Tuesday, June 24, 2014

Markets tumble on concern over escalating violence in Iraq

Dow dropped 119, decliners over advancers almost 2-1 & NAZ sank 18.  The MLP index lost a little steam in the PM but still ended up 1+ to the 415s for a new record & the REIT index was up fractionally in the 302s.  Junk bond funds changed little & Treasuries rallied.  Oil slipped amid speculation that Iraqi oil production won’t be disrupted by violence in OPEC’s 2nd-largest producer & gold crawled higher, remaining above the important 1300 support level.

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CLQ14.NYMCrude Oil Aug 14105.86 Down 0.31 (0.3%)

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Home prices in 20 US cities rose at a slower pace than forecast in the year ended in Apr as declining affordability put a lid on appreciation.  The S&P/Case-Shiller index of property values increased 10.8% from Apr 2013, the smallest 12-month gain in more than a year, after rising 12.4% in Mar.  The projection called for an 11.5% year-over-year increase in Apr.  Sellers’ ability to ask ever-higher prices has diminished as smaller wage gains make it difficult for some prospective buyers to qualify for financing.  Cheaper properties, an easing of credit standards & employment opportunities accompanied by faster income growth would help brighten the outlook for residential real estate.  Home prices adjusted for seasonal variations increased 0.2% in Apr from the prior month, the smallest gain since Feb 2012 & less than the 0.8% forecast while unadjusted prices rose 1.1%.

Home Prices in 20 U.S. Cities Rise at a Slower Pace

German Business Confidence Declines
Photo:   Bloomberg

German business confidence fell to the weakest level this year amid signs of slower growth in Europe’s largest economy.  The Ifo institute’s business climate index declined to 109.7 in Jun from 110.4 in May.  A drop to 110.3 was forecasted.  A gauge of German manufacturing & services activity published yesterday showed slower growth than anticipated & a similar measure signaled contraction in France, highlighting the euro area’s struggle to sustain its recovery.  While the Bundesbank has said Germany's economic outlook remains positive, the ECB is relying on unprecedented stimulus to fuel growth & inflation in the currency bloc.  The German economy expanded 0.8% in Q1, compared with growth of 0.2% in the euro area.  A gauge of current conditions was unchanged at 114.8 & a measure of expectations slid for a 2nd month, dropping to 104.8 from 106.2.  Markit Economics said yesterday that German services activity slowed in Jun while manufacturing accelerated.  A composite index for both industries declined to 54.2 from 55.6 in May, while a euro-area measure slipped to the lowest level since Dec.  The Bundesbank predicts that the German economy expanded “only slightly” in Q2, & that the pace will pick up again in H2.  The central bank released forecasts 2 weeks ago projected GDP will increase 1.9% in 2014, 2% in 2015 & 1.8% in 2016.

German Ifo Business Index Declines as Growth Seen Slowing

Apple suppliers in China will begin mass production of its largest iPhones ever next month as it faces increased competition as AAPL ramps up on 2 bigger devices.  One model will have a 4.7" display, compared to the 4" screen of the current iPhone 5s, that may be available to ship to retailers around Sep.  A 5.5" version is also being prepared for manufacturing & may be available at the same time.  The company is getting ready for its annual unveiling of new iPhones after rivals released smartphones with displays that are as large as 5.7".  Consumers have been gravitating toward larger-screen devices, in China 40% of mobile gadgets based on the Android operating system that were sold in 2014 had display sizes of more than 5", according to an estimate from Forrester Research.  CEO Tim Cook is under pressure to reignite sales growth of the iPhone, which generates more than half of the company’s annual revenue.  Last year, the smartphone produced $91B in revenue.  The new iPhones will also be rounder & thinner than previous models.  Production of the 5.5" model is more complicated than the smaller version, resulting in lower production efficiency that must be overcome before manufacturing volume can be increased.  AAPL is developing new iPhone designs including bigger screens with curved glass & enhanced sensors that can detect different levels of pressure.  Called 2.5-dimension glass, the material lets manufacturers taper the edges of the screen where the bezel meets the frame of a smartphone.  Earlier this month, AAPL also introduced new features for the software powering the iPhone & iPad in a bid to add more functions & utility to the devices.  The company’s new iOS 8 mobile software has capabilities that enable people to use the gadgets to monitor their health & remotely control locks & lights for their home.  The stock slipped pocket change.  If you would like to learn more about AAPL,
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Apple’s Big IPhones Said to Start Production Next Month

Apple (AAPL)

There were reports that Syrian warplanes struck targets in a western Iraqi.  This mess is becoming a regional mess & at the most basic level, a lot of oil production is involved.   Of course, there are plenty of other problems which affect countries around the globe.  The good guys do not have a leader (the US is only forming committees to think about things) & the bad guys are grabbing objectives without much to stop them.  Selling in the PM shows traders are nervous. 

Dow Jones Industrials

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