matching Estimates

Photo:   Bloomberg

China's economic growth accelerated for the first time in 3 qtrs, as Premier Li Keqiang spurred factory output & investment to meet gov expansion goal for 2013.  GDP rose 7.8% in Q3 from a year earlier, the National Bureau of Statistics said, matching the estimate.  Today’s figures also showed home sales jumped 34% in Sep from the previous month even amid restrictions aimed at preventing a bubble, adding to signs of imbalances that may cast doubt on the recovery’s staying power.  China’s rebound is a bright spot in a world economy that has been buffeted by a possible tapering of the Federal Reserve’s monetary stimulus & an impasse that saw American lawmakers push the nation to the brink of default.  The IMF earlier this month cut its global forecast as capital outflows further weaken emerging markets.  China GDP was up 2.2% from Q2 & expanded 7.7% in the first 9 months of the year.  Li Keqiang said last week that growth in the first 9 months exceeded 7.5% & this week said that China’s recovery will continue & the nation is able to meet this year’s targets

China Growth Rebounds After Li Stimulus to Meet Target

  • A General Electric Company (GE) logo is seen on a toggle switch package in New York January 18, 2012. REUTERS/Shannon Stapleton
Photo:   Yahoo

General Electric, a Dow stock, posted a record backlog of orders that the company said positioned it well for 2014.  That overshadowed a decline in profit & revenue.  CEO Jeff Immelt sounded an optimistic tone to end a week of economic uncertainty, saying the conglomerate's results were "very strong in an improving global business environment."  Its backlog for everything from jet engines to locomotives to turbines jumped nearly 13% compared with the year-ago qtr.  Earnings increased at 6 of the 7 industrial businesses, & the company said it was on track to achieve its target for expanding profit margins for the year.  EPS was 31¢ in Q3 which compares with 33¢ a year earlier.  Excluding one-time items, EPS of 36¢ topped the average estimate of analysts by a penny.  Revenue fell 1.5% to $35.7B.  Analysts were looking for nearly $36B.  Revenue was weighed down by its GE Capital finance arm, which the company is shrinking, & a $132M toll from the negative impact of foreign currency translation.  Among the 7 industrial segments, its oil & gas & aviation lines posted revenue increases of 18% & 12% respectively, offsetting a 10% decline in its power & water unit that makes a variety of turbines.  Still, the power & water business recorded a 9% gain in earnings & performed better than expected.  The accumulated backlog rose to $229B, up $6B from the Q2, led by the aviation division which nearly doubled its orders, while transportation equipment orders jumped 65%.  GE said it was on track to reach its target of expanding operating profit margin for its industrial businesses by 0.7%, to 15.8% this year from 15.1% in 2012.  In Q3, the profit margin improved by 1.2% from a year ago.  The stock rose 69¢.

General Electric (GE)

stock chart

Forget talk of a budgetary grand bargain when members of Congress sit down to meet a Dec deadline for progress on a revenue-and-spending plan.  Lawmakers say even a mini-bargain to carry the gov thru the next year or 2 would be difficult, never mind a breakthrough on entitlement spending limits & tax revenue that’s eluded negotiators for the past 3 years.  “It’s kind of hard to be positive about it, particularly when we’ve gone through what we’ve gone through recently,” said Senator Saxby Chambliss, a retiring Georgia Rep who anticipates what may be his final opportunity to put the nation’s fiscal house in order.  He was co-chairman of a now-demobilized group of 8 Senate negotiators.  This week’s deal to end a gov shutdown & avert the threat of a default followed weeks of stalemate sets a Dec 13 date for completing the budget talks that opened yesterday.  It funds gov thru Jan 15 & suspends the debt limit thru Feb 7.  Negotiators will seek a mix of cost reductions & revenue increases that could replace the across-the-board spending cuts (sequestration) that Congress approved 2 years ago.  Obama said yesterday that a bipartisan deal should be possible.  In his budget released earlier this year, the pres offered to reduce annual Social Security cost-of-living increases & to increase Medicare premiums for the wealthy, in exchange for tax increases to help fund other gov programs.

Obama’s Goal of Grand Budget Deal Elusive as Talks Begin: Taxes

Stocks are resting after an exciting week.  The next DC deadline is a few months away & the bulls will be talking up the market.  But earnings are coming in mixed & after effects from the gov shutdown & debt talks will give a negative bias going into the important holiday season for retail.  Dow is up 125 this week & 230 in Oct.  Not bad, but now it's time for more earnings reports.

Dow Jones Industrials

stock chart

No comments: