Friday, January 17, 2014

Markets fluctuate after UPS forecast

Dow rose 61, advancers barely ahead of decliners & NAZ was off 5.  The MLP index fell 1+ to the 454s & the REIT index lost a fraction in the 262s.  Junk bond funds did  little & Treasuries slipped lower.  Oil rose to a 2 week high on signs that economic growth in the US is accelerating.  Gold went higher.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

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U.S. 2-year


U.S. 10-year


CLG14.NYM...Crude Oil Feb 14...94.37 Up .....0.41  (0.4%)

GCF14.CMX...Gold Jan 14.......1,246.20 Up ...6.20 (0.5%)

Job openings in the US climbed in Nov to the highest level in more than 5 years, a sign the labor market was picking up before the pause in the final month of 2013.  The number of positions waiting to be filled increased 70K to 4M, the most since Mar 2008, from a revised 3.93M in Oct, according to the Labor Dept.  The pace of hiring was little changed, & more Americans quit their jobs.  A faster pace of hiring lays the ground for the income gains needed to spur consumer spending, which accounts for almost 70% of the economy.  Data last week showed payrolls in Dec grew at the slowest pace in 3 years, indicating a temporary cooling in the job market that partly reflected bad weather.

Job Openings in the U.S. Rise to Highest in More Than Five Years

The pace of home construction in the US dropped less than forecast in Dec, capping the best year for the industry since 2007.  Housing starts fell 9.8% to a 999K annualized rate following the revised 1.11M pace in Nov (the highest in 6 years), according to the Commerce Dept.  The estimate called for 985K.  Permits for future projects declined, a sign activity may pause in early 2014.  Housing remains a mainstay of the expansion, with builders breaking ground on more projects as an improved job market boosts demand for real estate.  At the same time, bigger gains in employment and incomes will be needed to overcome the decline in affordability as property values & mortgage rates rise.  Applications for building permits fell 3% to a 986K pace in Dec, less than the projected 1.01M.  For all of 2013, builders began work on 923K homes, up 18.3% from the prior year & the most since 2007’s 1.36M.  Work on single-family houses fell 7% to a 667K rate in Dec from 717K in the prior month.  Construction of multifamily projects declined 14.9% to an annual rate of 332K.  2 of 4 regions showed a decrease in groundbreaking, led by a 33.5% plunge in the Midwest.  Starts fell 12.3% in the South, were little changed in the Northeast & rose 15% in the West to a 6 year high of 269K.  Weather may have played a role in setting back some builders, autodealers & retailers as last month was the coldest Dec since 2009 with snowfall 21% above normal.

Builders Begin Work on More U.S. Homes Than Forecast

United Parcel Service said 2013 profit would miss forecasts as a flurry of orders towards the end of a shorter US holiday shopping season & cold weather took a toll on service.   It delivered more than 31M packages on Dec 23, its highest ever, & 13% more than the prior-year peak day.  However, the "highest delivery day" occurred 6 days later than expected & was 7.5% greater than planned.  On Dec 25 it was overwhelmed by a high volume of holiday packages, delaying the arrival of Christmas presents around the globe.  Cold weather coupled with 6 fewer days between Thanksgiving & Christmas pushed Americans to shop more towards the end of the season, when discounting was at its peak.  The level of online shopping towards the end of Dec was unprecedented.  UPS has also been hurt by retailers cutting back express shipping.  This reduces costs for manufacturers, but hurts companies like UPS, which make more money on faster shipping.  The company expects full-year EPS of $4.57, below the previous forecast of $4.65-$4.85.  UPS expects EPS of $1.25 for Q4 & analysts expect $1.43.  But the company said it was confident of its 2014 outlook for diluted EPS to rise 10-15%, implying a EPS of $5.02-$5.26 while analysts are forecasting $5.48.  The stock dropped 1.99.

United Parcel Service (UPS)

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Stocks are stumbling along in the early days of earnings season.  Initial reports are less than robust, barely good enough to keep the bulls happy.  The economy is trying to put on its best face & move higher with data that is inconclusive.  Meanwhile Dow remains under water in 2014, not a good start for the new year.

Dow Jones Industrials

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