Thursday, April 10, 2014

Markets tumble as selling resumes in tech stocks

Dow sank 266 (closing at the lows), decliners over advancers better than 3-1 & NAZ tumbled 129.  The MLP index saw selling in the index which gave a loss of 4+ to 471 & the REIT index was off 2+ to the 285s.  Junk bond funds crawled higher & Treasuries rallied when stocks were sold.  Oil slid back & gold went up as a safe haven investment.

AMJ (Alerian MLP Index tracking fund)

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLF15.NYM....Crude Oil Jan 15....95.51 Down ...0.29  (0.3%)

Live 24 hours gold chart [Kitco Inc.]

Lagarde Adds to Chorus Urging U.S. Leadership on IMF Overhaul

Photo:   Bloomberg

IMF Managing Director Christine Lagarde urged the US to take responsibility & adopt an overhaul of the fund’s ownership structure that’s been stalled in Congress.  “When the U.S. withdraws, everybody loses,” Lagarde said as the 188 member countries are meeting this week.  “Do exercise that leadership; it’s there, it’s yours.”  The US is delaying implementation of a 2010 agreement by all member countries that would adjust some nations’ shares, or quotas, in the fund & double its lending capacity to about $739B.  The plan would give emerging markets, such as China, more clout at the institution, which was set up at the end of WW II to help safeguard global monetary stability.  Lagarde added to a chorus of countries showing impatience.  Twice this year, Congress rejected a push by the Obama administration to add the IMF provision to unrelated legislation, including an aid package for Ukraine.  The US is the largest shareholder of the fund, with a voting share of 16.8%.  Major decisions require 85% approval, effectively giving the US veto power.  “I would hope that before the end of this calendar year, we complete the reform of the IMF, which means that we make it more credible, better resourced, and capable of jumping on urgent issues like Ukraine, for instance, with adequate financing,” Lagarde said.  The fund last month reached a preliminary agreement for a loan up to $18B to the fledgling gov of Ukraine & is expected to approve the loan in a couple of weeks.  “The failure to finalize this issue diminishes America’s global standing,” Australian Treasurer Joe Hockey said yesterday.  2 days earlier, his British counterpart, Chancellor of the Exchequer George Osborne, called the US inaction “bad for the institution and bad for the international community.”  Speaking earlier, Lagarde said the global “recovery is uneven and remains too weak for comfort, with geopolitical tensions injecting new concerns.”

General Motors Headquarters
Photo:   Bloomberg

General Motors anticipates taking a Q1 charge of $1.3B primarily for the cost of recall-related repairs announced this year & courtesy vehicles for inconvenienced customers.  The charge includes $750M in previously announced recall costs, GM said.  In 2 weeks the automaker expects to report solid core operating performance for Q1.  GM also has informed the US National Highway Traffic Safety Administration that it will replace ignition-lock cylinders as it recalls 2.2M older small cars in the US.  The cylinders can allow the key to be removed while the engine is running.  This lock-cylinder recall covers all of the 2.59M vehicles already being recalled worldwide, a GM spokesman said.  GM said it’s aware of several hundred complaints of keys coming out of ignitions.  The company said a search of its own & gov databases revealed one rollaway in a parking lot that resulted in a crash & an injury claim.  The $1.3B expense doesn’t include the $400M charge previously announced by GM related to the Venezuelan currency.  The stock was off 32¢.  If you would like to learn more about GM, click on this link for Trend Analysis:

GM Fined by U.S. Safety Regulator for Incomplete Answers

General Motors (GM)

Family Dollar Stores, a Dividend Aristocrat, is closing about 370 stores & conducting a review to improve its business.  The closings, 4.6% of the 8K locations, will generate up to $45M in annual cost savings beginning in the fiscal Q3.  The review includes cutting an unspecified number of jobs, lowering prices on about 1K items & slowing new store growth.  FDO is contending with more competition from rival discount chains & big-box retailers.  Revenue is projected to rise 1.7% this fiscal year, according the estimate, after gaining 11% last year.  The company will book a restructuring charge in H2 of $85-$95M related to the job cuts & store closings.  CEO Howard Levine said fiscal Q2 results “did not meet our expectations,” as the company faced more competition & a more cash-strapped customer.  Sales fell 6.1%to $2.72B in the qtr ended Mar 1.  Other companies have recently said they’re shutting locations to save costs amid more rivalry from mass & online retailers.  The stock fell 1.90.  If you would like to learn more about FDO, click on this link for Trend Analysis:

Family Dollar to Close 370 Stores, Cut Jobs Amid Business Review

Family Dollar Stores (FDO)

While weak tech stocks have dragged down NAZ, Apple (AAPL) has held up fairly well.  This year its stock has been flattish, near 530, off only 5 to 524 today.  In the last 6 trading sessions, NAZ plunged about 200.  You don't see that too often!  Tech selling is dragging down other stocks.  Dow is down 280 in Apr in what in what is shaping up as another ugly month.  The glum news from FDO is sending a chilling message for the rest of retailers.  Tomorrow Dow stock JPMorgan (JPM) reports & that should set the tone for the trading session & maybe earnings season.

 Dow Jones Industrials

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