Wednesday, July 9, 2014

Cautious recovery in the markets after 2 day sell-off

Dow rose 23, advancers just ahead of decliners & NAZ added 3.  The MLP index was up fractionally after the week long sell-of from its record high & the REIT index dropped 1+ to 302.  Junk bond funds were mixed & Treasuries went higher.  Oil fell to the lowest in a month before oil inventory data & there was buying of gold.

AMJ (Alerian MLP Index tracking fund)

CLQ14.NYM...Crude Oil Aug 14...102.90 Down ....0.50  (0.5%)

GCN14.CMX...Gold Jul 14.........1,326.90 Up ...10.90 (0.8%)

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Manufacturing in China
Photo:   Bloomberg

China’s factory-gate prices fell in Jun at the slowest pace in more than 2 years, adding to signs of stabilization in the economy.  The producer price-index declined 1.1% from a year earlier, according to the National Bureau of Statistics, compared with the estimate for a 1% drop.  The consumer-price index increased 2.3%, below projections for a 2.4% gain.  Easing of factory deflation follows reports showing manufacturing expanded at a faster pace last month, indicating that gov efforts including speeding up infrastructure spending are helping to defend the economic-growth target for the year of about 7.5%.  Inflation remaining below the official goal of 3.5% gives Premier Li Keqiang room for additional stimulus if needed to deal with threats including a property-market slump.  Consumer inflation compared with 2.5% in May.  Food prices rose 3.7% in Jun from a year earlier, contributing 1.21 percentage points to the gain in the broader index after a 4.1% increase in May.  Non-food inflation was 1.7%, the same as May’s pace.  The drop in producer prices was the smallest since Apr 2012.  It compares with a 1.4% decline in May & was the 28th straight, extending the longest streak of declines since a 31-month run from 1997 to 1999.  Prices fell 0.2% from May, after a 0.1% drop the previous month.  China will release Q2 GDP data next Wed.  The economy is expected to show growth of 7.4% from a year earlier, the same pace as the previous period.

China PPI Falls at Slowest Pace in Two Years

Citigroup may reach an agreement with federal prosecutors as early as next week to resolve a probe into sales of mortgage-backed bonds before the 2008 financial crisis.  The bank would pay at least $4B under an agreement with the Justice Dept.  The deal could be $7B when including borrower relief such as mortgage modifications.  The lender had offered less than $4B while federal prosecutors had sought more than $10B.  Citi is among banks facing investigations into whether they misled investors about the quality of bonds backed by mortgages as housing prices plummeted.  Prosecutors have sought multibillion-dollar penalties from banks this year for wrongdoing including US sanctions violations & helping clients avoid taxes.  The stock was about even.  If you would like to learn more about Citi,
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Citigroup Said Near Mortgage Settlement Seen at $7 Billion

Citigroup (C)

Alcoa chairman and CEO Klaus Kleinfeld
Photo:   Bloomberg

Alcoa, shifting its focus to manufacturing auto & aerospace components, reported better-than-expected profit on the strength of its traditional aluminum smelting business.  Q2 EPS excluding restructuring costs & other one-time items was 18¢, beating the 12¢ estimate.  Sales were little changed from a year earlier at $5.84B, compared with the $5.65B estimate.  The primary metals unit, which smelts aluminum, had $97M in after-tax operating earnings compared with a $32M loss a year before, boosting the bottom line after output shrunk as inefficient plants were closed.  Profit was unchanged at the global rolled-products business, which is expanding.  While it maintained its 2014 global forecast for aluminum demand growth at 7%, AA predicted a wider supply-demand deficit at 930K tons, compared with an Apr projection for 730K tons.  Q2 EPS was 12¢, compared with an 11¢ loss a year earlier.  The company also reported $302M in productivity gains in the period.  For Q3, its EPS will rise as much as 10% from a year earlier, AA said.  The stock rose 40¢.  If you would like to learn more about AA,
Click here for a FREE analysis of AA and be sure to notice the intermediate time frame

Alcoa Beats Estimates as Aluminum Smelting Unit Recovers

Alcoa (AA)

Traders are waiting for the minutes of the last FOMC meeting later today.  The AA earnings were sort of OK, but nothing spectacular.  Dow is still down for the week & there is a lot off nervousness about earnings.  A negative haunting the markets is that consumer data is inconsistent.   

Dow Jones Industrials

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