Monday, November 4, 2013

Markets edge higher on factory orders and earnings

Dow added 18, advancers over decliners 3-2 & NAZ inched up 1.  The MLP index was off 3+ to the 252s & the REIT index fell 1 to the 279s.  Junk bond funds gained & Treasuries were also up.  Oil & gold gained ground.

AMJ (Alerian MLP Index tiacking fund)

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Treasury yields:

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CLZ13.NYM....Crude Oil Dec 13...94.52 Down ...0.09  (0.1%)

GCX13.CMX...Gold Nov 13.....1,319.80 Up ...6.70 (0.5%)

Orders to US factories rose in Sep after 2 months of declines on a big jump in demand for commercial aircraft.  But businesses cut back sharply on orders for machinery & other goods that signal their confidence to expand, signs of slower economic growth.  The Commerce Dept said that factory orders increased 1.7% in Sep from Aug.  That followed a 0.1% decline in Aug & a 2.8% plunge in Jul.  The Sep gain was driven by a 57.7% jump in demand for aircraft.  But core capital goods, which include machinery & electronics, fell 1.3%, dragged lower by a 23.6% drop in machinery demand, with big declines in construction machinery, electric turbines & generators.  Economists pay closer attention to core capital goods because they exclude more volatile orders for defense & aircraft & are a better gauge of businesses' plans to invest.  The decline was the 2nd in 3 months & points to weaker activity at factories in Q3.  Orders for durable goods increased 3.8%, largely on the airplane gains.  The big rise in demand for aircraft helped offset a 0.7% dip in demand for autos & auto parts.  That decline is expected to be temporary given the strength in auto sales this year.  Demand for non-durable goods, such as chemicals, paper & food, edged down 0.2%.

US factory orders rise 1.7 percent in September Associated Press

Food distributor Sysco, a Dividend Aristocrat,  fiscal Q1 net income was nearly flat as it dealt with restructuring & other costs, but adjusted results beat expectations,  Many of its customers are casual dining chains, which are dealing with a tough competitive environment as consumers go out to eat less & the number of outlets proliferate.  EPS edged down slightly to 48¢ which compares with 49¢ last year.  Adjusting for one-time restructuring charges, EPS was 49¢.  Excluding other business streamlining costs, EPS was 56¢.  Analysts expected 47¢.  Revenue rose 6% to $11.71B from $11.09B last year.  Analysts expected $11.62.  CEO Bill DeLaney said the company is on track to achieve financial objectives for fiscal 2014.  The company said in Aug that earnings performance trends are expected to gradually improve during the fiscal year, but has not offered any specific guidance.  The stock jumped 1.33.

Sysco 1st-qtr net income flat amid restructuring Associated Press

Sysco (SYY)

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Kellogg Co. Logo

Photo:   Bloomberg

Kellogg plans to trim its global workforce 7%, citing weaker-than-expected sales for the year.  It expects EPS for the year to be toward the lower end of its previous forecast.  It employs 31K, suggesting the company plans to cut about 2170 jobs.  "Some employee notifications will take place this week," the company said.  Workforce reductions will take place by the end of 2017, along with plant consolidations & other cost-cutting measures it's dubbing "Project K."  The company has been struggling to boost cereal sales in North American.  Although cereal remains a huge business, Americans have a growing number of options in the morning & are increasingly reaching for foods that they can eat on the go.  In the latest qtr, sales in US Morning Foods segment fell 2.2%.  Among other products are Special K, Pop Tarts, All-Bran & Rice Krispies.  To expand into the salty snacks business, Kellogg last year bought Pringles chips hoping that the chips will also give it a bigger presence overseas as well.  But in the latest period, sales in the US Snacks segment also fell 2.5%.  For the qtr, EPS was 90¢.  Not including one-time items, EPS was 95¢, above the 89¢ projection.  A year ago, EPS was 89¢.  Revenue slipped to $3.72B, just under the $3.73B expected.  The stock rose 2.55.

Kellogg to cut 7 pct of jobs in cost-cut drive Associated Press

Kellogg (K)

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Stocks are rising, but the rally is nervous.  Earnings season is winding down with so-so results at best.  GDP growth data is coming out at the end of the week & earnings from retailers are next week.  Both of these areas are not expected to inspire buyers.  But Dow is just a whisper below its record reached last week while yield securities remain below their yearly highs.

Dow Jones Industrials

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Dow Jones Industrials

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