Wednesday, December 18, 2013

Markets waffle while waiting for the FOMC announcement

Dow rose 22, decliners barely ahead of advancers & NAZ was off 18.  The MLP index dropped 3 to the 334s (near the low end of its trading range for most of the year) & the REIT index inched up pennies in the 262s.  Junk bond funds were slightly lower & Treasuries sold off.  Oil & gold are little changed.

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...97.46 Up ...0.24 (0.3%)

GCZ13.CMX...Gold Dec 13....1,232.00 Up ....0.80 (0.1%)

Builders Began Work on Most U.S. Homes in More than Five Years
Photo:   Bloomberg

The pace of home construction reached a more than 5 year high in Nov amid broad-based gains as builders boosted inventory to keep pace with demand.  Housing starts jumped 22.7% to a 1.09M annualized rate, exceeding all forecasts & the most since Feb 2008, according to the the Commerce Dept.  Permits for future projects held near a 5 year high, indicating the pickup will be sustained into 2014.  Builders are optimistic in the face of higher mortgage rates as they benefit from a shortage of available properties that’s driving home-price appreciation.  Nov building permits fell 3.1% from the prior month to a 1.01M rate, exceeding the projected 990K annual pace forecasted.  The Oct 1.04M level was the highest since Jun 2008.  Starts of single-family houses climbed 20.8% to a 727K rate, the most since Mar 2008, from 602K in the prior month.  Last month’s jump was the biggest since Feb 1991.  Work on multifamily projects increased 26.8% to an annual rate of 364K, the most since Mar.  Labor-market gains & rising real estate values have homebuilders upbeat about the industry’s prospects. 

FedEx fiscal Q2 EPS rose 14%, less than the forecast, as customers moved to cheaper shipping options outpaced cost reductions at its airline unit.  But it boosted full-year EPS growth forecast one percentage point to as much as 14% as a record share repurchase plan announced in Oct helps increase EPS.  The company has been working to lower operating costs by $1.7B over 3 years primarily at FedEx Express because of what it sees as a permanent move away from expensive overnight deliveries.  The shift eroded revenue from intl express shipments, its most lucrative, as operating costs remained constant. EPS was $1.57, up from $1.39 last year.  But the results fell short of the $1.65 estimate.  While revenue for each intl priority package rose 3%, average daily volume declined 5%.  Sales rose 3% to $11.4B, just under the forecast of $11.5.  The stock lost 26¢.

FedEx Profit Misses Estimates as Express Package Volumes Decline

FedEx (FDX)

stock chart

Johnson Controls, the largest US auto-parts maker, forecast full-year EPS growth that lagged behind the estimates as the manufacturer predicted limited car-market expansion in Europe.  EPS will total $3.15-$3.30 for the year ending Sep 30 on sales of $43B.  That compared with estimates of $3.34 on revenue of $43.8B.  EPS in FY2013 amounted to $1.71 a share with revenue at $42.7B.  “Over the long term, we have a clear vision for our portfolio and our ability to improve profitability ,” CEO Alex Molinaroli said.  “We are committed to disciplined capital allocation, and our strong balance sheet gives us the capacity to continue investing in our businesses while meaningfully increasing the cash we return to our shareholders.”  JCI is reconfiguring the company to focus on its building-efficiency unit, lessening a dependence on the cyclical automotive industry.  The company is trying to sell its automotive-electronics business & is considering options for its unprofitable auto-interiors unit, which makes door & instrument panels.  JCI received 51% of revenue from the auto-components division last year.  It also makes equipment for managing building climate & security, & provides maintenance of those systems which accounted for 34% of sales.  The power-solutions unit, which makes vehicle batteries, contributed 15% of revenue.  The stock fell 84¢.

Johnson Controls Forecasts 2014 Profit Trailing Estimates

Johnson Controls (JCI)

stock chart

There's not much to do now but wait.  The bulls are praying Big Ben extends the bond buying program.  But if there was a time to start tapering, this is a good time.  There is just enough good economic data to give those guys the courage to cut back on QE3.  Also, it will make Janet look less bad then if she begins her term with tapering.  Yield stocks are not taking the prospects of tapering well.  That negative attitude should continue with taperring.

Dow Jones Industrials

stock chart

No comments: