Thursday, May 22, 2014

Markets edge higher on small caps advance

Dow rose 10, avancers over decliners 2-1 & NAZ recovered 22.  The MLP index jumped 3+ to the 493s (flirting with a new record) & the REIT index fell a fraction to 296.  Junk bond funds gained while Treasuries eased lower.  Oil dropped from a one-month high as more Americans than projected filed applications for unemployment benefits last week.  Gold rose after US jobless claims increased more than forecast, boosting demand for the metal as a haven.

AMJ (Alerian MLP Index tracking fund)

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CLN14.NYM....Crude Oil Jul 14....103.68 Down ...0.39  (0.4%)

Live 24 hours gold chart [Kitco Inc.]

A Chinese manufacturing gauge rose to a 5-month high in May, an indication that the economy is stabilizing after gov moves to counter a slowdown.  A preliminary purchasing managers' index from HSBC Holdings & Markit Economics was 49.7, exceeding the 48.3 estimate & a final reading of 48.1 in Apr.  But the number remained below the expansion-contraction line of 50.  The report showed rebounding output & orders, fueling optimism Chinese demand will be sustained after after the gov announced tax breaks & accelerated spending on railways to protect a 7.5% annual growth target.  At the same time, a property slump & slowing investment & retail sales threaten the pace of expansion.  The manufacturing report is typically based on 85-90% of responses to surveys sent to purchasing managers at more than 420 companies.  The final reading will be released Jun 3.  Growth in industrial production, fixed-asset investment & retail sales unexpectedly decelerated in Apr & the property market has cooled, with a 22% drop in new building construction in the first 4 months.  Besides a gov package of spending on railways & housing, & tax relief, the central bank has cut reserve requirements for some rural banks & called on the biggest lenders to accelerate the granting of home mortgages. 

China Manufacturing Gauge Rises in Sign of Stabilization

Sears posted a wider Q1 loss amid a sales decline that’s stretched into its 7th year.  The net loss per share expanded to $3.79 from $2.63 a year earlier.  Revenue fell 6.8% to $7.88B.  The company reiterated that it’s considering strategic options for its auto-service centers & said it’s hired Bank of America (BAC) to explore a sale of its 51% stake in Sears Canada.  Comparable-store sales rose 0.2% at US Sears locations, compared with a 2.4% decline a year earlier.  Same-store sales would have risen 0.8% if not for weak consumer-electronics demand.  Kmart’s same-store sales fell 2.2%, less than a 4.6% slide a year earlier.  The overall sales decline was driven by the smaller store base, lower revenue in its home-services, Sears Canada units & the separation of Lands’ End last month.  SHLD said its investing in digital capabilities to reshape Sears into a leaner, member-focused merchant that can seamlessly sell to customers via any format.  In Q1, the online unit posted a 26% sales gain, & 74% of the retailer’s eligible sales came from Shop Your Way awards-program members.  Today it announced about 80 store closings this year & may shut more.  Asset sales helped boost cash reserves to $842M.  SHLD repeated today that it expects to generate more than $1B this year in proceeds, including a $500M div from the Lands’ End spinoff.  The stock went up 1.54 in what has been a volatile year.  If you would like to learn more about SHLD,
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Sears Posts Wider First-Quarter Loss as Sales Decline

Sears Holdings (SHLD)

Don Thompson
Photo:   Bloomberg

McDonald's, a Dow stock & Dividend Aristocrat, CEO Don Thompson, defending the fast-food chain after worker protests this week, said its restaurants pay a fair wage.  “We respect the fact that they want to challenge us relative to wages,” Thompson told investors at the annual meeting today.  “We pay fair and competitive wages and we provide opportunity, and we provide job opportunities and training for those entering the workforce.”  He fielded investor questions about the pay issue after protests at MCD headquarters entered a 2nd day.  In response to another question, Thompson said that MCD is looking to serve more vegetarian items in US restaurants.  MCD & other chains are facing growing criticism for not paying workers enough.  MCD is also contending with sluggish demand & increasing competition.  Sales at its domestic locations open at least 13 months were little changed in Apr.  MCD has more than 35K restaurants worldwide.  In the US, about 90% of locations are owned by franchisees who determine pay.  The stock was off pennies.  If you would like to learn more about MCD,
Click here for a FREE analysis of MCD and be sure to notice the intermediate time frame

McDonald’s Says It Pays Fair Wages After Worker Protest

McDonald's (MCD)

Stocks needed time to digest yesterday's gains.  Small cap stocks rose, maybe they're breaking out of their recent slump. (JD), the Chinese online retailer that handled more than $20B of purchases on its website last year, rose in its trading debut.  The company went up 1.90 to 20.90 on its debut.  Meanwhile Alibaba is getting ready for its IPO.  This kind of activity gets speculative juices going.  But economies around the world are not reporting impressive growth numbers.  Dow continues in the red YTD.

Dow Jones Industrials

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