Friday, April 25, 2014

Markets tumble on growing Russia-Ukraine tensions

Dow dropped 144, decliners over advancers 5-2 & NAZ fell 64 (hurt by Amazon (AMZN)).  The MLP index sank 5 to 477 & the REIT index lost a fraction to 291.  Junk bond funds were  mixed to lower & Treasuries gained as stocks declined.  Oil pulled back along with the stocks & gold saw buying, taking it above 1300.

AMJ (Alerian MLP Index tracking fund)

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CLM14.NYM...Crude Oil Jun 14...100.75 Down ....1.19  (1.2%)

GCJ14.CMX.....Gold Apr 14......1,302.00 Up ...11.50 (0.9%)

The pres was set to discuss a possible expansion of sanctions with European leaders after Secretary Kerry said Russia is running out of time to ease tensions in Ukraine.  Obama, planned a conference call with leaders including German Chancellor Merkel.  In DC yesterday, Kerry accused president Putin's gov, which began new military exercises on Ukraine’s border, of using the “barrel of a gun and the force of a mob” to impose its will on its neighbor.  “If Russia continues in this direction, it will not just be a grave mistake, it will be an expensive mistake,” Kerry said.  Russia has failed to live up to commitments under an accord signed in Geneva a week ago, & continued lack of cooperation would bring consequences, he said.  The conflict escalated yesterday when Putin warned Ukraine against continuing an anti-separatist offensive that killed 5 rebels.  The accord signed last week by Ukraine, Russia, the EU & the US is on the brink of collapse.  Russia unexpectedly raised its key interest rate today after Standard & Poor’s cut the country’s credit rating.  The Russian central bank increased its one-week auction rate to 7.5% from 7%.  The ruble has lost more than 8%.  The yield on the Ukrainian gov dollar-denominated notes due in 2023 rose for a 5th day, climbing 0.05 percentage point to 10.1%, the highest in a month.  Obama said today that Putin increasingly sees the world thru a “Cold War prism,” though he’s “not a stupid man.”  He added that a united front on sanctions may be difficult to achieve when he talks to European leaders as they consider the consequences for their own economies.  “There’s some variation inside of Europe,” Obama said.  “That is as much of an issue as is any differences between our assessments and theirs.”

Kerry Warns Putin on Ukraine as Russia Opens Troop Drills

Consumer confidence rose in Apr to a 9-month high, showing Americans are growing more upbeat about the economy as the labor market gains traction.  The Thomson Reuters/University of Michigan final index of sentiment increased to 84.1 from a 4-month low of 80 in Mar.  The projection called for 83 after a preliminary Apr reading of 82.6.  Consumers were more optimistic about current conditions than at any time since Jul 2007 as smaller ranks of the unemployed, near-record stock prices & higher property values help bolster household finances.  The index averaged 89 in the 5 years before 2008, when the last recession began, & 64.2 in the 18-month contraction that followed.  The Michigan sentiment survey’s index of current conditions, which measures Americans’ views of their personal finances, advanced to 98.7 in Apr from 95.7 a month earlier.  The initial Apr figure was 97.1.  The gauge of expectations 6 months from now increased to 74.7, the highest since Jul, from 70 last month.  The preliminary Apr reading was 73.3.  The Conference Board’s confidence index climbed in Mar to the highest level since 2008.  The gauge is projected to rise further this month as well.

Consumer Sentiment in U.S. Climbed in April to Nine-Month High

Ford EPS was 25¢, excluding certain items, in Q1.  That trailed the 31¢ estimate for the first time in 3 years.  The company attributed the miss to an extra $400M in warranty & recall expenses, a bigger loss in South America & bad weather in North America.  Recall costs are rising across 2008-2013 vehicles, not from one specific model, said CFO Bob Shanks.  “We have seen more field-service actions over the last two years,” Shanks said.  Recalls have been increasing because “there’s more complexity in the vehicles, more technology in the vehicles.  There’s better data & a better ability to very quickly identify issues.  Everybody is generally reacting -- certainly we do -- as soon as we find a problem.”  The South America unit lost $510M before taxes, compared with a loss of $218M a year earlier.  It recognized $310M is costs to reflect the decline in Venezuelan currency.  Ford said it will now lose more money in South America this year than the $34M it lost last year, which is a change from its previous guidance.  The region may break even for the rest of the year, Shanks said.  The company’s pretax operating profit fell 36% to $1.38B.  A higher warranty reserve, weather-related expenses & currency effects reduced profit by about $900M.  The coincidence of these items is unusual & not representative of the business, Ford said.  “It was a solid quarter,” Shanks added.  “The underlying run rate of the business was much stronger than was indicated by the bottom line.”  The 2nd-largest US automaker is rolling out 23 new models worldwide this year & a record 16 in North America.  In Q1, Ford had pretax operating income in North America of $1.5B, down from $2.4B last year.  US sales fell 2.8% to 580K vehicles, while its market share fell to 15.5% from 16.2% a year earlier, according to researcher Autodata.  The stock lost 48¢.  If you would like to learn more about Ford, click on this link for Trend Analysis:

Ford Profit Misses on Growing Recalls Amid Higher Costs

Ford (F)

After a weak start, the bulls have been struggling all year to take command of the market.  The US economy is doing reasonably well, although a faltering housing market & uncertainties about the effects Obamacare will have in the economy are drags.  The Dow was close to setting a new record, but failed again this week.  Dow is down 60 this week & more than 200 YTD.  The Ukraine mess is serious & nobody knows where Putin will take it.
Dow Jones Industrials

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