Monday, April 28, 2014

Dow gains while the rest of stocks waffle

Dow shot up 87, advancers only marginally ahead of declines & NAZ slid 1+.  The MLP index went up fractionally to the 479s & the REIT index added 2+ to the 292s (a 9 month high).  Junk bond funds slid lower & Treasuries were mixed.  Oil rose & gold fell, ending the longest rally in 6 weeks, as pending sales of previously owned US homes had the biggest gain in almost 3 years, crimping demand for the precious metal as an alternative asset.

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Treasury yieles:

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CLM14.NYM....Crude Oil Jun 14....100.87 Up ...0.27 (0.3%)

Live 24 hours gold chart [Kitco Inc.]

Asian policy makers must push ahead with structural changes to ensure the region continues to lead global growth & withstand volatility as the US reduces monetary stimulus, the IMF said.  Asian economies will face higher interest rates & bouts of volatility in capital flows & asset prices as global liquidity tightens amid a recovery in advanced nations.  Tightening of global liquidity is one of the 4 main risks confronting Asia this year & next year, the IMF said.  Other dangers include a sharper-than-envisaged slowdown in China, waning effectiveness of growth-supporting policies in Japan, & political & geopolitical tensions that disrupt trade, it said.  “Asia is well positioned to meet the challenges ahead provided it stays the course on reforms.”   “Reforms are critical not only to sustain Asia’s growth leadership over the medium term, but also, in some cases, to maintain investor confidence and secure financial stability in the near term.”  Economic expansion in Asia will be more than twice as fast as advanced nations this year, while growth in the emerging Asian economies, which includes China & India, will be 3 times faster, the IMF estimates.  Even so, productivity has decelerated in recent years & the region needs a new wave of reforms to boost potential growth and to continue to attract inward investment, according to the report.  Asian economies are now more resilient to global financial volatility after implementing policies to address their vulnerabilities, the IMF said, noting that India & Indonesia were among nations that were able to better weather the Jan rout in emerging-market currencies & equities as the Federal Reserve began withdrawing stimulus.  Yet a sudden or sharper-than-anticipated tightening of global financial conditions remains “a key downside risk” for Asia.  Low inflation in most economies will allow central banks to loosen monetary policy & cushion the blow on growth.  Within the region, the IMF highlighted risks posed by China & Japan, Asia’s 2 largest economies.  It estimates China will expand 7.5% this year & 7.3% next year, while Japan will grow 1.4% & 1%.

IMF Says Asia Must Pursue Structural Changes Amid Volatility

Pfizer, a Dow stock, proposed buying AstraZeneca (AZN) for about £58.8B ($98.7B) in what would rank as the industry’s biggest-ever takeover, surpassing its $64B purchase of Wyeth in 2009.  AZN spurned the offer as too low, & PFE said it’s considering its options.  If AZN eventually agrees, a deal would create a company incorporated in the UK for tax purposes & run from New York.  AZN operations would be sewn into the 3 new business units at PFE.  The company offered £46.61 a share in cash & stock in Jan, & AZN declined.  The proposal is about 14% above Fri close for AZN & the stock today climbed above that price.  “We tried to get a mutual announcement to say we were in preliminary discussions,” PFE CEO Ian Read said.  “AstraZeneca rebuffed that, which is why we were forced to make the announcement.”  Another key component of the deal is moving PFE outside the US for tax purposes.  A deal would allow PFE to use $70B of cash it has built up overseas that would be subject to taxes if brought back to the US, because the combined company would be incorporated in the UK, would lead to a lower tax rate.  “I don’t see why there’s any conflict in what we’re doing with U.S. policy,” he said.  The company would keep its operational headquarters in the US & maintain a US stock listing.  PFE CEO has complained before about the US corp tax rate, the highest in the world.  “We saw how difficult it was to do business development with an uncompetitive tax rate,” he said.  PFE stock rose $1.29 & AZN shot up $8.33 to $76.99.  If your would like to learn more about PFE, click on this link for Trend Analysis:

Pfizer Will Pursue $98.7 Billion AstraZeneca Takeover After Bid Rejected

Pfizer (PFE)

Mario Draghi, ECB President, told German lawmakers that a quantitative-easing program isn’t imminent & is relatively unlikely for now.  The central bank does stand ready to embark on QE if needed, Draghi said at the gathering from the parties that form the nation’s coalition gov.  Draghi has said he is considering unprecedented measures from negative interest rates to QE to avert the risk of deflation as he guides the euro area thru a gradual economic recovery.  Gov & central-bank officials in Germany, the region’s largest economy, have been among the strongest opponents of his more radical policies amid concern the ECB will overstep its mandate.  While the ECB expects a prolonged period of low inflation, Draghi doesn’t see the imminent threat of falling prices.  Inflation in the bloc slid to 0.5% in Mar, the lowest rate in more than 4 years & below the ECB’s goal of just under 2%.  Consumer prices are forecast top rise 0.8% this month from a year earlier.  Draghi said this month that ECB officials are unanimous in their willingness to use unconventional tools if needed to support the recovery.  In a speech last week, he said the central bank could start broad-based asset purchases if the medium-term outlook for inflation worsens.

Draghi Is Said to Tell German Lawmakers Quantitative Easing Isn’t Imminent

This was an unusual day for the markets.  Dow gained with PFE leading the way.  But the rest of the market did little.  Earnings season is winding down & so far has been less than inspiring.  Asian markets, led by China, are iffy after a good run in recent months.  Then there is the Ukraine mess which is going nowhere fast as the world waits for Putin to make his next move.

Dow Jones Industrials

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