Friday, December 13, 2013

Markets fluctuate ahead of FOMC meeting next week

Dow inched up 15, decliners slightly ahead of advancers & NAZ added 4.  The MLP index rose 1+ to the 437s & the REIT index was up 1+ to 261.  Junk bond funds were a little lower & Treasuries marked time.  Oil hardly budged & gold had a small rebound after recent  selling.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLF15.NYM...Crude Oil Jan 15...91.52 Up ...0.04 (0.0%)

GCZ13.CMX...Gold Dec 13....1,233.20 Up ...7.20 (0.6%)

Wholesale Prices

US wholesale prices declined for a 3rd month in Nov, reflecting lower costs for energy & cars.  The 0.1% drop in the producer-price index followed a 0.2% decrease in the prior month, according to the Labor Dept report.  The estimate called for no change.  The core measure, which excludes food & energy, rose 0.1%.  Prices of goods & materials used in the earlier stages of production fell for a 2nd month as slow improvement in global markets limits demand.  Scant signs of accelerating inflation indicate Federal Reserve next week have more room to maintain the $85B in monthly asset purchases.  Last month’s increase reflected higher costs for light trucks & agriculture equipment.  While trucks were more expensive, the cost of cars fell 0.8%, the most since Jan.  Compared with last Nov, companies paid 0.7% more for goods & the core index rose 1.3% following a 1.4% gain.  Finished energy costs decreased 0.4% from the prior month.  The price of gasoline, heating oil & diesel declined & the cost of finished consumer foods was unchanged.

China’s leaders pledged to tackle local gov debt next year while creating a stable economic & social environment to promote reforms.  The gov will maintain continuity & stability in its macro-economic policies in 2014 & stick to a prudent monetary policy & proactive fiscal policy, China Central Television reported, citing a statement from the annual Central Economic Work Conference that just ended.  President Xi Jinping & Premier Li Keqiang are grappling with a surge in local-gov debt, risks from shadow banking & environmental degradation as they implement reforms unveiled after a Communist Party summit last month.  The conference, held to map out economic policies for next year, concluded that the nation should seek “reasonable” growth in GDP, without giving a target.  “We must take controlling and addressing local government debt risks as an important task in economic work,” according to a statement from the conference read on CCTV.  Provincial-level govs will be held accountable for local debt, it said.  This year’s goal for economic expansion is 7.5%, the same as in 2012.  An annual target of 8% was in place from 2005-2011 & it was 7% in 2004.  Premier Li said in Oct that China needs annual growth of 7.2% to keep unemployment stable after indicating in Jul his “bottom line” for expansion was 7%.

China Pledges to Tackle Local Government Debt Amid Reform

United Technologies, a Dow stock, said profit & revenue next year will probably fall below estimates as sluggish US gov sales & tax-law changes temper earnings growth.  EPS will be $6.55-$6.85 which compares with estimates of $6.85.  Sales will climb 1.6% to about $64B, below the $66.2B projection.  The initial forecast for 2014 showed the drag from waning demand for US military jets & helicopters along with a slow European economic expansion.  “It’s clear to me we’ve had a softer recovery than what we expected this time last year,” CEO Louis Chenevert said at an analyst meeting.  EPS this year will be about $6.15, matching the estimate.  The company will benefit from strengthening demand for Carrier air conditioners, Otis elevators & spare parts for its Pratt & Whitney jet engines & economic growth in Asia & the Americas.  That plays to the company’s strengths, after a reorganization, to focus on the aerospace & commercial building industries, Chenevert said.  UTX will spend $2B on divs & $1B each on share buybacks & mergers & acquisitions next year.  The stock lost $1.

United Technologies Sees Profit Growth Below Estimates

United Technologies (UTX)

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Stocks continue on their meandering ways.  DC wrapped the year on a quiet note & now those guys take off a couple of weeks until the new year begins.  The first major budget headache is raising the debt ceiling & that won't be pretty.  Meanwhile Obamacare will start biting consumers which will have a negative effect on the economy in Jan (traditionally a weak month at retail).  As I've said before, Dow is not greatly concerned.

Dow Jones Industrials

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