Friday, April 25, 2014

Lower markets on Russian tensions and Amazon earnings

Dow sank 139, decliners over advancers 2-1 & NAZ plunged 72.  The MLP index fell 3+ to the 478s & the REIT index lost 1 to just over 290.  Junk bond funds were weak & Treasuries advanced.  Oil slid back to almost 100 & gold rose for a 3rd straight day amid reignited tension in eastern Europe.

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CLM14.NYM....Crude Oil Jun 14....100.69 Down ...1.25  (1.2%)

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The Group of Seven nations are preparing new measures against Russia, European officials said, as Ukraine’s gov said separatists had seized intl monitors as hostages in eastern Ukraine.  Pres Obama discussed deepening sanctions against Russia with the leaders of Germany, France, the UK & Italy today, a day after Secretary Kerry accused Russia of trying to impose its will in Ukraine at “the barrel of a gun.”  They spoke after Russia renewed military exercises on its neighbor’s border & explosions in 2 Ukrainian cities wounded 8.  Russia hasn’t fulfilled its part of an Apr 17 accord aimed at calming the crisis, the US & European officials said.  The conflict escalated yesterday when Russian pres Putin warned Ukraine against continuing an anti-separatist offensive that killed 5 rebels.  “The five leaders agreed that in the light of Russia’s refusal to support the process, an extension of the current targeted sanctions would need to be implemented, in conjunction with other G-7 leaders and with European partners,” UK Prime Minister David Cameron’s office said.  Pro-Russian militants captured a bus carrying observers from the Organization for Security & Cooperation in Europe, a 57-nation group that includes Russia & the US focusing on conflict prevention & preserving human rights, Ukraine's Interior Ministry said.  They’re holding 13 hostage in the separatist-held eastern Ukrainian city of Slovyansk.  During the conference call between Obama, Cameron, German Chancellor Angela Merkel, French President Francois Hollande & Italian Prime Minister Matteo Renzi, condemned “the absence of any efforts” by Russia to support the implementation of the Geneva agreement.  EU ministers agreed in principle to expand a “stage two” blacklist on Apr 14, possibly targeting Russian companies alongside gov officials & military officers.  So far, the bloc has slapped asset freezes & travel bans on 55 Russians & Ukrainians.  “Stage three” sanctions -- EU code for sweeping economic measures -- are more controversial within the 28-nation group and would need to be decided by its leaders.  John Baird, the foreign minister of G-7 member Canada, said “there is no doubt” that sanctions were having an effect on Russia thru depreciation in the ruble & market instability, even as Putin has argued the impact is limited.

G-7 Leaders Agree to Act on Russia as OSCE Monitors Held

After a roller-coaster decade of boom-bust-boom, the US housing market is going downhill just when many thought annual sales would be heading up.  Sales of previously owned properties in Mar tumbled 7.5% from a year earlier to the slowest pace in 20 months, while purchases of new houses sank 14.5% from Feb.  Mortgage applications to buy homes plunged 19% from a year earlier, indicating slowing demand during what is typically the busiest season for deals.  The housing market’s underlying fragility is emerging as outside influences that fueled a 2-year rebound are receding.  Mortgage interest rates are rising from record lows as the central bank withdraws its stimulus, & investors, who had helped drive national prices up more than 20% as they went on a buying spree, are now retreating.  While last year’s spring buying season was characterized by bidding wars across the country as buyers rushed to take advantage of record-low mortgage rates amid low inventory, the market so far in 2014 has been more affected by issues specific to local geographic areas.  “We’ve had a boom and we’ve had a bust, and those were all national events,” said Mark Palim, VP at Fannie Mae said.  “Now that national drivers are less significant to the market, you’re seeing the re-emergence of local economic factors.”  Prices have climbed so fast in the last 2 years that buyers have sticker shock, said Lawrence Yun, chief economist for the National Association of Realtors.  He projects that sales will decline 2% this year after predicting, at the start of the year, for a small increase over 2013.  “Housing is a victim of its own success,” Yun said.  “It’s just that the fast price growth is not healthy.”

Housing in U.S. Cools as Rate Rise Hits Sales: Mortgages

Photo:   Bloomberg

Starbucks yesterday raised its forecast for profit this year, helped by a sales boost from new baked sweets, egg sandwiches & a rewards program with about 8M US members.  EPS in the fiscal year through Sep will be as much as $2.68 SBUX said, above its previous forecast of as much as $2.67 & tops the $2.66 projection.  CEO Howard Schultz has attracted US customers with non-coffee offerings, such as new breakfast sandwiches, juice & tea.  The company also is expanding its evening program, selling beer, wine & small plates of food in afternoon hours.  Same-store sales rose 6% in the US in fiscal Q2, surpassing estimates.  In the US, “the single largest contributor to the comparable sales growth in the quarter was food,” COO Troy Alstead said.  “It resonates with customers.”  He added that the company’s loyalty program also is growing “dramatically.”  EPS climbed 9.4% to 56¢ from 51¢ a year earlier.  Analysts had projected 56¢.  Revenue rose 9.1% to $3.87B, while analysts estimated $3.95B.  Sales at cafes open 13 months or longer climbed 6% worldwide, while analysts projected growth of 5.4%.  Comparable-store sales rose 6% in Europe, the Middle East & Africa & 7% in China & Asia Pacific.  SBUX, which has more than 1000 locations in China, recently introduced gift cards to consumers.  The Asian nation is on track to be its biggest market outside the US.  The stock went up 36¢.  If you would like to learn more about SBUX, click on this link for Trend Analysis:

Starbucks Raises Profit Forecast as New Foods Help Sales

Starbucks (SBUX)

Stocks had a bad day which put in the red for the week.  Tensions in eastern Europe have become the major concern for traders & there is no solution in sight.  Yield securities are having a rally (by their standards) this year as investors seek more income in the low yield environment.  Momentum stocks have been sold & that money was reinvested in yield securities.  MLPs, REITs, junk bond funds & even munies are up while the popular averages are below their highs at the start of the year.  The 32 decline for Amazon (AMZN) today shows this has become a much different market than in recent years.

Dow Jones Industrials

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