Wednesday, April 9, 2014

Markets rise on Alcoa earnings

Dow went up 47, advancers over decliners 3-2 & NAZ advanced 25 after recent selling.  The MLP index rose 1 to the 473s & the REIT index lost a fraction to the 288s.  Junk bond funds were higher & Treasuries backed off.  Oil is over 102 while gold is trying to hold above 1300.

AMJ (Alerain MLP Index tracking fund)

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLK14.NYM...Crude Oil May 14...102.55 Down ....0.01  (0.0%)

GCJ14.CMX....Gold Apr 14.........1,301.10 Down ...7.60  (0.6%)

Years of cheap credit have inflated corp & sovereign debt in emerging markets that now find themselves at greater risk of capital flight if global interest rates rise further, according to the IMF.  While the IMF predicts a smooth withdrawal of monetary stimulus by the Federal Reserve, a “bumpy exit” is possible.  The result could be a faster-than-anticipated increase in interest rates, widening credit spreads & greater financial volatility.  “Emerging markets are especially vulnerable to a tightening in the external financial environment, after a prolonged period of capital inflows, easy access to international markets, and low interest rates,” The IMF report said.  Years of low interest rates in advanced economies have encouraged global investors to seek higher yields in fast-growing developing countries.  Investment from advanced economies into emerging-market bonds reached an estimated $1.5T by the end of 2013, the IMF said.  Emerging-market corporate debt tripled from 2009 to 2013, with debt levels in countries such as China, Hungary & Malaysia reaching or exceeding 100% of GDP.  Much of that debt is owed to overseas investors.  The share of corp debt owed to non-residents is now above 25% in countries including India & Turkey, making them more vulnerable to currency fluctuations.  Other risks exist in China, where the challenge is for policy makers to orchestrate a move toward greater market discipline.  “Investors and lenders will have to bear some costs of previous financial excesses, and market prices will need to adjust to more accurately reflect risks,” the IMF said.

IMF Sees Rising Risks for Emerging Markets’ Corporate Debt

In Q1, Russian capital outflows were the largest since the Q4-2008 when the collapse of Lehman Brothers triggered the biggest credit squeeze in decades.  Net outflows totaled $50.6B, more than double the $17.8B that left in Q4, the central bank in Moscow said.  In Q4-2008, capital outflows were $132B.  Outflows for the whole of last year reached $59.6B.  Russian stocks have been the worst performers in 2014 globally, falling more than 10%.  Pres Putin’s move to absorb Crimea last month prompted US & EU sanctions, bringing the already slowing Russian economy to a near standstill.  Q1 outflows fell short of a gov estimate of $70B.  The economy, which is now forecast to expand 0.5% to 1.1% this year & may contract more if capital outflows reach $150B.  The ruble has depreciated 8% against the dollar this year, the 2nd-worst performance among 24 emerging-market currencies.  Maybe Putin will take notice next time he decides to flex his muscles.

Russia’s First-Quarter Capital Outflows Largest Since Late 2008

Constellation Brands stock shot up after its newly gained Corona beer brand helped fuel profit growth in last qtr.  Fiscal net income almost doubled to $157M, with net sales climbing 86% to $1.29B, the company said.  Excluding some items, the EPS was 81¢, topping the 76¢ estimate.  STZ bought Grupo Modelo’s US beer business last Jun for $5.3B, gaining the rights to Corona & Modelo brands, as well as a brewery in Nava, Nexico.  The deal helped the company’s beer division perform better than projected, CEO Rob Sands said.  STZ is working to expand the brewery in Mexico to keep up with supply.  “Our beer business exceeded our expectations for the year, fueled by robust consumer demand,” he said.  STZ expects EPS of $3.95-$4.15 in fiscal 2015, which ends next Feb.  Analysts estimated $3.96.  The stock rose 84¢.  If you would like to learn more about STZ, click on this link for Trend Analysis:

Constellation Shares Climb After Corona Brand Fuels Beer Sales

Constellation Brands (STZ)

Stocks are higher after former Dow stock Alcoa (AA) reported favorable earnings.  Q1 EPS was 9¢, beating the nickel forecast & the stock rose 56¢.  Lower sales was ignored, traders are viewing this as a positive signal for earnings season.  Maybe, but this is a commodity stock that lives with gyrations in the price of aluminum.   Like yeserday, the market advance was limited although NAZ is seeing buying after all that selling in recent weeks.

Dow Jones Industrials

This Undervalued Energy Stock is Set to Soar! Special Report

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