Friday, November 22, 2013

Markets crawl higher on rising German business confidence

Dow went up 13 to another record, advancers barely ahead of decliners & NAZ rose 12.  The MLP index was up 2 to 454 & the REIT index lost 2+ to 266.  Junk bond funds fluctuated & Treasuries were flattish.  Oil & gold are also doing little.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

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CLF14.NYM....Crude Oil Jan 14...94.98 Down ...0.46  

GCX13.CMX...Gold Nov 13....1,245.60 Up ...2.10 (0.2%)

BMW's i3 Battery-powered Automobile

Photo:   Bloomberg

German business confidence surged to the highest level in more than 1½ years, signaling that its recovery is on track even after growth slowed in Q3.  The Ifo institute’s business climate index increased to 109.3 in Nov from 107.4 in Oct (the highest since Apr last year) & exceeds all forecasts.  German companies are becoming more optimistic as they invest to take advantage of domestic unemployment near a 2 decade low & the end of the area’s longest recession.  Investor confidence rose to the highest level in 4 years in Nov & the Bundesbank said this week that the nation’s economy remains on a “solid growth path.”  A measure of current conditions rose to 112.2 in Nov from 111.3, while a gauge of expectations jumped to 106.3 from 103.7.  GDP grew 0.3% in Q3 after a 0.7% expansion in Q2.  Growth was driven exclusively by domestic demand.  Capital investment rose 1.6% in Q3 from Q2 & construction increased 2.4%.  While the local economy contributed 0.7 percentage point to GDP in Q3, net trade subtracted 0.4 percentage point, signaling the fragility of the recovery in the euro area.

German Business Confidence Increases as Recovery on Track

The Gap maintained an annual profit forecast range signaling that the crucial holiday-shopping season may fall short of estimates.  The company reaffirmed the full-year EPS estimate of $2.57-$2.65.  That range, excluding results from Q1-Q3, implies Q4 EPS of 50-58¢, trailing the estimate of 69¢.  CEO Blenn Murphy is working to boost holiday sales with lower-priced & on-trend products as apparel retailers increase discounts.  Consumers also are shifting spending to durable goods such as cars & appliances.  Sales for Q3 rose 2.9% to $3.98B, meeting the estimate.  Same-store sales rose 1%, compared with a 6% gain a year earlier.  Murphy said that product assortment wasn’t as strong in Q3 as last year’s colored denim trend that drove sales.  Sales at Banana Republic stores open at least a year fell 1%, while the Gap brand gained 1% & Old Navy sales were flat.  Murphy said he expects retailers will continue to discount heavily through the holiday season.  “There’s a little bit of fatigue out there when it comes to consumers,” Murphy said.  “So the question is are we disappointed in consumer sentiment, or have we as an industry not been that innovative to give the consumer product that doesn’t look like wallpaper day in and day out.”  The stock fell 1.44.

Gap’s Profit Forecast for Holiday Quarter Falls Short

Gap (GPS)

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Some traders are taking the day off to enjoy a long holiday weekend.  As for much of this month, little is going on & buyers retain the upper hand.  Next week, being somewhat of a holiday weekend, is not expected to be exciting.  Then there's just a couple of weeks to get the rest of the federal fiscal budget squared away.  As what has become usual, little will be done until the last couple of days.  Dysfunctional DC looks awful around the world, but those guys don't care because tomorrow will take care of itself.  I don't know how long that attitude can last.

Dow Jones Industrials

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