Monday, June 30, 2014

Markets attempt to crawl higher on mixed economic data

Dow lost 26, advancers over decliners almost 3-2 & NAZ added 10.  The MLP index jumped 2+ to the 523s, yet another record, & the REIT index fell 1 to the 302s.  Junk bond funds were mixed & Treasuries saw buying.  Oil slid back but gold gained.

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Pending Sales of U.S. Existing Homes Rise by Most in Four Years
Photo:   Bloomberg

The number of contracts to purchase previously owned homes in the US jumped in May by the most in more than 4 years, a sign the residential-real estate market is rebounding after a slow start to the year.  The pending home sales index climbed 6.1% after a revised 0.5% increase in Apr, the National Association of Realtors (NAR) said.  The gain exceeded the most optimistic estimate in a Bloomberg survey of economists, whose median forecast for a 1.5% gain.  Housing demand is benefiting from cheaper borrowing costs, a stronger employment outlook & easier access to credit for some households.  At the same time, higher prices & limited income gains are keeping the improvement in the residential real estate from becoming more broad-based.  The gain in May was the biggest since first-time buyers rushed to sign contracts before the expiration of a tax credit 4 years ago.  But purchases fell 6.9% from the year prior (unadjusted) after a 9.3% decrease in the 12 months that ended in Apr.  The pending sales index was 103.9 on a seasonally-adjusted basis, the highest since Sep.  A reading of 100 corresponds to the average level of contract activity in 2001, or “historically healthy” home-buying traffic, according to the NAR.

Pending Sales of U.S. Existing Homes Rise Most in Four Years

The Institute for Supply Management-Chicago business barometer fell to 62.6 in Jun from 65.5 the prior month.  The forecast projected the index would fall to 63.  The estimate (due tomorrow) for the national factory index probably is that it increased to 55.9 in Jun from 55.4 the prior month.

Chicago ISM Manufacturing Index Fell to 62.6 in June From 65.5

The most-actively traded Chinese companies in the US are on pace to report the smallest profits in 2 years as growth in the economy decelerates to the slowest since 1990.  Analysts estimate that on average they will post EPS of $5.64 this year, which would be the lowest profits reported since 2012.  They’ve cut revenue forecasts 7.9% in the past 11 weeks.  Earnings & sales projections are falling as China's GDP will slow to 7.4% this year, the weakest pace in 24 years, after back-to-back annual increases of 7.7%.  While the gov has implemented tax breaks, accelerated spending & cut some banks’ reserve requirements, investors are concerned that officials aren’t doing enough to stem a decline in real estate prices and boost private consumption.

Slowing China Economy Dims Profit Outlook to 2012 Low

Time Warner is expanding its UK operations, taking advantage of gov subsidies & official strategies to promote the film, animation & video-game industries.  The studio plans to build 3 new stages, bringing its number in the UK to 13 by the end of the year & enabling the company to have 4 major features in production there at one time.  Hollywood is enjoying widening subsidies at home & abroad as countries vie to attract the industry’s high-paying jobs.  The UK gov is introducing new initiatives that include reducing the red tape for permits required for filming & a strategy to double the exports from the sector to £31B ($53B) by 2020.  “Warner Bros. has produced some of our most popular and successful films in the U.K., working with British talent,” Kevin Tsujihara, the studio’s CEO, said.  The expansion “will allow us to further tap into the world-class creativity and innovation  available here to continue this tradition.”  The UK is one of the countries that has benefited the most from incentives to entice filmmakers.  Under current rules, a qualifying movie can claim a rebate of 25% for budgets of £20M or less filmed in in the UK & 20% of budgets in excess of that.  The gov wants to increase the incentive to 25% for all spending in the UK on films & is awaiting EU approval.  Studios are expanding to meet demand.  Last month Pinewood Shepperton was granted permission to almost double the size of its facilities.  The country has in recent years expanded its incentives to include TV production & video games.  Many big-budget Hollywood movies are now made exclusively in the UK.  TWX stock went up 51¢ to a new record.  If you would like to learn more about TWX,
Click here for a FREE analysis of TWX and be sure to notice the intermediate time frame

Warner Bros. Expands U.K Ops on New Film Initiatives

Time Warner (TWX)

Very little went on today in the markets.  This was the last day of Q2 & volume was very sloooow.  With that, modest amounts of buying or selling can make for relatively large swings.  MLPs deserve special mention.  The Alerian MLP index went up 58 (12%) in Q2, its best quarterly performance since its start in 1996.  All yield securities have been popular as investors look for yields, but MLPs are in a world of their own.  These are bought primarily for their yields & the yield on the Alerian MLP index is at a record low, under 5¼%.  Meanwhile Dow rose 358 (2%).  Earnings season begins next week when Alcoa (AA) reports after the close on Tues.

Dow Jones Industrials

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