Wednesday, May 14, 2014

Lower markets on rising inflation

Dow fell 44, decliners ahead of advancers almost 3-2 & NAZ went down 8.  The MLP  index was flattish in the 484s & the REIT index lost 1 to the 297s.  Junk bond funds were mixed & Treasuries gained ground.  Oil  was up & gold went over 1300 again.

AMJ (Alerian MLP Index tracking fund)

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLM14.NYM...Crude Oil Jun 14...102.04 Up ...0.34 (0.3%)

GCK14.CMX...Gold May 14.....1,300.50 Up ...5.90 (0.5%)

Russian Foreign Minister Sergei Lavrov
Photo:   Bloomberg

Ukraine “is as close to civil war as you can get” & a solution must be found that satisfies all regions, Russian Foreign Minister Sergei Lavrov said.  Russia has “no intention” of sending its troops anywhere, Lavrov said.  While holding Russia accountable for Ukraine’s presidential election on May 25 is “ridiculous,” the vote can’t be legitimate if it’s impeded by fighting.  There’s already a “real war” between gov forces & separatist fighters in the country’s east & south, Lavrov said.  Any attempt to grant NATO membership to Ukraine would be “an issue for Russia” & its inclusion in the alliance would hurt European security, he added.  Russian pres Putin last week for the first time signaled his endorsement of the election as a “step in the right direction,” while noting that it wouldn’t resolve the crisis if Ukrainian citizens don’t understand how their rights will be guaranteed.  Russia this week urged national dialogue to resolve the crisis after saying it “respects” the results of 2 disputed referendums in eastern Ukraine’s Donetsk & Luhansk regions that separatists said backed independence.  Leaders of the breakaway Donetsk People’s Republic have asked to join Russia.

Ukraine ‘Close to Civil War as You Can Get,’ Russia Says

Wholesale prices in the US rose in Apr by the most in more than a year, reflecting broad-based gains that signal the threat of deflation is ebbing as the economy improves.  The 0.6% increase in the producer price index (PPI) was the biggest since Sep 2012, exceeding all estimates, according to the Labor Dept.  Over the past 12 months, costs climbed 2.1%.  Food costs jumped by the most in 3 years.  A rebound in pricing power could be taking shape as global growth begins to pickup.  Higher prices will probably ease concern among some Federal Reserve policy makers who have said they want inflation to increase closer to their 2% goal.  The Apr PPI increase followed a 0.5% gain the prior month.  The estimate called for an advance of 0.2%.  The advance from the same month a year before was the biggest since Mar 2012 & followed a 1.4% rise in the year to Mar.  Wholesale food expenses increased 2.7%, the biggest jump in over 3 years, led by an 8.4% surge in the costs of meats (the biggest since 2003).  Energy costs increased 0.1% last month after a 1.2% decline in Mar.  The core measure, which strips out volatile food & fuel, increased 0.5% after rising 0.6% in Mar.  The cost of services increased 0.6%, reflecting higher costs for clothing, machinery & airline fares.  Prices for goods also climbed 0.6% last month, paced by light trucks & a record jump in ethanol. 
Producer prices for finished products related to consumer spending increased 0.7% in Apr after rising 0.6% the month before.

Wholesale Prices in U.S. Rise by Most in More Than a Year

Macy's maintained its annual profit forecast & increased its share buyback program after cost cuts helped it cope with a Q1 marked by weak shopper traffic.  While sales unexpectedly declined, EPS was 60¢, matching the estimate. The retailer said earnings this year still will meet its projections & that it will repurchase $1.5B more in stock than originally planned while raising its div.  CEO Terry Lundgren has been cutting jobs to trim costs as flagging mall traffic & unfavorable weather plague retailers.  The company eliminated about 1.8K positions this year to save about $100M annually.  Lundgren’s moves helped cushion the blow from Q1 sales that fell 1.7% to $6.28B, below the forecast of $6.47B.  Selling, general & administrative expenses shrank to $2B from $2.04B a year earlier.  EPS still are expected to be $4.40-$4.50 for the year thru January 2015 while analysts estimate $4.46.  Macy’s said that the shift of a portion of its annual “Friends & Family” sale into May from Apr damped Q1 revenue.  The quarterly div was increased to 31¼¢ from the current 25¢.  The stock was up pocket change.  If you would like to learn more about Macy's,
Click here for a FREE analysis of AAPL and be sure to notice the intermediate time frame

Macy’s Raises Buyback, Holds Forecast Despite Weak Sales

Macy's (M)

Stocks are settling back after a run that finally took Dow to a new record (with nothing dramatic going on to bring out buyers).  In the next few days, retailer earnings are coming & they will probably be soggy.  Wal_Mart (WMT) will report tomorrow & expectations are mediocre at best.

Dow Jones Industrials

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