Tuesday, April 22, 2014

Markets rise on earnings

Dow climbed 74 (within spitting distance of a new record), advancers over decliners better than 2-1 & NAZ advanced 34.  The MLP index went up 1+ to the 487s for a new record, & the REIT index was flat at just above 290.  Junk bond funds rose & Treasuries fell back.  Oil declined from its highest closing level in 7 weeks on estimates that US supplies rose last week & gold was even.

AMJ (Alerian MLP Index tracking fund)

Treasury yields:

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CLK14.NYM...Crude Oil May 14...103.24 Down ...1.13  (1.1%)

GCK14.CMX...Gold May 14.......1,288.00 Down ...0.10  (0.0%)

Vice President Joe Biden

Photo:   Bloomberg

An agreement to ease tensions in Ukraine showed signs of crumbling as the US & Russia traded blame as VP Biden meets gov leaders in the country.  Secretary Kerry warned Russian Foreign Minister Sergei Lavrov yesterday “there will be consequences” if Russia fails to act “over the next pivotal days” to restrain pro-Russian militants in eastern Ukraine.  Lavrov called on the US to hold Ukraine’s gov accountable for curbing what Russia portrays as right-wing militias.  Pro-Russian forces who seized buildings in at least 10 eastern Ukrainian cities have said they are not bound by the deal reached by Ukraine, the EU, the U.S & Russia last Thurs.  The gov in Kiev accuses pres Putin of stirring the unrest & exploiting the situation to prepare a potential invasion.  “As of today, the Russian side has shown no signal that it is ready to implement the Geneva accords,” Ukraine’s Foreign Ministry said yesterday.  “Illegal armed groups controlled by Russia continue to destabilize the situation in eastern Ukraine, preparing the ground for another stage of Russian military aggression.”  Biden will offer US support for Ukraine’s sovereignty & economy in today’s visit.  While the US won’t unveil new sanctions when Biden is on this trip, the administration hasn’t seen progress on the accord.

Ukraine Accord Nears Collapse as Biden Meets Kiev Leaders

United Tech, a Dow stock, raised the lower end of its 2014 earnings forecast today after beating Q1 estimates.  Excluding divestitures & foreign exchange, quarterly sales rose 5%.  CEO Louis Chenevert has transformed UTX with the 2012 purchase of aerospace supplier Goodrich, asset sales & the combination of the elevator, climate-control & fire & security divisions into one unit.  The company reaped savings in the $16B Goodrich deal & sees more from the blended construction businesses.  Full-year EPS will be $6.65-$6.85, a 10¢ boost to the bottom of that range.  EPS from continuing operations of $1.32 a share topped the $1.27  estimate.  Net quarterly sales increased 2.4% to $14.75B, buoyed by gains in orders for elevators & aircraft equipment.  “We’re feeling pretty good about the economies,” CFO Greg Hayes said.  “Europe seems to be coming out of the doldrums and the U.S. is performing about as expected.”  Net income fell 4.2% to $1.2B & restructuring costs shaved 9¢ from EPS.  UTX plans to spend $375M on restructuring projects to boost cost savings, up from a projected $300M.  The company is still in negotiations with the Canadian gov to supply helicopters &doesn’t expect shipments to begin until H2, Hayes said.  The stock rose 85¢  If you would like to learn more about UTX, click on this link for Trend Analysis:

United Technologies Lifts Forecast on Aviation, Buildings

United Technologies (UTX)

A McDonald's Corp. Big Mac Meal
Photo:   Bloomberg

While McDonald’s, another Dow stock, posted falling sales at established US locations & Q1 profit that trailed estimates, it's showing some encouraging signs.  The Mar drop in US sales was the smallest in 5 months, & the company said global store sales may be “modestly positive” in Apr (the 2nd straight monthly gain).  CEO Don Thompson has struggled to attract diners in the past year as a complicated menu slowed service while rivals created new products.  To fight back, it offered free McCafe coffee at its more than 14K domestic stores from late Mar into Apr & also introduced a new Clubhouse burger.  While Mar same-store sales fell 0.6% in the US, the 5th straight monthly decline.  It was the best result since a 0.2% gain in Oct & marked the 3rd straight month that the drop shrank.  But the improvement wasn’t enough to lift Q1 results.  Sales at US locations open at least 13 months slid 1.7%, compared with a 1.4% decline estimated.  EPS fell to $1.21 from $1.26 a year earlier.  Analysts estimated $1.24.  Revenue rose 1.4% to $6.7B, the $6.72B estimate.  Comparable-store sales advanced 1.4% in Europe & 0.8% in the Asia Pacific, Middle East & Africa region.  The European business is improving as it rolls out new items, such as blended ice drinks in the UK, & advertises value deals in France.  The company gets about 40% of its revenue in Europe.  The stock slid 42¢.  If you would like to learn more about MCD, click on this link for Trend Analysis:

McDonald’s Sees April Sales Growth After Profit Fell

McDonald's (MCD)

Stocks have had a nice rise since Apr 11, with Dow advancing 500 & is approaching its record high.  Earnings are helping although higher revenue is spotty at best, a troublesome sign.  High yields sectors continue to be in demand as Janet Yellen has all but promised interest rates will remain low for more than 2 years.  Then there's Russia & the messy Ukraine situation.  Nobody knows where that will go.  I'm nervous about the advance as earnings season began.  More reports are coming.
Dow Jones Industrials

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