Wednesday, January 29, 2014

Markets sell off ahead of FOMC announcement

Dow sank 124, decliners over advancers 3-1 & NAZ fell 29.  The MLP index dropped 3+ to the 456s & the REIT index was off 2 to the 268s.  Junk bond funds slid lower &Treasuries gained.  Oil retreated from a 4-week high before a US gov report that may show crude inventories rose for a 2nd week.  Gold climbed on global uncertainties.

AMJ (Alerian MLP Index tracking fund)

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CLH14.NYM...Crude Oil Mar 14...96.63 Down ...0.78  (0.8%)

GCF14.CMX...Gold Jan 14.......1,258.30 Up ...7.30 (0.6%)

Boeing forecast a profit for 2014 that fell short of the estimates as the pace of its jet orders slow after the 2nd-highest year in 2013.  EPS excluding some pension expenses will be $7-$7.20.  That compares with $7.07 in 2013 & an average estimate of $7.46.  The planemaker has provided conservative forecasts over the last 2 years.  BA is under pressure to top last year’s performance after posting record jetliner deliveries & adding to an order haul that will keep factories busy for almost 8 years.  The company’s fast pace of deliveries was highlighted in Q4, soaring on faster production tempos for the 3 best-selling jets.  In Q4-2013, 172 planes were delivered, an increase of 4% from a year earlier.  It shipped 648 jets last year & garnered 1531 gross orders, a 14% increase from 2012.  BA projects deliveries to rise again in 2014 to 715-725 aircraft, including 110 Dreamliners.  65 of the mostly composite 787 Dreamliners were delivered in 2013.  In Q4, EPS excluding some pension expenses was rose 29% to $1.88.  Analysts projected $1.57.  The backlog grew to a record $441B, including $135B of net orders in Q4.  Last year BA introduced a profit measure, core EPS, that it said gives a clearer picture by adjusting for market fluctuation in pension expenses.  Without the adjustment, EPS rose to $1.61 compared $1.28 a year earlier.  Sales for the defense, space & security unit increased 6.1% to $8.86B from a year earlier, as the company landed overseas contracts.  The stock sank 6.23.
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Boeing 2014 Forecast Trails Estimates as Order Pace Slows

Boeing (BA)

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JPMorgan, a Dow stock,could fetch at least $2B for its commodities unit after it received bids from Blackstone Group (BX), Macquarie Group & Mercuria Energy Group.  The suitors ar being asked for more details on their offers to narrow the list to one exclusive bidder & a winner may be chosen by Fri.  The biggest US bank is selling the business as regulators review a decade-old ruling allowing deposit-taking banks to trade physical commodities.  The unit produces $750M in annual income before compensation costs.  The sale of the physical commodities business doesn’t include derivatives or gold bullion storage, the bank has said.  The unit is believed to have $3.3B in physical commodity assets.  The stock lost 69¢.
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JPMorgan Said to Be Near Decision on Selling $2 Billion Commodities Unit

J P Morgan Chase (JPM)

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China Credit Trust started repaying investors in a high-yield product whose threatened failure spurred concern of further defaults & contributed to a sell-off in emerging-market stocks.  Most clients in Shanghai, Guangzhou & Beijing signed an agreement yesterday to transfer their rights in the 3B yuan ($496M) trust to unidentified buyers in exchange for an amount equal to the product’s face value.  The bailout offer averted what would have been China’s biggest trust default in at least a decade & eased concern that financial stresses will mount in the $1.7T trust industry, the fastest-growing segment of the shadow-banking system.  At the same time, the bail-out spurred warnings that investors are being shielded from the risks in the trust market. 

China Credit Repays Principal to Investors in Bailed-Out Trust Product

Stocks continue to be under pressure as Big Ben's last announcement approaches.   Stories around the world are not pretty, beginning with China.  Earnings season is winding down & that has been less than impressive.  A lack of higher earnings suggests 2014 will be less than a stellar year & Dow sank to a new low for Jan (& the new year).

Dow Jones Industrials

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