Wednesday, June 25, 2014

Markets rise after 2 days of selling

Dow climbed 49, advancers ahead of decliners 3-2 & NAZ went up 29.  The MLP index jumped 2+ to the 518s for another record & the REIT index slipped pennies in the 302s.  Junk bond funds were mixed while Treasuries rose.  Oil rebounded in the PM & gold hardly budged.

AMJ (Alerian MLP Index tracking fund)

CLQ14.NYM....Crude Oil Aug 14....106.44 Up ...0.41 (0.4%)

Live 24 hours gold chart [Kitco Inc.]

Sec Kerry warned that the US & Europe are ready to level more sanctions against Russia in the absence of steps by pres Putin to de-escalate tensions in Ukraine.  “We are not announcing a new round of sanctions today, but we are going to continue to take steps to prepare in the event that the circumstances on the ground warrant those sanctions,” Kerry said at a news conference.  Revoking Putin’s authority to use force in Ukraine is “a great step, but it could be reversed in 10 minutes, & everyone knows that.  Russian lawmakers voted today to rescind the authorization they gave Putin on Mar 1 to use force in Ukraine.  The EU on Mon demanded Russia overturn that mandate, which helped fuel months of market volatility in Russia & Ukraine.  Ukrainian pres Poroshenko held talks with leaders in Russia, Germany & France to discuss ways to end months of fighting that’s killed more than 400.  Poroshenko said he’ll present a draft constitution tomorrow to Ukrainian & EU officials that seeks to widen regional powers in an attempt to calm the situation in the country’s east.  ‘‘Our aim is not war, it’s not Ukraine who started it,” Poroshenko said.  “But we are not going to agree to peace at any cost and any conditions.”  German Chancellor Merkel said additional sanctions against Russia could be “back on the agenda” if further progress isn’t made to end the conflict as the Obama administration was said to ready penalties of its own.  Speaking to the German parliament days before this week’s EU summit, Merkel said that leaders might start to weigh wider measures against Russia.  In the US, the gov is preparing sanctions on technology aimed at exploiting 3 producing oil & gas products.  The biggest difference could be made by Putin publicly calling on the separatists to lay down their arms & getting his diplomatic service to achieve this goal, according to Kerry.  “Moving forces out, not allowing tanks and rocket launchers to actually cross the border -- there are many concrete things that could make a difference,” he said, adding that “we are delighted” by the move to rescind the authority for military intervention in Ukraine.

U.S. Prepares Russia Sanctions as Ukraine Unrest Simmers

Manufacturing At A Seven-Month High
Photo:   Bloomberg

China's chief auditor said growth in local gov debt slowed, a sign that tighter scrutiny on borrowing & an economic slowdown have curbed credit.  Outstanding debt for 9 provinces & 9 cities grew 3.79% from the end of Jun last year thru Mar, 7 percentage points slower than the pace in the first half of 2013, according to a report from the National Audit Office.  A slower pace of debt growth would help ease financial risks in local borrowings that surged 67% to 17.9T yuan ($2.9T) as of Jun 2013 from the end of 2010.  The gov is trying to protect its 7.5% target for gains in GDP this year without reviving a credit boom that’s evoked comparisons to the runup to Japan's lost decade.  The local-debt accumulation poses risks to central gov finances, Moody’s Investors Service said in Jan.  The 9 audited provinces had 821M yuan in overdue liabilities as of Mar 31, after borrowing 57.9B yuan during the 9 preceding months to repay maturing debt.  4 cities raised 15.7B yuan by using gov guarantees or collateral that wasn’t allowed.  China’s economy grew 7.4% in Q1, the weakest pace in 6 qtrs.  Expansion of 7.4% is forecasted for 2014.

China Local Debt Growth Slows as Economic Expansion Cools

General Mills reported fiscal Q4 earnings that trailed estimates & said it began a review of its North American manufacturing & distribution network as part of a wider effort to reduce costs.  Cost-cutting plan is expected to generate pretax savings of $40M in fiscal 2015, & will have additional savings in 2016.  CEO Ken Powell said sales & operating profit were “disappointing” in the last fiscal year as promotional spending in developed markets was less effective than planned.  Revenue in the qtr dropped 2.9% to $4.28B.  Adjusted EPS were 67¢, below the 72¢ estimate.  Earlier this year Warren Buffett said he’s looking for “elephants” or large acquisitions.  GIS may fit the bill.  The stock dropped 1.94.  If you would like to learn more about GIS,
(Click here for a FREE analysis of GIS and be sure to notice the intermediate time frame

General Mills to Cut Costs as Earnings Miss Estimates

General Mills (GIS)

With all the gyrations, Dow is back to where it was 3 weeks ago (after advancing almost 1K from mid Apr thru the first week in Jun).  Intl uncertainties are weighing on even the hardiest bulls.  Fighting in Ukraine & the Iraq region have caused oil to climb to near the best levels in more than 5 years.  The US economy looks better, but it has problems starting with the downward revision of growth in Q1 & uneven consumer spending patterns.  But Dow & the S&P 500 remain essentially at their record highs.  The next move by the markets from this plateau could be telling.

Dow Jones Industrials

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