Tuesday, June 17, 2014

Markets advance ahead of the FOMC announcement tomorrow

Dow rose 27, advancers ahead of decliners 3-2 & NAZ climbed 16.  The MLP index lost 1+ to 505 & the REIT index went up a fraction in the 298s.  Junk bond funds were mixed & Treasuries fell.  Oil & gold pulled back.

AMJ (Alerian MLP Index tracking fund)

CLN14.NYM....Crude Oil Jul 14....106.25 Down ...0.65 (0.6%)

Live 24 hours gold chart [Kitco Inc.]

Unemployment Unexpectedly Increased in May
Photo:   Bloomberg

German investor confidence unexpectedly fell for a 6th month in Jun even after the ECB announced a new round of stimulus aimed at preventing deflation & rekindling growth in the euro area.  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 29.8 from 33.1 in May.  The forecast called for an increase to 35.  The gauge has dropped every month since reaching a 7-year high in Dec & is now at the weakest since Dec 2012.  German economic growth has slowed in Q2 after output was buoyed at the start of the year by a mild winter, according to the Bundesbank.  While the prospects for the economy remain sound, the euro area is struggling with subdued growth & low inflation, prompting the ECB to unveil a package of measures including a negative deposit rate & targeted long-term loans to banks.  A measure of the current conditions climbed to 67.7 from 62.1 & an index of expectations for the euro area advanced to 58.4 from 55.2.  Expectations among respondents became “slightly more optimistic” after the ECB announced its measures on Jun 5, signaling that that the stimulus plans had a positive effect, ZEW said.  German unemployment unexpectedly increased in May for the first time in 6 months & business confidence as measured by the Ifo institute declined.  The Bundesbank predicts the economy will grow “slightly” in Q2 after it expanded 0.8% in Q1.  The central bank forecasts growth of 1.9% in 2014, 2% in 2015 & 1.8% in 2016.

German Investor Mood Drops Even as ECB Boosts Stimulus

The Federal Reserve will probably raise its benchmark interest rate faster than money-market investors expect, according to a majority of economists recently surveyed.  Eurodollar futures, the world’s most actively traded short-term interest-rate contract, are underestimating the pace of tightening over the next 2 years, according to 55% of economists over the weekend.  Options on Eurodollar futures contracts show a 47% probability the benchmark rate will be 0.75% or lower at the end of 2015.  The odds that the rate will be 2% or lower by the end of 2016 are 54%.  Eurodollars trade in price terms while the implied yield is derived by subtracting the contract price from 100.  In Mar, officials predicted the fed funds rate, now between zero & 0.25%, would rise to 1% at the end of next year & 2.25% at the end of 2016.  Officials will release a new set of quarterly forecasts for unemployment, inflation, economic growth & the benchmark federal funds rate at the conclusion of their meeting tomorrow.

Fed Will Raise Rates Faster Than Investors Bet, Survey Shows

Jeff Bezos, the CEO at Amazon, wants control of the smartphone home screen to put more of the company’s services squarely in front of consumers.  AMZN will unveil its first foray into the market tomorrow at an event in Seattle.  The company is jumping into a crowded and hyper-competitive smartphone arena dominated by deep-pocketed rivals such as Samsung & Apple (AAPL), as well as lower-cost rivals from Asia, even as sales growth slows in some markets that are saturated.  By introducing a handset, AMZN will be able to more directly push access to its online store, or digital content like music, movies and games, to consumers. A smartphone also adds to the growing lineup of tablet, e-reader & other hardware that can help it circumvent AAPL, Google (GOOG) & Samsung, which serve as digital gatekeepers by controlling how applications & media reach customers on mobile gadgets.  AT&T (T), a Dow stock & Dividend Aristocrat, will be the exclusive carrier for the new smartphone.  A smartphone underscores how far AMZN has moved from its roots as an online book seller.  The web retailer said this week that its app store has tripled its titles over the past year to more than 240K programs, primarily for its tablets, & is available in almost 200 countries.  Its $99-a-year Prime membership for unlimited shipping also provides access to movies, television shows & music.  Yet the smartphone industry is an increasingly complicated market to navigate with devices that generated sales of $338B last year, up 21% from 2012.  Much of the growth has been coming from developing countries like China, where local manufacturers are gaining popularity.  In the US, growth is slowing.   High flying AMZN lost 2.  If you would like to learn more about AMZN,
Click here for a FREE analysis of AMZN and be sure to notice the intermediate time frame

Amazon Plots Smartphone to Help Bezos Sidestep Apple Selling to Consumers

Amazon.com (AMZN)

There is a report that special forces captured a Libyan militant who played a central role in the attack on the US post in Benghazi.  That may have brought out buyers.  However there are no shortage of problems in that area, starting with the possible fall of Iran.  Janet's Yellen's announcement tomorrow should be the center of interest assuming there are no more significant events in the MidEast.

Dow Jones Industrials

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