Wednesday, July 23, 2014

Higher markets on Apple results

Dow dropped 26, advancers over decliners 4-3 & NAZ advanced 17.  The MLP index lost steam in the PM, finishing up fractionally to the 526s (inches below the prior record), & the the REIT index rose fractionally to the 309s.  Junk bond funds gained & Treasuries inched higher, with the lowest yields in almost 13 months.  Oil rose after a gov report showed stockpiles dropped at Cushing, Oklahoma, the contract’s delivery point, & gold was flattish.

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CLU14.NYMCrude Oil Sep 14103.03 2:53PM EDTUp 0.64 (0.63%)

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The Federal Reserve (FED) may have scope to keep interest rates at zero for longer than investors anticipate as inflation stays muted & a 2014 slowdown prolongs the labor-market recovery, the IMF said.  The IMF cut its US growth forecast for this year to 1.7% from 2% predicted in Jun, citing a Q1 contraction, after a 1.9% advance last year.  The fund left its 2015 forecast at 3%, the fastest expansion since 2005.  “Even with that relatively good growth outlook, we still see there’s a lot of slack in the economy,” Nigel Chalk, deputy director of the IMF’s western hemisphere department, said.  The nation’s jobless rate fell to 6.1% in Jun, down from 6.6% in Jan, even as harsh winter weather contributed to a 2.9% contraction in GDP in Q1.  While the job market is weaker than the unemployment rate implies, there’s “meaningful rebound” under way, the staff report said.  “With better growth prospects, the U.S. should see steady progress in job creation but headline unemployment is expected to decline only slowly.”  For the rest of this year, the IMF predicts growth will accelerate 3-3.5%.  The projected rebound will “well exceed potential for the foreseeable future,” the IMF said in its Article IV report.  The fund said potential growth is about 2%, down from more than 3% in the decade before the 2008 global financial crisis.  Still, stagnant wages, elevated long-term unemployment rates & weak labor participation may limit growth, the report said, forecasting the US will reach full employment by the end of 2017 as inflationary pressures stay “muted.”  “If true, policy rates could afford to stay at zero for longer than the mid-2015 date currently foreseen by markets.”  The IMF urged the FED to improve its communications to help alleviate uncertainty about the direction of policy, saying officials should consider more press conferences & releasing a quarterly monetary policy report.

IMF Says Fed May Have Scope for Zero Rate Past Mid-2015

PepsiCo, a Dividend Aristocrat, reported better-than-projected profit & raised its annual forecast after reducing costs, giving the company more leverage in a looming fight with activist investor Nelson Pelz.  Excluding some items, EPS was $1.32, topping the $1.23 estimate.  PEP expects to increase EPS 8% this year, excluding the effects of currency fluctuations, up from a previous target of 7%.  The results may help CEO Indra Nooyi ward off an attack from Peltz who has lobbied to break up the company’s snack & beverage businesses.  The latest results were helped by cost cutting & better-than-expected performance in Europe.  Organic revenue grew 5% in Europe, lifted by higher pricing & a 1% volume sales gain in both snacks & drinks.  Q2 EPS was $1.29, compared $1.28 a year earlier.  Revenue rose 0.5% to $16.9B, beating the $16.8B estimate.  Snack volume increased 1%, as did global beverage volume.  The company said it’s on track to deliver $1B in productivity savings this year.  The stock jumped 1.65.  If you would like to learn more about PEP, click on this link:

PepsiCo Profit Beats Estimates as Nooyi Turns to Cost Cuts to Thwart Peltz

Pepsico (PEP)

Apple signaled that the long wait for new products is nearing an end.  With bigger-screen handsets in development, AAPL said yesterday that shoppers are delaying buying new iPhones, which will weigh on sales in the current qtr.  Yet rather than dissuade buyers from procrastinating, the company stoked anticipation for new devices on a conference call, with CEO Tim Cook talking about an “incredible pipeline” that “we can’t wait to show you,” & finance chief Luca Maestri declaring it would be a “very busy fall.”  Looking ahead to new gadgets is the main reason investors barely reacted to fiscal Q3 results yesterday when the company posted a 12% rise in net income to $7.75B & a 6% revenue increase to $37.4B, with strong iPhone & Mac sales making up for a drop in iPad demand.  AAPL has released new iPhones each Sep for the past 2 years.  Maestri, who took over as the CFO this year, said that the trend of customers waiting for new releases is especially pronounced in English-speaking countries where more rumors are spread online about the company’s product pipeline.  He said AAPL took that phenomenon into account when crafting its outlook for the current qtr.  The company projected sales of $37-$40B, slightly below the $40.6B estimated.  “We’re seeing some purchase delays and we’ve reflected that in our guidance,” Maestri said.  “It happens. We have to live with that.”  In the most recent qtr, iPhone sales rose 13% to 35.2M & Mac sales increased 18% to 4.4M, helping offset a 2nd-straight quarterly decline for the iPad, with sales dropping 9% to 13.3M as the tablet market becomes more saturated, especially in the US & Western Europe.  The results reinforced the importance of the iPhone, which accounts for more than half of revenue & about 70% of profit.  The company also continued to boost its quarterly div, to 47¢.  Thru divs & buybacks, AAPL has paid out $74B as part of a $130B capital return program that’s authorized for another 6 qtrs.  The stock went up 2.47.  If you would like to learn more about AAPL, click on this link:

Apple Signals New Products Are Near With Larger IPhones, Wearable Devices

Apple (AAPL)

Earnings were the story today & they were basically favorable although Dow had 20 stocks decline led by Boeing (BA), Caterpillar (CAT & Cisco (CSCO).   AAPL gave a boost to the NAZ.  While Dow has been edging higher, it's only up a little more than 100 since Jun 6.  This is another reminder that the recovery is less than robust, not to mention growing truobles around the world.
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