Monday, January 6, 2014

Markets fluctuate as traders weigh risks

Dow lost 44, decliners ahead of advancers 5-4 & NAZ was off 18.  The MLP index fell 1 to the 456s & the REIT index went up fractionally to the 267s.  Junk bond funds were weak & Treasuries gained ground as service industry data showed an uneven recovery.  Oil fell to a 5 week low as US service industries expanded at a slower pace than forecast in Dec & US fuel supplies rose.  Gold was flattish.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLG14.NYM....Crude Oil Feb 14....93.51 Down ...0.45  (0.5%)

Live 24 hours gold chart [Kitco Inc.]

The wages in China are set to increase 10% or more in 2014, driving more low-cost manufacturers out of the country & boosting consumption.  Bank of America sees wage growth of 11% this year after an estimated 10.7% gain in 2013.  2 other banking analysts predict 10-15% increases.  The ruling Communist Party is pushing for pay increases to retain public support & to accelerate the nation’s shift away from polluting & capital-intensive manufacturing to a more services-driven economy.  In minimum-wage increases so far announced for 2014, workers in Shenzhen in Guangdong province get a 13% boost & the gain for those in Yangzhou, Jiangsu province, is 15.6 %.  Demographic shifts will limit the labor force in coming years as the population ages.  The party in Nov pledged to loosen the one-child policy & also to ease the household registration which has served to constrain labor mobility.  Rising wages have pushed companies to seek lower labor costs in countries such as Vietnam.  The risk for China is a deeper economic slowdown, should the nation stumble during the transition to higher-value manufacturing.  A services-industry gauge released today by HSBC Holdings & Markit Economics showed a decline for Dec.  In Shenzhen, the 13% rise in the minimum wage to 1808 yuan a month in Feb is almost double the pace of the previous increase.  According to the central gov 5 year plan from 2011-2015, minimum wages should increase by 13%.

China Wages Seen Jumping in 2014 Amid Shift to Services

In 2014, American automakers are fielding their best cars in a generation while they are saddled with an image for building poor-quality models.  Even though dealers want them to cut prices, the Big 3 have promised not to sacrifice growing profitability by falling into old habits of deep discounting.  This year, US auto sales could be the highest level since 2006.  The North American auto industry is expanding factory capacity by 3M vehicles from its 2009 low, & new model introductions will more than double this year.  But added capacity & competition will put pressure on prices.  The combined US market share for General Motors (GM), Ford (F) & Chrysler rose to 45.3% last year, up from 44.8% in 2012, the 3rd time in the last 4 years they’ve gained ground.  Industrywide, US sales rose 7.6% to 15.6M, according to Autodata, the highest since 2007 when automakers sold 16.1M cars & trucks.  An otherwise strong year petered to a slow finish, as Dec sales rose just 0.3%, suggesting that automakers are still challenged to convince reluctant consumers to part with their money for such a big-ticket purchase.  New models will attract more tire-kickers to showrooms in 2014 & they will find more attractive prices because of growing competition from Japanese automakers that have more flexibility to cut prices.  The automakers will get a chance to display what’s next at the Detroit auto show next week.

Made-in-America Gets Better as Price Drives 2013 U.S. Sales Growth: Cars

Consumers purchased more than 3M Xbox One players in 2013, following the Nov 22 debut of the device in 13 countries according to Microsoft, a Dow stock.  The company is trying to keep pace with Sony’s PlayStation 4, which went on sale a week earlier in North America.  The companies were neck & neck in early Dec, with each selling more than 2M units in their first 18 days.  The $499 Xbox One & the $399 PlayStation 4 have more powerful graphics & entertainment functions than older models.  To distinguish its machine, MSFT has touted its motion-sensing camera, the ability to control live TV & exclusive games like “Ryse: Son of Rome” and “Dead Rising 3.”  MSFT fell 78¢ while SNE went up pocket change.

Microsoft Says Consumers Bought More Than 3 Million Xbox One Game Players

Microsoft (MSFT)

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Sony (SNE)

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Little was accomplished today as investors are assessing the new year.  Dow had a spectacular year in 2013 & extended its winning streak to 5 years with hardly a hiccup along the way.  If it replicates last year's gain in 2014, it will close around 20K with the most sluggish economic recovery in decades.  That's difficult to imagine.

Dow Jones Industrials

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