Tuesday, June 3, 2014

Markets slide lower after favorable auto sales in May

Dow fell 44, decliners over advancers 2-1 & NAZ lost 9.  The MLP index gained a fraction in the 298s & the REIT index lost a fraction to 301.  Junk bond funds were mixed & Treasuries retreated.  Oil & gas were slightly lower.

AMJ (Alerian MLP Index tracking fund)

CLN14.NYM....Crude Oil Jul 14...102.36 Down ...0.11  (0.1%)

GCM14.CMX...Gold Jun 14......1,242.90 Down ...0.80  (0.1%)

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General Motors (GM), Ford (F), Chrysler Group & Nissan reported US sales that exceeded the estimates for May.   GM’s deliveries, helped by Chevrolet Cruze sedans & Silverado pickups, rose 13% to 285K, beating the 6.4% estimate.  “The momentum we generated in April carried into May, with all four brands performing well in a growing economy,” Kurt McNeil, GM’s US VP of sales operations, said.  The month marked GM’s best May in 7 years & best since Aug 2008  Gains by GM suggest consumers are separating new models on the lot from the older small cars that make up the company’s 2.59M recalled vehicles.  Toyota (TM) sales rose 17%, more than double the 8.1% rise projected.  Ford’s light-duty vehicle sales rose 3% to 253K.  Its sales were projected to decline 0.2%.  Nissan sales jumped 19%, beating estimates for an 11% increase.  Chrysler sales rose 17% to 194K vehicles, ahead of the 14% estimate.  GM forecast an annualized light-vehicle sales pace of 16.5M while Chrysler forecast an annualized sales pace of 16.9M, including medium-duty & heavy trucks, which typically account for at least 0.2M sales a year.  While US auto sales exceeded 16M in 1999-2007, domestic automakers weren’t consistently profitable.  This time, pricing discipline & lower costs are producing steady income for Chrysler & GM, 5 years after their bankruptcies, & Ford, which financed its own restructuring.  The stocks were fractionally higher.

GM, Chrysler Lead U.S. Sales Gains Beating Analysts' Estimates

AT&T, a Dow stock & Dividend Aristocrat, boosted 2014 revenue forecast, while predicting adjusted EPS will come in at the lower end of an earlier range, as more wireless customers opt to buy new phones on installment plans.  For Q2, AT&T said it expects to add more than 800K monthly customers & about half of customers buying new phones opted for Next, AT&T’s financing plan.  Next customers accounted for about 40% of phone sales.  Wireless companies are turning to installment plans to attract customers who are willing to pay for smartphones that can cost as much as $650 & who don’t want to sign up for 2-year commitments.  The trend has given carriers a boost in device sales since they don’t have to offer as many discounts for smartphones.  On the other hand, monthly service bills shrink because the carriers are no longer charging to make up for device discounts they used to offer upfront.  AT&T said wireless-service revenue won’t grow in Q2 due to the shift to installment plans.  Revenue will rise about 5% this year after AT&T had previously projected growth of 4%.  Adjusted EPS is projected to rise at “the low end of a mid-single digit range” after the company in Apr had forecast growth in “the mid-single digit range.”  Analysts were forecasting a 3.6% gain in revenue & an 8% gain in adjusted EPS.   The company reiterated forecasts for capital spending in the $21B range & for $11B in free cash flow this year.  The revised outlook doesn’t include the impact of DirecTV (DTV), which AT&T agreed to purchase last month for $48B.  The stock was little changed.  If you would like to learn more about AT&T,
Click here for a FREE analysis of T and be sure to notice the intermediate time frame

AT&T Lifts Sales Outlook, Sees Financing Cutting Profit

AT&T (T)

Bank of America said it sent incorrect data to a US regulator that made its private stock trading platform look bigger than it actually is.  The Financial Industry Regulatory Authority (Finara), one of the organizations that polices US stock trading, yesterday for the first time published data on the size of alternative trading systems.  BAC’s Instinct X was the biggest dark pool in the report for the week of May 12-18.  BAC made an error calculating the volume it sent to the regulator, according to a spokesman.  The company sent a correction to Finra & expects the adjustment to cut its volume roughly in half.  Finra created the repository to reveal how much US equity volume is handled on alternative trading systems including dark pools.  The private platforms have won market share from the public exchanges, which now only handle about 60% of volume, & drawn scorn from critics who argue that broker-dealers use dark pools to rip off investors.  This wasn’t BAC’s first data error this year.  Its stock price tumbled 6%, the most in 17 months, on Apr 28 after the bank suspended plans for a div increase & $4B of share repurchases because of a mistake in its stress-test submission to the Federal Reserve.  The stock was flattish today.  If you would like to learn more about BAC,
Click here for a FREE analysis of BAC and be sure to notice the intermediate time frame

Bank of America Says Mistake Inflated Reported Size of Its U.S. Dark Pool

Bank of America (BAC)

While stocks are lower, little is going on in the markets.  Everybody is looking to the jobs report on Fri, but that should  be a non event, coming in near forecasts around 200K new jobs.  Yield stocks continue strong as the low interest rate environment has been all by promised by the Fed to continue for at least another 2 years.
Dow Jones Industrials

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