Tuesday, May 13, 2014

Markets turn mixed with reports of increased fighting in Ukraine

Dow went up 19 to a new record & was able to stay in the black all day, but decliners over advancers 5-4 & NAZ slipped 13.  The MLP index dropped 1+ to the 484s & the REIT index lost 2 to the 298s.  Junk bond funds continued mixed & Treasuries rose.  Oil was higher & gold fell as the Dow climbed to a record & the dollar’s rally curbed demand for the metal as an alternative investment.

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Insurgents killed 7 Ukrainian soldiers & wounded 8 in an ambush near an eastern rebel-held stronghold as the defense minister said the country was fighting an “undeclared war” with Russia.  More than 30 attackers struck a convoy near the Donetsk region city of Kramatorsk, according to the Defense Ministry, which said that 6 paratroopers were killed.  Another died later during transport to the hospital.  “Russia is already engaged” in Ukraine “in supporting Russian-led protesters and terrorists,” Ukrainian Prime Minister Arseniy Yatsenyuk said after talks with European Commission pres Jose Barroso.  “We urge Russia to condemn them, to urge all these so-called protesters -- or really, terrorists -- to leave and vacate the buildings, and to do everything they can to stabilize the situation in Ukraine. Russia will fail to make Ukraine a failed state.”  As fighting flared, Europe tried to rev up diplomatic efforts, with Germany’s Foreign Minister Steinmeier visiting Kiev & Odessa in a bid to broker talks between the central gov & pro-Russian separatists.  Russia would face new sanctions if the scheduled presidential election on May 25 is disrupted, French President Hollande said in Tbilisi.  The self-styled Donetsk People’s Republic & neighboring Luhansk agreed to unite today, a day after declaring themselves sovereign states.  Donetsk said 90% of voters backed splitting from Ukraine in a May 11 referendum that was rejected by the US & EU as illegitimate & marred by irregularities.  Luhansk reported a similar ballot result.  The events echo Russia’s annexation of Crimea in Mar, Ukraine’s gov.  The US & euro allies say pres Putin is stoking unrest that’s threatening to rip apart the former Soviet republic ahead of the presidential vote.  “In our eastern regions we have an undeclared war,” acting Defense Minister Mykhaylo Koval said.  “Our neighboring country unleashed the war, sending special forces and saboteurs into our territory.”

Ukraine in ‘Undeclared War’ With Russia as Rebels Unite

German Manufacture

Photo:   Bloomberg

German investor confidence fell for a 5th month in May in a sign of growing concern that threats from low inflation to a strong € may undermine the recovery.  The ZEW Center for European Economic Research said its index of investor & analyst expectations, which aims to predict economic developments 6 months in advance, slid to 33.1 from 43.2 in Apr.  The gauge is at the lowest level since Jan 2013.  Economists forecasted a decline to 40.  The index has dropped every month since reaching a 7-year high of 62 in Dec.  Investor caution in Europe’s largest economy reflects concern that the slow recovery in the 18-nation euro area leaves it vulnerable to shocks.  ECB pres Mario Draghi has signaled he may add monetary stimulus in early Jun because policy makers are “dissatisfied” with the inflation outlook, in part due to an increase in the exchange rate.  A measure of the current situation climbed to 62.1, the highest reading since Jul 2011.  A gauge of expectations for the euro area dropped to 55.2 from 61.2 the prior month.  The Bundesbank said last month that German economic expansion will slow in Q2 after a strong start to the year.  Industrial output unexpectedly declined in Mar, & manufacturing & services cooled in Apr.  GDP is expected to rise 0.7% in Q1 before data on May 15.

Xbox One Players
Photo:   Bloomberg

Microsoft, a Dow stock, introduced a lower-priced option for its Xbox One, seeking to take back the lead in video-game console sales from Sony (SNE).  The new version will cost $399 & won’t include the Kinect motion-sensing camera.  It will be available Jun 9.  The move reverses a controversial decision to bundle Xbox One with Kinect, increasing the price of the console to $499, or $100 more than PlayStation 4.  SNE’s big lead is prompting MSFT to change its strategy.  The PlayStation 4 outsold Xbox One consoles in the US in Mar, holding the lead for a 3rd month.  “The vision we have had for Xbox One continues, and that is that the premium experience is with Kinect,”  Yusuf Mehdi, Xbox VP for strategy & marketing, said.  “We did get a lot of customer feedback since launch from people saying ‘I’d like more choices,’ & for some people $399 is an important price point,”  MSFT will also give users more access to entertainment applications such as YouTube, Netflix & HBO GO, changing another policy that annoyed customers.  The company had required users to pay for an Xbox Live Gold subscription to use such apps.  Starting in Jun, anyone with an Xbox One & Xbox 360 can use those apps.  Since its Nov, sales of the $399 PlayStation 4 have surpassed 7M units worldwide as of Apr 6.  MSFT has sold more than 5M of its $499 Xbox One units.  The results point to tight competition with their first consoles in 7 years & a shift toward social & mobile games.  MSFT will also sell a standalone Kinect module for Xbox One later this year.  MSFT stock rose 45¢.  If you would like to learn more about MSFT,
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Microsoft to Offer Lower-Priced Xbox One Without Kinect

Microsoft (MSFT)

The sluggish pace of retail sales was the only dramatic news today.  Stocks made an attempt to advance, but there was selling in the PM.  Dow managed a gain for a new record, although it can not be called impressive.  Increased fighting in eastern Europe is disturbing.  Nobody knows what is really going on other than Putin who is calling all the shots & he can't be trusted.  Buying in tech stocks yesterday faded today.  Q1 earnings from the major retailers are coming in the next few days & they may disappoint.

Dow Jones Industrials

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