Thursday, November 14, 2013

Markets edge higher despite Wal-Mart earnings disappointment

Dow was up 31, advancers over decliners 3-2 & NAZ slipped 3.  The MLP index jumped 4+ to the 449s & the REIT index rose 2+ to the 272s.  Junk bond funds were about even & Treasuries were slightly higher.  WTI’s discount to Brent widened to the biggest in almost 8 months as the US benchmark dropped amid rising inventories.  Gold gained after more Americans than forecast filed claims for jobless benefits & Federal Reserve Chairman nominee Janet Yellen signaled she will carry on with monetary stimulus.

AMJ (Alerian MLP Index tracking fund)

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CLZ13.NYM....Crude Oil Dec 13...93.24 Down ....0.64  (0.7%)

GCX13.CMX...Gold Nov 13.....1,284.80 Up ...16.50 (1.3%)

More Americans Than Forecast File Claims for Jobless Benefits

Photo:   Bloomberg

More Americans than forecast filed applications for unemployment benefits last week, a sign that the labor market is making progress in fits & starts.  Jobless claims declined 2K to 339K from a revised 341K in the prior week, the Labor Dept.  The forecast called for a drop to 330K.  Applications for 5 states were estimated because of the Veterans Day holiday-shortened week.  Companies, already running lean after the recession, are trying to determine the optimum level for their workforces as political gridlock in DC prevents lawmakers from reaching a compromise for this fiscal year’s budget.  A pick-up in consumer spending is needed to help drive growth & boost hiring in Q4.  The 4 week average decreased to 344K from 349K in the prior week. The reading compares with an average 329K at the end of Aug, before delays in processing claims in California caused the numbers to see saw.  The number continuing to receive jobless benefits was unchanged at 2.87M.  Continuing claims don’t include Americans who have exhausted their traditional state aid & are receiving emergency & extended benefits under federal programs.  Those job seekers decreased by about 37K to 1.33M.

Wal-Mart Store

Photo:   Bloomberg

Wal-Mart, a Dow stock & Dividend Aristocrat, cut its annual profit forecast for the 2nd time since Aug as the uneven economic recovery & increased competition from dollar stores hurt sales.  EPS for its fiscal year is guided at $5.01-$5.11, down from the forecast of $5.10-$5.30 it gave 3 months ago & trailed analysts’ average estimate of $5.19.  In Feb it forecasted EPS as high as $5.40.  CEO Mike Duke is trying to improve grocery selection & keep prices low to fend off smaller-format stores that offer merchandise starting at $1, while consumers restrain spending because of unemployment & higher taxes.  Sales at the US stores open at least 12 months excluding fuel fell 0.3% in the qtr.  Analysts predicted they’d be little changed.  US same-store sales have slid for 3 straight qtrs as a 2 percentage point increase in Social Security taxes reduced spending among its shoppers, many of whom live paycheck to paycheck.  WMT, which has a corp goal of keeping inventory growth at or less than the rate of net sales growth, scaled back its orders from suppliers for Q3 & Q4 to keep inventory from rising too quickly.  But the company said the order pullback wasn’t across the board & was happening “category by category.”  Today, the company said US inventory increased 5.1%.  While that was slower than the 6.9% inventory gain in Q3, it was faster than Q3 US net sales growth of 2.4%.  EPS in fiscal Q3 was $1.14 versus $1.08 a year earlier.  The average estimate was $1.13.  Revenue increased 1.7% to $115.7B, trailing the $116.8B average projection.  Sales in the intl division increased 0.2% to $33.1B. Excluding the effect of foreign-currency fluctuations, sales would have risen 4.1% to $34.4B.  The stock was up pocket change.

Wal-Mart Trims Forecast as Economy Restrains Shoppers


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Container Ship at Port of Oakland, California

Photo:   Bloomberg

The trade deficit in the US widened more than forecast in Sep to a 4 month high, reflecting a pickup in imports of consumer goods & capital equipment.  Exports declined for a 3rd month.  The gap in goods & services trade increased 8% to $41.8B from a revised $38.7B in Aug, according to the Commerce Dept.  The forecast called for a $39B deficit.  The US imported more mobile phones, while shipments of automobiles from overseas producers reached a record, indicating American companies were confident domestic demand would be sustained.  Limited progress in foreign markets has held back demand for US made goods, indicating it will take time for the economy to get a bigger boost from trade.  The report, initially scheduled for Nov 5, was delayed by the shutdown of the federal gov.

U.S. Trade Gap Widens More Than Forecast to $41.8 Billion

Stocks are sloshing around, not knowing what to do next.  Disappointing earnings from WMT were accepted without complaint.  Cisco (CSCO), another Dow stock, had a weak report & the stock fell $3 (12%).  But Janet Yellen will be accepted to succeed Big Ben & is saying interest rates will remain low until at least 2015, making the bulls happy. Meanwhile, DC is focused on fixing Obamacare as the deadlines for funding the gov approaches.

Dow Jones Industrials

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