Thursday, July 31, 2014

Markets plunge on increasing global tensions and earnings

Dow tumbled 317 finishing at the low, decliners over advancers almost 10-1 & NAZ declined 93.  The MLP index dropped a massive 11+ to the 501s & the REIT index was off 4+ to the 302s.  Junk bond funds sank around 2% (a very big move for them) & Treasuries were flattish.  Oil fell to a 4-month low amid global declines in stocks & commodities & after learning a Kansas refinery will be shut longer than expected, reducing oil demand.  Gold also lost ground, below 1300.

AMJ (Alerian MLP Index tracking fund)

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CLU14.NYM....Crude Oil Sep 14....98.35 Down ...1.92  (1.9%)

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Arseniy Yatsenyuk
Photo:   Bloomberg

Ukraine's parliament backed bills to keep cash from a $17B bailout flowing & maintain funding to the army as an intl team reached the site of the Malaysian jet crash for the first time in a week.  Lawmakers in Kiev also rejected the resignation of Prime Minister Arseniy Yatsenyuk, who’d sought to step down last week after the legislation wasn’t passed.  Amid the pro-Russian insurgency in the nation’s east, Ukraine halted combat operations to allow Organization for Security & Cooperation in Europe monitors to get to the scene of the plane disaster after fighting blocked attempts in the last 7 days.  “I said I won’t go down without a fight and I did it,” Yatsenyuk said today. “Ukraine didn’t default and will never default,” he said, referring to the IMF rescue.  The show of unity in Ukraine’s parliament will boost a gov offensive to dislodge the separatists, who’ve overrun the country’s easternmost regions & are blamed by the US & allies for shooting down Flight MH17.  American officials may add to sanctions on Russian business after Europe blacklisted tycoons close to pres Putin in a bid to halt his backing for the rebels & free access to the crash site.  Ukraine is seeking to ensure the IMF maintains loan disbursements, with the economy shrinking 4.7% from a year earlier in Q2.  The IMF board will meet next month on the next $1.4B tranche after a mission to Kiev recommended approving it.  Yatsenyuk had also insisted lawmakers don’t shut off financing for the military, which has been pegging back the rebels in its offensive that’s focused around the densely populated regional hubs of Donetsk & Luhansk.  More than 1000 have been killed since the push began.  While hostilities were suspended today to allow OSCE access to the plane site, a “strong explosion” was heard nearby, according to the Italian Foreign Minister.  “I’m afraid that in the coming hours we could have further negative developments."  “The first major economic news today is that Argentina went into default,” Yatsenyuk told lawmakers. “And the second is that Ukraine didn’t default, and it never will.”

Ukraine Backs IMF, Army Bills as OSCE Reaches Crash Site

Time Warner Cable earnings trailed estimates as internet customer gains weren’t enough to make up for video subscriber losses.  Q2 EPS, excluding some items, rose to $1.89, under the $1.90 estimate.  Costs for sports programming also cut into profit & a dispute with competitors over rights to Los Angeles Dodgers games led the cable provider to reduce its forecast for the year.  The company lost 152K TV customers in a seasonally weak period when college students typically disconnect their service for summer vacation, but added 67K internet subscribers, better than the 62K estimate.  EPS climbed to $1.76 from $1.64 a year earlier.  Sales increased 3.2% to $5.73B.  TWC cut its forecast for profit growth this year, adjusting its outlook to assume no SportsNet LA deal with other carriers.  Adjusted profit will climb as much as 4.75% this year, down from an earlier forecast of as much as 6%.  The forecast for capital expenses this year was increased to $4B from $3.7B after deciding to include Austin, Texas, in network upgrade plans to boost internet speeds.  Faster download rates & price increases are helping it charge customers more.  Monthly bills for home users rose 1.7% to $106.98 on average, with data charges climbing 9.7% to $46.92.  The stock fell 6.32.  If you would like to learn more about TWC, click on this link:

Time Warner Cable Earnings Trail Analysts’ Estimates on Drop in TV Users

Time Warner Cable (TWC)

DirectTV Q2 profit topped estimates as the World Cup lured Latin American customers.  EPS of $1.59, excluding one-time items, beat the $1.53 estimate.  Profit was buoyed by 543K additional Latin American customers, who flocked to the World Cup offerings.  US subscribers, by contrast, fell by 34K.  Analysts had projected 366K for Latin America & a loss of 85K in the US.  Demand for DTV services underscores how viewers still need pay-TV to watch sports & other live programming amid the growing popularity of online offerings.  EPS was $1.59, up from $1.18 a year earlier.  Revenue rose 5.3% to $8.11B, outpacing the $8.02B estimate.  AT&T (T), a Dow stock & Dividend Aristocrat, made a $48.5B bid for DirecTV in May.  The acquisition, which still needs regulatory approval, would create a bundle of satellite television & high-speed internet.  DTV stock fell 20¢.  If you would like to learn more about DTV, click on this link:

DirecTV Beats Earnings Estimates on Demand for World Cup 


This was one of the roughest days for the stock market in a long time.  Dow had its worst day in almost 6 months, taking it back to where it was in late May.  Another way to look at it is that Dow is in the red YTD.  Sellers have taken control of the markets around the world as military conflicts continue & Argentina had its 2nd default in 13 years.  More selling lies ahead.

Dow Jones Industrials

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Markets sink on international conflicts and sanctions

Dow plunged 187, decliners over advancers 8-1 & NAZ was off 64. The MLP index plunged again 8+ to the 504s & the REIT index lost 2 to 305.  Junk bond funds dropped over 1% (big time for them) & Treasuries were off slightly.  Oil slid below 100 & gold retreated.

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CLU14.NYM...Crude Oil Sep 14...99.58 Down ...0.69  (0.7%)

GCQ14.CMX...Gold Aug 14....1,285.60 Down ....9.30  (0.7%)

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Fewer Americans filed applications for unemployment insurance benefits over the past month than at any time in more than 8 years, signaling employers are hanging on to workers as demand improves.  The 4-week average of jobless claims dropped to 297K, the lowest since Apr 2006, from 301K in the prior week.  Claims last week climbed to 302K, in line with the forecast, from a revised 279K in the prior week (that was the lowest since 2000).  While auto plant shutdowns during this time of year make it more difficult to adjust the data for seasonal variations, the declining trend points to a job market that is heating up.  A tightening labor market could lift wages & spur consumer spending.  The number continuing to receive jobless benefits rose 31K to 2.54M & the unemployment rate among those eligible for benefits held at 1.9%.

Jobless Claims in U.S. in Past Month Drop to Eight-Year Low

Exxon Mobil, a Dow stock & Dividend Aristocrat, Q2 oil & natural gas production declined to the lowest level in almost 5 years.  Oil & gas output decreased 5.7% to the equivalent of 3.84M barrels a day, the lowest since Q3- 2009.  XOM had been expected to post output equivalent to 3.96M barrels.  Crude output dropped from wells in Europe & Asia while gas production faltered in every region in which the company does business except Africa & the South Pacific.  The company is allocating $39.8B to capital projects this year, including $Ms for an exploratory well in Russia's Kara Sea, as part of a 29-year agreement signed with Moscow-based OAO Rosneft in 2011.  XOM is going after crude in Russia’s Arctic regions in an effort to extract some of the largest crude reserves & reverse a trend of declining production for the company.  Sanctions threaten to halt that progress after the US & EU said Tues they would restrict the export of technologies for energy production to Russia.  Lower production figures came as the company reported better-than-expected Q2 earnings.  Excluding one-time items, EPS was 19¢ more than the $1.86 estimate.  EPS was $2.05, up from $1.55 a year earlier.  Brent crude futures, a global benchmark, rose 6% from a year earlier to average $109.76 a barrel in Q2 & natural gas futures prices in NY rose 14% to average $4.57 per million British thermal units.  The stock fell 1.94.  If you would like to learn more about XOM, click on this link:

Exxon Falls After Reporting Lowest Output in Five Years

Exxon Mobil (XOM)

Whole Food Market lowered its annual sales forecast amid increased competition from new rivals.  Sales this fiscal year will rise 9.6-9.9%, down from a previous projection for a gain of as much as 11%.  Sales at stores open at least 53 weeks will rise as much as 4.4% after earlier forecasting up to 5.5%.  WFM has been trying to lower its prices to better compete with other natural & organic food sellers.  The retailer lowered the top end of its forecast for EPS this fiscal year to as much as $1.54, excluding certain items, from a previous estimate of as much as $1.56.  Analysts estimate $1.53.  The company is trying to boost sales with a new marketing campaign that will start this fall, Co-CEO Walter Robb said.  It will be the first national ad program for the company, which spends less than 1% of sales on marketing, he said.  EPS rose to 41¢ from 38¢ a year ago & beat the estimate of 39¢.  Revenue increased 10% to $3.3B, trailing the $3.39B estimate.  New stores may be hurting the sales of existing locations, Co-CEO John Mackey said.  “With our accelerated growth over the last few years, we’re seeing a slightly greater impact today” from store cannibalization, he said.  Comparable-store sales rose 3.9% in Q2, compared with a 4.5% gain in the prior qtr.  Analysts estimated 4.8%.  The stock fell 1.87.  If you would like to learn more about WFM, click on this link:

Whole Foods Market (WFM)

Global issues have become center stage.  There are plenty of troubles which brought on selling today.  The threat of higher interest rates coming sooner than some had thought is adding to negative thinking.  Dow is down 400 from its recent record high & more selling looks to be in the cards.

Dow Jones Industrials