Wednesday, February 12, 2014

Markets fluctuate after 4 day rally

Dow managed a gain of 30 after being in the red all day, advancers were little ahead of decliners & NAZ gained 10.  The MLP index inched up fractionally in the 466s (a whisper from its record high) & the REIT index lost a fraction to the 278s.  Junk bond funds slid lower & Treasuries saw selling.  Oil advanced to the highest level in almost 4 months after the gov reported that inventories at Cushing, Oklahoma, decreased last week.  Gold extended its 2014 rally, climbing to a 3-month high as speculation that US stimulus will continue boosted the appeal of alternative assets.

AMJ (Alerian MLP Index tracking fund)

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CLH14.NYM...Crude Oil Mar 14....100.37 Up ....0.43 (0.4%)

Live 24 hours gold chart [Kitco Inc.]

The U.S. Capitol Building
Photo:   Bloomberg

The federal budget deficit narrowed by 37% in the first 4 months of the fiscal year compared with a year earlier as spending declined & a stronger economy helped increase revenue.  Outlays exceeded receipts by $184B from Oct-Jan compared with a $290B shortfall in the same period a year earlier, the Treasury Dept said.  Last month’s deficit was $10.4B, compared with a $2.9B surplus in Jan 2013.  The deficit as a share of the economy will shrink to a 7 year low in the 12 months ending Sep 30, according to a recent projection by the CBO, which predicted a $10B deficit for Jan.  An unemployment rate that fell to 6.6% last month from 7.9% a year earlier is helping boost gov revenue & contain spending.  Revenue rose 8.2% in Oct-Jan to $960.6B from the same period a year earlier, while outlays dropped 2.8% to $1.14T.  Commerce Dept figures last month showed the US economy expanded at a 3.2% pace in Q4 as spending climbed the most in 3 years, laying the ground for further improvement in 2014.  In Jan, receipts gained 8.7% to $296B, while spending expanded 13.8% to $306B from a year earlier.  Feb 1 this year fell on a Sat, requiring some payments to be made in Jan instead of this month.  The CBO said that the fiscal 2014 deficit will narrow to $514B, or 3% of GDP, from $680B last year.  The projected gap is down from 9.8% of GDP in 2009, the widest in records dating back to 1974.

China’s export & import growth unexpectedly accelerated in Jan, defying signs the economy will slow while fueling speculation that fake shipments are resurfacing.  Overseas shipments rose 10.6% from a year earlier, the General Administration of Customs said, a pace that may be distorted by false invoices & holidays.  It compares with a projection of a 0.1% gain.  Imports advanced 10%, leaving a trade surplus of $31.9B, the widest for Jan since 2009.  By contrast, Taiwan & South Korea reported exports fell in Jan from a year earlier.  The comparison with year-earlier figures is distorted because of false invoices to disguise capital flows in 2013 & the different timing of the weeklong Lunar New Year holiday.  A widening discrepancy between Hong Kong & Chinese data for bilateral trade in Dec spurred speculation that China’s numbers are again exaggerated because of fake exports.

China Trade Growth Defies Signs of Slowdown

Deere forecast fiscal 2014 profit that exceeded estimates as it predicted higher construction & forestry equipment sales will help offset some of the decline in revenue from agriculture, its largest market.  Net income will drop to about $3.3B in the year through Oct, from $3.54B in the prior year.  While that’s the same as its Nov projection, it’s more than the $3.13B projection.  DE maintained a forecast of a 3% drop for equipment sales.  This would be the first drop in earnings in 5 years as full-year sales at its agriculture & turf business, its largest unit, will fall by about 6%, while sales at the construction & forestry segment, will rise about 10%.  US building activity is recovering, with spending at its highest level since the aftermath of the financial crisis more than 4 years ago.  Meanwhile sales to farmers are projected to fall as their earnings drop along with corn prices.  EPS was $1.81 in the qtr thru Jan 31, compared with $1.65 a year earlier.  That’s more than the $1.53 estimate.  Equipment sales rose 2.2% to $6.95B in the period, higher than the $6.55B estimate.  The stock fell 56¢.
If you would like to learn more about DE, click on this link:

Deere Forecast Tops Estimates as Construction Gains

Deere (DE)

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The bulls took a day off & stocks fell back.  The largest news event today is the storm in the south which is heading up the east coast.  This can be expected to crimp retail sales & business activity in general.  DC will close tomorrow, so those guys will be able to do less damage to the economy.  There has been a fair amount of good news on the economic front lately.  But it has been inconsistent & mixed with negative stories.  Verizon (VZ), a Dow stock, just announced it's closing 5 call centers & will layoff 5200 workers.

Dow Jones Industrials

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