Tuesday, April 29, 2014

Markets gain ahead of FOMC meeting announcement

Dow climbed 86, advancers over decliners 3-2 & NAZ went up 29.  The MLP index rose 4+ to the 483s & the REIT index was even in the 292s.  Junk bond funds went up & Treasuries fluctuated.  While oil was higher, it backed off AM gains, & gold is still trying to break thru the 1300 ceiling.

AMJ (Alerian MLP Index tracking fund)

Treasyry yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLM14.NYM....Crude Oil Jun 14....101.24 Up ...0.40  (0.4%)

Live 24 hours gold chart [Kitco Inc.]

U.S. Home Prices
Photo:   Bloomberg

Home prices in 20 US cities rose at a slower pace in the year ended Feb as the residential real-estate market cooled.  The S&P/Case-Shiller index of property values increased 12.9% from Feb 2013, the smallest 12-month gain since Aug, after rising 13.2% in the year ended in Jan.  The median projection called for a 13% advance.  Growth in property values eased as rising mortgage rates & severe winter weather restrained demand for dwellings in the first few months of the year.  Cooling price appreciation combined with an improving job market may help home sales regain momentum later in the year.  Home prices adjusted for seasonal variations increased 0.8% in Feb from the prior month, matching the estimate.  All of the 20 cities in the index showed a year-over-year gain, led by a 23.1% jump in & a 22.7% advance in San Francisco.  Cleveland showed the smallest year-over-year increase, with prices rising 3%.  Just 5 cities showed larger year-to-year gains in Feb.

IBM, a Dow stock, raised its quarterly div 16% to $1.10 (from 95¢) as CEO Ginni Rometty tries to appease shareholders while the company shifts businesses.  Earlier this month, IBM reported its 8th straight quarterly decline in revenue as it shifts its business from hardware to cloud computing & data analysis.  Rometty is banking on a strong comeback in the coming qtrs as she aims to deliver on a forecast for adjusted EPS of at least $18 this year.  The larger-than-expected div boost comes as IBM plans to reduce its pace of stock buybacks following an $8.2 billion splurge in Q1.  “Today’s announcement reinforces our commitment to delivering value to shareholders,” Rometty said.  “We will continue to invest aggressively in our strategic growth areas including cloud, big data analytics, social, mobile and security to position the company to drive growth and higher value for our clients.”  This marks the 19th straight year that it has increased the div.  IBM said earlier this month that it won’t sustain its rate of share repurchases from Q1, when buybacks more than tripled from a year earlier to the most since 2007.  The company plans to spend less than $5.8B total in the final 9 months of this year.  Repurchases have helped IBM meet projections for EPS simply by reducing the number of shares.  The stock rose 1.97.  If you would like to learn more about IBM, click on link for Trend Analysis:

IBM Increases Quarterly Dividend by 16% as Pace of Share Buybacks Slows

International Business Machines (IBM)

Merck & Co. Cholesterol Pill Mevacor

Photo:   Bloomberg

Merck, another Dow stock, beat earnings estimates as the company cut spending on promotions & research.  EPS excluding certain items was 88¢, 9¢ above the estimate.  Sales were $10.3B, down from $10.7B.  The company last year said it would lay off 8500 workers in a move to save $1B, trimming R&D, sales & management.  Those cuts showed up in these results.  EPS was 57¢, up from 52¢ a year earlier.  R&D costs fell 17% from a year before, to $1.57B, & marketing & administrative expenses dropped 8% to $2.73B.  “The prioritization process we introduced last year is clearly bearing fruit, as can be seen in the reduced R&D expenses,” said Roger Perlmutter, the company’s head of research.  Combined sales of the top product, the diabetes pill Januvia & related drug, Janumet, increased 3% to $1.33B from a year before.  But overall pharmaceutical sales fell 5% to $8.5B.  In the US, Januvia sales benefited from price increases, as revenue from the drug grew 3% while prescriptions of declined.  “We’re looking to see if we can grow again,” said Adam Schechter, VP of global human health.  The most-promising pipeline drugs are a new cancer treatment that uses the body’s own immune system to fight the disease.  It’s testing the medicine, MK-3475, in skin & lung cancers.  It also has a therapy for hepatitis C that does away with side-effect heavy injections that are a staple of current treatments.  The consumer-health business is for sale while the company determines the future of an animal-health unit.  The stock went up 2.04.  If you would like to learn more about MRK, click on link for Trend Analysis:

Merck (MRK)

Buyers were feeling good before the big announcement by the FOMC tomorrow.  Another $10B reduction in its bond buying program is assumed.  That is all but certain given the economic it's looking at.  Increasing the interest rate, of greater importance to traders, is viewed as far down the road.  Earnings reports have been fairly well received, but accounting adjustments & stock buybacks (not higher revenue) continue to be the main driving force behind the rise in EPS.  Dow is just 40 below its record.

Dow Jones Industrials

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