Thursday, April 24, 2014

Markets edge higher on earnings

Dow crawled up 19, advancers ahead of decliners 5-4 & NAZ gained 24 (helped by a a 41 jump at Applel (AAPL)).  The MLP index slid 1+ to the 483s & the REIT index was up fractionally to the 291s.  Junk bond funds pulled back & Treasuries rose.  Oil rose as tension increased between Russia & Ukraine, & on signs that US & European economic growth is accelerating.  Gold is climbing back to 1300.

AMJ (Alerian MLP Index tracking fund)

Treasury yields:

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U.S. 2-year


U.S. 10-year


CLM14.NYM....Crude Oil Jun 14....101.95 Up ...0.51 (0.5%)

GCJ14.CMX......Gold Apr 14.......1,293.70 Up ...9.50 (0.7%)

Orders for durable goods into American factories jumped in Mar, setting up manufacturing as one of the central drivers of a rebound in economic growth during Q2.  Bookings for goods meant to last at least 3 years increased 2.6%, the biggest gain since Nov, after rising 2.1% in the prior month, according to the Commerce Dept.  Orders excluding transportation equipment rose by the most in more than a year.  The biggest increase in computers & electronics orders since Nov 2010 highlighted a broad-based pickup in demand that will help the economy rebound after a weather-plagued Q1.  Orders for non-defense capital goods excluding aircraft, a proxy for future business investment in items like computers, engines & communications gear, increased 2.2%, the biggest gain in 4 months & followed a revised 1.1% drop that was smaller than previously estimated.  Producers of computers & electronics received 5.7% more orders than in Feb, the biggest advance since Nov 2010.  Orders for metals, machinery, electrical equipment & appliances also picked up.  Capital goods demand increased at a 3.1% annualized rate in Q1, compared with a 1.9% gain the prior qtr   Shipments of those goods, used in calculating GDP, climbed 1% after rising 0.7% in Feb, more than previously estimated.  Sales rose at a 1.7% annualized rate Q1, down from 7.8% in Q4, indicating business spending cooled.  Durable goods data were boosted by an 8.6% surge last month in bookings for non-military aircraft, largely due to Boeing (BA), a Dow stock.

Orders for Durable Goods Poured Into U.S. Factories in March

More Americans than forecast filed applications for unemployment benefits last week , but the Easter holiday period made it more difficult to adjust the data for seasonal variations.  Claims increased 24K to 329K, the most in a month, according to the Labor Dept.  The forecast called for an increase to 315K.  Looking beyond the swings, layoffs have slowed, which probably means employers are gaining confidence the economy is strengthening.  Claims dropped to the lowest level since 2007 at the start of the month, a sign the companies are seeing string-enough sales to retain staff.  The 4-week average of claims climbed to 317K from 312K in the prior week, the lowest since 2007.  The number continuing to receive jobless benefits dropped by 61K to 2.68M, the fewest since Dec 2007.  The unemployment rate among people eligible for benefits fell to 2% in the latest week, down from 2.1% in the prior week.

Jobless Claims Rise More Than Forecast in U.S. Holiday Week

A Caterpillar Inc. 259D Compact Track Loader Sits in Louisville
Photo:  Bloomberg

Caterpillar, a Dow stock, posted better-than-expected Q1 results & boosted its full-year profit outlook on improved expectations for construction while also saying the mining industry continues to disappoint.  EPS this year excluding restructuring costs will be $6.10, exceeding the company’s Jan projection of $5.85 & is above the $5.81 estimate.  CAT, the world’s largest maker of construction machinery, said that segment increased sales 20% while earnings tripled.  It doubled its 2014 sales growth forecast for construction equipment such as excavators & backhoes to 10%.  North American customer demand is rising & dealers are rebuilding inventories.  CEO Doug Oberhelman said he’s hearing “positive stories about new projects and reasons for optimism” from US construction customers & dealers.  “While that’s encouraging, there’s still quite a bit of room for improvement,” he said.  “The U.S. construction industry is still well below its 2006 peak.”  Q1 EPS rose to $1.44 from $1.31 a year earlier.  Excluding restructuring costs, EPS was $1.61, topping the $1.23 estimate.  Sales were almost unchanged at $13.2B, compared with the estimate of $13.1B.  The state of the construction market contrasts with the company’s natural resources business, which has been hit by a downturn in mining investment.  Its profit dropped 68% & full-year sales are now expected to fall 20%, twice as much as previously expected.  The large mining-truck sales are about 80% down from their 2012 peak.  CAT maintained its expectation for global economic growth to accelerate to 3% this year, from about 2% in 2013, with China growing 7.5%.  Chinese reforms aimed at transitioning “to a more sustainable growth model while maintaining social stability” may impact the economy & CAT customers.  CAT warned that the political conflict between Russia & Ukraine could escalate, slowing growth & result in gov trade sanctions that would hurt sales in the region.  The stock went up 2.80.  If you would like to learn more about CAT, click on this link:

Caterpillar Raises Forecast on Construction Outlook

Caterpillar (CAT)

Earnings are generally favorable, but revenue growth continues to be sluggish at best.  On the intl front, the Russia-Ukraine conflict drones on & China's economy is relatively stuck in the mud.  Dow is having a tough time reaching a new record & even the better performing S&P 500 has only barely topped its prior record levels.  This performance does not tell the story of a bull market.

Dow Jones Industrials

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