Tuesday, May 13, 2014

Markets edge higher amid US retail sales data

Dow advanced 35, advancers over decliners 3-2 & NAZ added 9.  The MLP index slipped 1 to the 484s & the REIT index rose 1 to the 301s, a new 11 month high.  Junk bond funds were mixed to higher & Treasuries were higher.  Oil rose to a 2 week high on amid speculation that US crude inventories dropped a 2nd week & gold was flattish.  

AMJ (Alerian MLP Index tracking fund)

Treasury yields:

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CLM14.NYM...Crude Oil Jun 14...101.17 Up ....0.58 (0.6%)

GCK14.CMX...Gold May 14......1,292.00 Down ...3.60  (0.3%)

3 Stocks You Should Own Right Now - Click Here!

American consumers took a respite from going to malls & restaurants as retail sales climbed less than forecast in Apr after the strongest gain in 4 years.  The 0.1% increase followed a revised 1.5% surge in Mar (the biggest in 4 years), according to the Commerce Dept.  The forecast called for a 0.4% advance.  Consumers were less inclined to ramp up again after Mar saw a release of pent-up demand caused by harsh winter weather.  At the same time, a pickup in hiring, rising home values & higher Apr sales at retailers signal household spending may resume growth.  A later Easter holiday than last year probably helped boost demand for spring outfits as apparel sales climbed 1.2%, the most since Oct.  Receipts also increased at general-merchandise outlets, including a 1.8% jump at department stores that was the biggest since Jan 2013.  Warmer weather & steep discounts also helped to energize shoppers, industry data showed last week.  Retailers’ sales at stores open at least a year climbed 6.2% in Apr from a year earlier, the most since Jun 2011, according to researcher Retail Metrics.  Today’s report showed sales rose 0.6% at automobile dealers after a 3.6% increase the prior month.  Retail sales excluding autos were unchanged after rising a more-than-previously estimated 1% in Mar, better than the 0.6% forecast.

American Shoppers Take Breather Following Retail Sales Surge

China's economic slowdown deepened with unexpected decelerations in industrial-output & investment growth & a decline in home sales, testing policy makers’ reluctance to step up monetary stimulus.  Factory production rose 8.7% in Apr from a year earlier, the National Bureau of Statistics said, compared with the 8.9% estimate.  Fixed-asset investment increased 17.3% in the first 4 months of the year, the slowest for the period since 2001, & home sales fell 9.9%.  The figures signal risks are increasing that China will miss the year’s expansion goal of 7.5%, as gov efforts to counter the slowdown, including tax breaks & spending on railways & housing, have yet to gain traction.  The central bank said today it told banks to approve home mortgages in a timely manner, amid a cooling in the property market.  Factory-production growth compared with an 8.8% increase in Mar (the slowest since 2009), excluding Jan & Feb data that are distorted by the shifting timing of the Lunar New Year holiday.  Retail sales advanced 11.9% in Apr from a year earlier, compared with the 12.2% projection & the same gain in Mar.  The value of homes sold declined 18% in Apr from the previous month.

China Slowdown Deepens

Coca-Cola Products
Photo:   Bloomberg

Coca-Cola, a Dow stock & Dividend Aristocrat, raised its stake in Keurig Green Moutain to 16%, becoming the largest shareholder, only 3 months after acquiring an initial 10% holding.  KO now controls about 26M shares as it owns about 19.5 M shares & has the right to buy as much as 6.5M more.  The company is doubling down on Keurig at a time when consumers are increasingly shunning sugary sodas for alternative drinks, a trend that’s hurting revenue growth.  The companies are working together on the Keurig Cold single-cup beverage brewer that will be sold in Keurig’s fiscal 2015 (later this year). The coffee maker will also produce & sell Coca-Cola-branded pods to go with the machine.  The partnership will ratchet up competition for SodaStream International, a company that makes home carbonation appliances & soft-drink syrups.  The move fits into KO’s preferred strategy of taking equity stakes in promising new brands & technologies, such as Zico coconut water & Honest Tea, & helping incubate them.  Coca-Cola eventually acquired all of Zico & Honest.  KO stock went up 37¢ & GMCR shot up 10.88.  If you would like to learn more about KO,
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Coca-Cola Boosts Holding in Keurig Green Mountain to 16%

Coca-Cola (KO)

Keurig Green Mountain (GMCR)

Traders remain in a good mood & are bidding up stocks.  But retail sales data is a reminder that there is a limit as to how much consumers are going to support a recovering economy.  The Ukraine mess drones on.  That is important globally if for no other reason than Russian is the #1 producer in the world of oil.  Then there is more news that China continues to stumble as new leaders look for ways to crank up the growth engine.  With Dow at new record levels, buyers are unconcerned.

Dow Jones Industrials

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