Thursday, May 1, 2014

Markets waiver amid favorable economic data

Dow slid back 21, advancers only marginally ahead of decliners & NAZ added 12.  The MLP index rose 1+ to the 483s & the REIT index went up 1+ to the 295s.  Junk bond funds were mixed & Treasuries saw buying on growing tensions between Russia & Ukraine.  Oil remained weak after yesterday's inventory report & gold fell further below 1300.

AMJ (Alerian MLP Index tracking fund)

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U.S. 10-year


CLM14.NYM....Crude Oil Jun 14....99.47 Down ...0.27  (0.3%)

Live 24 hours gold chart [Kitco Inc.]

Manufacturing picked up in Apr after consumer spending surged the prior month, showing the US economy is poised to lift off in Q2.  The Institute for Supply Management factory index rose to 54.9 (the strongest so far this year) from 53.7 in Mar.  Readings above 50 indicate expansion.  Household purchases climbed in Mar by the most since Aug 2009, according to Commerce Dept data.  Sales are increasing at automakers as the weather warms.  The data bear out the view of Federal Reserve policy makers who yesterday looked beyond weak growth in Q1 & projected the economy would speed up.US factories weren’t the only ones gaining momentum.  UK manufacturing grew more than forecast in Apr as output surged to an 8-month high & exports increased, according to data from Markit Economics.  But the news was less upbeat in Asia as a purchasing manager index showed China’s manufacturing grew less than estimated.

Manufacturing Picks Up as U.S. Consumers Spend: Economy

Ukraine's easternmost regions are slipping from gov grasp as separatists take over more official buildings, with the IMF warning extra financing may be needed if control of the industrial heartland is lost.  Armed men stormed the Donetsk regional prosecutors’ office today, throwing stones & stun grenades.  Pro-Russian rebels in nearby Slovyansk said they’d begun talks to swap intl monitors abducted last week.  Acting Ukrainian pres Oleksandr Turchynov signed a decree backed by lawmakers last month to reinstate a military draft.  “The government doesn’t control the situation in Donetsk as well as part of the Donetsk region,” Turchynov said yesterday.  “Because there is a real threat of Russia starting a continental war, our army is on full combat alert.”  The IMF, which approved a $17B bailout for Ukraine early today, said “a significant recalibration of the program” might be required if the situation worsens.  The US & EU accuse Russia of stoking the turmoil, which has worsened even after they ratcheted up sanctions on Russian interests.  Russia says Ukraine’s rulers must listen to complaints in the east & cede powers to the regions.  German Chancellor Merkel urged Russian pres Putin to help free the detained observers.  With the crisis straining Ukraine’s shrinking economy, the gov will get an immediate $3.2B disbursement under the IMF program to help it meet $9B in debt payments it’s facing this year.  The loan approval unlocks $27B in intl aid.  GDP fell 1.1% from a year earlier in Q1 as industrial production & the hryvnia currency slumped amid deadly protests and Russia’s annexation of the Crimean peninsula.

Ukraine’s East Unravels as IMF Warns on Financing

MasterCard posted Q1 profit that beat estimates on increased customer spending.  EPS was 73¢, above 62¢, a year earlier.  The estimate was for adjusted EPS of 72¢.  CEO Ajay Banga is boosting divs & repurchasing shares as MA benefits from a global shift from cash & checks to electronic forms of payment.  The company saw an increase in spending on credit & debit cards in Latin America, Asia & the US.  “We do have some challenges with Russia and the European payments industry regulation,” Banga said.  “But you know what? There are opportunities, too, around the world which we believe give us some balance.”  Revenue increased 14% $2.18B, topping the $2.14B estimate.  Worldwide purchase volume growth was 13%.  Operating expenses increased 12% to $892M as the company spent more on advertising & marketing.  The company repurchased $1.7B of shares.  Banja expects a “small impact” on 2014 results from US tensions with Russia.  The longer-term effects from sanctions & Russia’s efforts to impose new regulations on the payments industry are less clear, he said.  “It’s a complicated issue,” Banga said, adding that MA gets about 2% of total net revenue from the country.  “It’s a good growth market, so I don’t like it, but it’s what’s happening. It’s what we have to deal with.”  The stock rose 67¢.  If you would like to learn more about MA, click on this link for Trend Analysis:

MasterCard First-Quarter Profit Beats Estimates as Customer Spending Rises

Mastercard (MA)

This was a puzzling day in the markets.  The economic data was quite good.  Consumer spending & manufacturing data showed the economy is bouncing back after a tough winter.  Even the rise in jobless claims can be blamed on seasonal adjustments.  Tomorrow the jobs report will be released before the markets open & that should give more data supporting an economic recovery in the US.  But all is not well in the rest of the world, starting with the Ukraine.  A worsening situation can to do a lot of damage to the world's economy.  Dow remains a smidgen below yesterday's record.

Dow Jones Industrials

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