Tuesday, December 17, 2013

Markets drift lower ahead of FOMC announcement

Dow fell 35, decliners over advancers 2-1 & NAZ was off 13.  The MLP index dropped 2 to the 436s & REIT index was about even in the 261s.  Junk bond funds did little & Treasuries crawled higher.  Oil hardly budged & gold lost ground as it has for much of the year.

AMJ (Alerian MLP Index tracking fund)

 stock chart

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLF14.NYM...Crude Oil Jan 14...97.51 Up .......0.03 (0.0%)

GCF14.CMX...Gold Jan 14.....1,232.30 TDown ...12.90  (1.0%)

Consumer Prices
Photo:   Bloomberg

The cost of living in the US was unchanged in Nov from a month earlier, showing inflation is making scant progress.  That followed a 0.1% decrease in the prior month, according to the Labor Dept.  The forecast called for a 0.1% advance. The core measure rose 0.2%.  Retailers are offering more discounts to attract cash-strapped American shoppers this holiday season, underscoring limited cost pressures.  Overall consumer prices rose 1.2% in the year ended in Nov after a 1% year-over-year gain in Oct.  The core CPI climbed 1.7% from Nov 2012, matching the gains in the previous 2 months.  Energy costs fell 1% from a month earlier reflecting cheaper gasoline & natural gas.  Falling gasoline costs in Q4 have given households the wherewithal to spend more on other goods & services.  The average cost of a gallon of regular gasoline has declined to $3.23 as of Dec 15 from $3.39 on Oct 1.

Honeywell forecast a profit for 2014 whose low end trailed estimates.  Sales next year will rise 4-5%, to as much as $40.7B, the company said . EPS is expected to rise to $5.35-$5.55.  Analysts are projecting $5.55.  Honeywell said it’s bracing for continued budget declines at the Dept of Defense, where it gets about 8% of revenue, as it expects the economic environment next year “to be similar to 2013.”  Still, by keeping costs in check, CEO Dave Cote said he expects “strong margin expansion” & “double-digit earnings growth” next year.  The company also reaffirmed its forecast for 2013, saying sales would be $38.8-$39B.  The stock fell 23¢.

Honeywell 2014 Profit Forecast Low End Trails Estimates

Honeywell (HON)

stock chart

The Senate cleared a key procedural hurdle & advanced the fiscal budget deal.  In bipartisan fashion, the Senate voted by a 67-33 margin to advance the legislation to a final vote.  60 votes were needed to break a filibuster.  While the House passed the legislation last week, the Senate vote is expected to be close, amid steady opposition from some Reps.  However 8 key Rep senators suggested that they would at least vote to advance the measure.  12 Rep senators ended up voting to advance the budget legislation.


Even though there is very little going on in the markets, buyers are pausing.  The Fed meeting is the main focus of traders' attention & until those guys speak, little will get done in the stock market.  However, yield sensitive securities continue to slide.  Buyers for these securities have been taking a wait & see approach for months.  As a result, these stocks have pulled back, raising their yields.

Dow Jones Industrials

stock chart

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