Friday, June 20, 2014

Markets advance led by energy sector

Dow climbed 46, advancers slightly ahead of decliners & NAZ inched up 1.  The MLP index dropped 2+ to 507 & the REIT index slipped fractionally to the 301s.  Junk bond funds retreated & Treasuries also lost ground.  Oil rose, narrowing the discount to Brent oil traded for the first time in 5 days, & gold is well above 1300.

AMJ (Alerian MLP Index tracking fund)

3 Stocks You Should Own Right Now - Click Here!

U.S. Fed Chair Janet Yellen
Photo:   Bloomberg

Each time the world economy shows signs of strengthening, it runs into geopolitical upheaval.  The latest is the fighting in Iraq.  Then there’s the violence in Ukraine & the Syrian civil war; also, military coups in Egypt & Thailand, clashes in Libya & street disturbances in Turkey.  A report this week from the Institute for Economics & Peace attempted to calculate the cost to the global economy of containing & dealing with violence: $9.8T last year or 11.3% of GDP.  It cited upward revisions of China’s military expenditure & the intensifying of internal conflicts for the $179B increase from 2012.  “The danger is that we fall into a negative cycle: low economic growth leads to higher levels of violence, the containment of which produces lower economic growth,” said Steve Killelea, founder & executive chairman of the institute.  So far investors are nonplussed, yet political threats likely may present a greater risk to their portfolios when reserve banks start raising interest rates.  Now public opinion is becoming louder & more volatile.  Citigroup estimates the number of mass protests, elections, gov collapses & the like jumped 54% in the last 3 years versus the previous decade.  Richer nations haven’t been spared with the rise of protest candidates in ballots from the UK & France to Virginia reflecting a voter backlash against disappointing economic growth & growing income inequality.  The US federal gov shut for a time last year & Rep lawmakers have made continued debt service a political bargaining chip.  Geopolitical risks are intensifying & unlikely to be resolved soon.  The markets are ignoring them for the time being.

Fed Tops Iraq as One Thing After Another Fails to Rattle Markets

Payrolls climbed in 36 states in May & the unemployment rate fell in 20, showing the labor market continued to strengthen across the nation.  Texas led gainers with a 56K increase in employment, followed by Pennsylvania with 24K more jobs, according to the Labor Dept.

Payrolls Increased in 36 U.S. States in May, Led by Texas

Oracle fiscal Q4 profit & sales missed estimates amid efforts to remake itself into a cloud-computing provider & catch up to rivals.  The company yesterday reported EPS before certain costs of 92¢ on revenue of $11.3B.  Analysts projected EPS of 96¢ & sales of $11.5B.  The database & business-software maker, which has relied on acquisitions to fuel growth, has seen the benefits of those deals peter out, posting sales growth of less than 5% for the past 11 qtrs.  CEO Larry Ellison is nearing a deal to buy Micro Systems (MCRS) for more than $5B & he’s also seeking to jump-start growth by remaking ORCL into a cloud provider to win back corp customers adopting programs delivered via the internet.  ORCL made another acquisition in cloud computing today, with an agreement to buy LiveLOOK, a real-time technology for co-browsing & screen-sharing.  ORCL has more than 100 global customers using LiveLOOK’s technology as an embedded part of its cloud offering.  EPS in Q4 fell to 80¢.  New software-license sales, a closely watched indicator of future revenue, was unchanged at $3.77B & hardware systems sales rose 2.4% to $1.47B.  For the current qtr, CFO Safra Catz said profit, excluding some costs, will be 62-66¢, & sales will climb 4-6%.  Analysts were predicting EPS of 64¢ & a revenue gain of 5% to $8.78B.  Catz attributed lower revenue to the transition to cloud software, products for which the company recognizes revenue over the term of a subscription.  With traditional software, ORCL recognizes revenue up front when it makes a sale.  “We’ve successfully grown the company’s revenues and earnings through every transition, whether it was many computer databases to a complete suite of products, client-server Internet, hardware engineered systems and now on-premise cloud,” Catz said.  “We are well under way with our most recent transition.”  The stock sank 2.50.  If you would like to learn more about ORCL, 
Click here for a FREE analysis of ORCL and be sure to notice the intermediate time frame

Oracle Profit Misses Estimates as Cloud Rivals Lure Customers; Shares Fall

Oracle (ORCL)

There is not a lot of action in the markets.  The energy sector is strong as oil keeps rising from growing tensions in the Iraq region.  With zero leadership coming from the US, it's just a matter of time before the bad guys take over Iraq with its key oil fields & refineries.  300 US advisers won't be able to alter the gains made by the bad guys.  While markets have a "What, me worry?" attitude, the path of least resistance for stocks is onward & upward.  Dow should be able to take out 17K shortly.  The question remains, what next?

Dow Jones Industrials

No comments: