Friday, November 8, 2013

Dow rises to new record on GDP data

Dow shot up 167 (closing at the highs again), advancers 4-3 ahead of declines & NAZ jumped 61.  The MLP index recovered from AM selling to finish down 1+ to the 449s & the REIT index lost 3+ to the 269s.  Junk bond funds were down 1-2% & Treasuries had a huge sell-off.  Oil went up while gold settled back, going below 1300.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

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U.S. 2-year


U.S. 10-year


CLZ13.NYM ...Crude Oil Dec 13 ...94.71

Live 24 hours gold chart [Kitco Inc.]

Home-buying conditions in the US, favorable by historical standards, will remain strong thru next year, & "millennials," or people born after 1980, will likely return to the market despite industry fears to the contrary, Moody's said in a new report, "US Homebuilders Experience Pause that Refreshes, Rather than Homebuying Paralysis."  The report also reiterates the agency's positive outlook for the US homebuilding industry, despite a slowdown in home-buying inH2.  "Homebuyers have reacted rationally to increased mortgage rates and a sharp rise in home prices by slowing down their househunting and homebuying," VP -- Senior Credit Officer, Joseph Snider said.  "But as mortgage rates stabilize and new home price increases level off, homebuyers will return to the market, lured by still-low mortgage rates and still-high affordability."  "While the industry is now stronger, any individual company's effort to attain and maintain an investment-grade rating may depend on its willingness to forgo certain avenues for growth, such as large debt-financed acquisitions, massive investments in land supply or big share repurchase programs," Snider said.

Moody's: Outlook for US homebuilding industry remains positive despite slowdown

Sony CEO Kazuo Hirai

Photo:   Bloomberg

Kazuo Hirai's plan to revive Sony's iconic electronics business now hinges on the Christmas shopping season.  After 2 straight profitable qtrs, the CEO shocked investors last week by reporting an unexpected fiscal Q2 loss that derailed the company’s rebound from $8B in TV losses.  SNE cut its forecasts for televisions, cameras & computers, businesses that make up 22% of sales.  Shares plunged 11% & Moody’s warned the credit rating may be cut to junk. The results intensify the pressure to turn around the company.  His plan faces a test this qtr with the release of a new PlayStation game console & a US push for the Xperia Z smartphone & new Bravia models.  If they don’t click, he may have to revisit more drastic ideas: a partial sale of Sony’s entertainment assets, or reassessing TV manufacturing.  The 19.3B¥ ($196M) loss in the period puts the spotlight on his plan, focused on games, mobile phones & imaging.  The PlayStation 4 will hit US retail shelves next week & TVs with curved screens & higher resolution will be on sale during the holidays.  The stock slid 12¢.

Sony’s Hirai Needs Christmas Success for Console as Revival Derails: Tech

Sony (SNE)

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The Gap shares soared after it reported solid gains in sales for Oct & gave an upbeat outlook for its Q3.  Investors welcomed the news following an unexpected drop in sales in Sep that threatened to stall the momentum the company had enjoyed since last year.  The owns Gap, Banana Republic, Old Navy, Piperlime, Athleta & Intermix brands.  Revenue from stores open at least a year increased 4% in Oct, with gains in each of its brands, exceeding expectations for a 0.1%.  The company said it expects EPS for fiscal Q3 to be 70-71¢, above the 66¢ forecasted.  The stock jumped 3.68 (10%).

Gap shares soar on sales, outlook

Gap (GPS)

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The bulls were back in force.  I think the way it works is if the jobs data is weak, markets rally because the Federal Reserve will not taper its bond purchases.  If the data is strong, the markets rally on that news.  Thus all news is good news.  As a result, Dow is up more than 2.6K YTD.  It's tough to find a better year, especially with only mediocre economic news.  This has been a sluggish economic recovery.  Retailer earnings reports are coming shortly & they will give a glimpse on the outlook for the important holiday season.  With all the uncertainties in DC, the forecast may not be encouraging.

Dow Jones Industrials

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