Monday, December 2, 2013

Lower markets on worries about Black Friday results

Dow gave up 32, decliners over advances almost 3-2 & NAZ was off 3.  The MLP index slipped 2+ to the 454s & the REIT index lost 2 to 264.  Junk bond funds were mixed & Treasuries saw more selling.  Oil rose for a 2nd day as US manufacturing unexpectedly climbed in Nov & gold continued losing ground.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

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CLF14.NYM...Crude Oil Jan 14..............93.23 Up .....0.51 (0.6%)

ZGZ13.CBT.....Gold 100 oz. Dec 13...1,238.50 Down ...11.50  (0.9%)

Carbon Fiber Manufacturing

Photo:   Bloomberg

The Institute for Supply Management (ISM) Index increased to 57.3, the highest since Apr 2011, from 56.4 a month earlier.  Readings above 50 indicate growth. The forecast was 55.1.  Orders, production & employment strengthened.  Gains in home sales have led to more orders for home-related merchandise & construction equipment.  Further improvement in consumer demand & a rebound in business investment would provide an even bigger push for manufacturers, which are contending with gov spending cutbacks & limited progress in the global economy.  The ISM measure has increased 6 straight months, the longest such stretch since 2009, when the economy was emerging from recession.  The ISM’s gauge of new orders rose to 63.6 last month, the highest since Apr 2011, from 60.6 in Oct.  The measure has exceeded 60 for 4 months.  An index of production climbed to 62.8 from 60.8.  The group’s factory employment measure increased in Nov to 56.5, the highest since Apr 2012, from 53.2, while the index of orders waiting to be filled rose to 54 from 51.5.  The report also showed gauges of factory inventories & customer stockpiles slowed in Nov from the prior month.  However, the pace of progress in the auto industry has shown signs of cooling since the summer.  Auto makers cut back production in Oct for the first time in 3 months.

U.S. ISM Manufacturing Index Rose to 57.3 in November

China Manufacturing

Photo:   Bloomberg

Chinese manufacturing growth beat the estimates in Nov, indicating the nation’s economic recovery is sustaining momentum amid gov efforts to rein in credit growth.  The Purchasing Manager Index was 51.4, according to the National Bureau of Statistics & China Federation of Logistics & Purchasing said, exceeding most estimates.  A separate gauge from HSBC Holdings Plc and Markit Economics was 50.8, topping all projections.  Numbers above 50 signal expansion.  Weakness in small companies & employment point to underlying fragility as Premier Li Keqiang prepares to push thru policy changes aimed at giving market forces a bigger role in the economy.  China faces headwinds including factory overcapacity & excessive corporate debt even as industrial investment picks up.  Economists estimate growth in GDP will slow to 7.5% next year from 7.6% this year.  The gov set a target for 7.5% expansion in 2013.

China Manufacturing Beats Estimates Amid Risks to Growth

Dow Chemical will shed about $5B worth of assets, making it the latest large industrial group to try to streamline itself.  The company has not determined whether it will spin off or sell the assets, which include chlorine production facilities, epoxy businesses & brine operations.  In Oct, CEO Andrew N. Liveris, said the company was planning $3-$4B in disposals.  “Today’s announcement represents a continuation of the shift of our company toward downstream high-margin products and technologies that customers value, and generate consistently higher returns than cyclical commodity products,” Mr. Liveris said.  “We are committed to prioritize our resources such that we maximize total shareholder return.”  In the last year, DOW took the first steps toward creating a simpler company with fewer business units by selling its global polypropylene licensing & catalysts business, part of $700M worth of divestitures over the last 12 months.  But the planned disposals of the chlorine, epoxy & brine businesses signal the company’s most substantial move to shed assets to date.  After the business units are sold, DOW expects to continue doing business with the buyers or newly public companies.  The company says it expects the disposals to be completed within 2 years, & that they could happen in one fell swoop or in parts.  The stock rose 90¢.

Dow Chemical Plans to Shed $5 Billion of Assets

Dow Chemical (DOW)

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Stocks are drifting lower.  The vibrations about Black Friday results are not good.  Stores are open longer hours & giving more discounts which will hurt gross margins.  The jobs report on Fri looks to be important, although there should be no great surprises.  Modest growth in jobs will be taken as a positive sign that Janet can keep throwing more money at the market.

Dow Jones Industrials

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