Tuesday, January 7, 2014

Higher markets on reduced trade deficit

Dow rose 121, advancers over decliners better than 2-1 & NAZ gained 36.  The MLP index slipped back 1+ to the 455s & the REIT index rose 1+ to the 268s.  Junk bond funds were higher & Treasuries did little in trading.  Oil was flat while gold pulled back.

AMJ (Alerian MLP Index tracking fund)

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CLG14.NYM...Crude Oil Feb 14...93.46 Up .....0.03 (0.0%)

GCF14.CMX...Gold Jan 14......1,227.00 Down ...10.80  (0.9%)

The US trade deficit shrank more than forecast in Nov as oil imports dropped to the lowest level in 3 years & exports climbed to a record.  The gap narrowed 12.9% to $34.3B, smaller than projected & the least in 4 years, according to the Commerce Dept.  The gain in sales to overseas customers was led by aircraft & chemicals.  Improving economies in Europe && Asia are benefiting US companies, leading to a pickup in manufacturing that is boosting economic growth.  The fuel-driven drop in imports overshadowed record purchases of foreign autos, parts & capital goods that indicate spending by American consumers & businesses is strengthening.  Exports increased 0.9% to $194.9B, reflecting a $390M gain in civilian aircraft & a $264M advance in chemical sales.  Imports dropped 1.4% to $229.1B.  Purchases of crude oil plunged to $28.5B, the lowest in 3 years, reflecting both lower prices & volume.  Gains in demand for capital goods were paced by computers & accessories.  The petroleum deficit shrank to $15.2B, the lowest since May 2009.  Excluding oil & adjusting for inflation, the trade deficit was little changed at $41.1B compared with $41.4B in the prior month.

Trade Gap Shrinks to Four-Year Low as U.S. Oil Imports Drop

Eli Lilly forecast a drop in 2014 profit & reduced its sales outlook because of generic competition to the its Cymbalta antidepressant & Evista drug for osteoporosis.  Sales will be $19.2-$19.8B, while EPS will be $2.77-$2.85.  Analysts predicted $19.6B & EPS of $2.78.  The company said in Oct that meeting its projection of at least $20B in sales in 2014 would be difficult.  It lost patent protection on Cymbalta, its best-selling drug, last month, leading to expectations that revenue will decline to its lowest level since 2007.  “We expect 2014 to be the most financially challenging year of Lilly’s current period of patent expirations,” Chief Financial Officer Derica Rice said.  LLY plans to increase sales starting next year as it brings new products to market.  5 Lilly drugs are being reviewed by regulators, & 8 more are in the final of 3 stages of testing required before approval.  Cymbalta generated sales of $5B in 2012 & 2014 sales are projected by analysts to fall to $1.4B.  Revenue from Evista is expected to drop to $500M this year from an estimated $997M in 2013.  The stock was up pennies in AM trading.

Lilly Sees Sales, Profit Decline on Generic Competition

Eli Lilly (LLY)

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Federal Reserve (FED) Bank of Boston President Eric Rosengren, the only dissenter against a FED decision to taper bond buying, said policy makers should avoid hurting the economy by cutting stimulus “only very gradually.”  “This recovery has already been too slow, and we do not want premature tightening of monetary policy to delay the return to more normal economic conditions,” Rosengren said.  “A very gradual normalization is very appropriate given that the unemployment rate remains unusually high and the inflation rate remains unusually low.”  The FOMC is scheduled to meet Jan 28-29 & will probably reduce purchases in $10B increments over the next 7 meetings before ending them in Dec, according to a recent survey.  Rosengren expects the economy to expand at a 3% pace in 2014, “consistent with stronger employment growth & declines in the unemployment rate.”  Joblessness fell to 7% in Nov.  “All of us who follow the economy have been waiting for the drag from fiscal austerity to wane, for consumers to regain confidence and increase demand, and for the housing market to solidify its nascent recovery,” Rosengren added.  Another "leak" aimed at keeping traders guessing about what's next.

Rosengren Says Fed Exit From Stimulus Should Only Be Gradual

Stocks are having their first good day in the new year, not a good sign.  Even with today's rally, it's down 30 YTD.  One old prediction for forecasting the new year is the first week sets the tone for rest of the year.  It's unclear whether that will be thumbs up or down.  Janet Yellen got her new job as Big Ben II & she will likely continue with gradual tapering.

Dow Jones Industrials

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