Tuesday, May 6, 2014

Markets slide lower led by techs

Dow dropped 129 (closing at the low), decliners over advancers more than 2-1 & NAZ was off a big 57.  The MLP index fell 3+ to 488 & the REIT index lost 1+ to the 295s.  Junk bond funds were weak & Treasuries fluctuated.  Oil rose above $100 a barrel briefly after a forecast said stockpiles at Cushing, OK, are weeks away from reaching minimum levels.  Gold slid from a 3-week high as signs of an improving global economy reduced the appeal of haven assets.

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....99.51 Up ....0.03 (0.0%)

Live 24 hours gold chart [Kitco Inc.]

It looks like the US economy contracted in Q1 instead of eking out a 0.1% gain (annualized) as reported by the Commerce Dept last week.  The latest knock came from data issued today.  Although the trade deficit shrank in Mar to $40.4B from $41.9B as exports grew, the narrowing was less than the gov had projected when putting together the advance estimate on GDP.  Those figures, combined with previous reports on construction spending, inventories & revisions to retail sales, mean the economy probably reversed course in Q1.  The bad news won’t last long, though, as many analysts that are notching down Q1 growth rates are also marking up forecasts for this Q2.  The advance GDP report last week showed declines in business investment, housing & gov spending, along with the trade deficit, held back growth at the start of the year.  The unusually harsh winter weather was blamed for the slowdown & that will not continue in Q2.  Downward revisions to retail sales got things off to a bad start less than 2 hours after the GDP data were released on Apr 30.  That update showed purchases slumped 0.9% in Jan instead of the 0.7% decline previously estimated.  Better readings in Feb & Mar weren’t enough to make up for the shortfall.  Then came the May 1 figures on construction spending that showed outlays dropped 0.2% in Feb instead of rising 0.1% as previously estimated.  The Mar reading was also disappointingly small at a gain of 0.2%.  A day later, data on factory orders showed inventories climbed less in Mar than had been forecasted.

First-Quarter U.S. Economic Slump Looking Uglier by the Day

US manufacturers are more optimistic about demand & capital spending this year than at the end of 2013, according to a survey by the Institute for Supply Management.  Purchasing managers at factories project sales will grow 5.3% in 2014, up from the end of last year when they forecast a 4.4% gain.  Service industries estimate a 2.7% net increase in revenue compared with a Dec projection for a 3.6% gain.  “U.S. manufacturing continues to demonstrate its broad-based strength, efficiency and leadership in the world economy,” the ISM said.  Manufacturers estimate their spending on new equipment & plants will increase 10.3% this year, according to the Apr survey.  The Dec forecast called for an 8% pickup.  Service industries plan to boost capital outlays 10.8%, up from an end-of-2013 projection of 4.6%.  The outlook for employment was little changed compared with the Dec survey.  Service providers predicted a 1.4% increase in staffing levels by the end of 2014, today’s report showed.  Manufacturers projected a 1.5% rise.  “Non-manufacturing will continue to grow,” Anthony Nieves, chairman of non-manufacturing survey committee, said.  “The relatively flat rate of growth for overall employment is a potential impediment.”

Manufacturers in U.S. More Upbeat About 2014 Sales, ISM Says

Intel, a Dow stock, showed off a new lineup of Chromebooks that use its latest laptop processors, as it strives to gain ground in one of the few growth areas of the PC industry.  INTC said Chromebook manufacturers are using its low-power Bay Trail & higher performance i3 chips.  The laptops have the Chrome operating system rather than built-in Windows software, & customers access tools from the cloud.  INTC is trying to guarantee its processors are central to Chromebooks, which have experienced rising sales as other parts of the PC market have declined.  Worldwide PC shipments dropped in the Q1 as consumers in emerging markets opted for smartphones & tablets, with unit sales falling 1.7% from a year earlier to 76.6M, market researcher Gartner said.  By contrast, Chromebook shipments are projected to grow to 11M in 2019, up from 2.1M in 2013, according to a ABI Research.  Chromebooks based on the new chips will start at $349, while other models sell for less than $200.  The machines have 11 hours of battery life & improved Wi-Fi capabilities, INTC said. The stock was up a penny.  If you would like to learn more about INTC, click on this link for Trend Analysis:

Intel Unveils Chromebooks Based on Latest Laptop Chips

Intel (INTC)

Stocks had a rough day.  Twitter, a darling of the tech fans, dropped almost $7 to below $32 (under its IPO price).  The lock up period ended today & a lot took advantage to sell.  This sell-off sent chilling thoughts to holders of most tech stocks.  How many smart guys forecasted that this would be another stellar year for stocks?  This is the mid year period.  The S&P 500 is up slightly YTD, while Dow & NAZ are a little lower.  Yield stocks are doing well.  Without them, this would be an ugly year.  Dow is off more than 170 YTD.

Dow Jones Industrials

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