Thursday, July 10, 2014

Markets decline on signs of financial stress in Portugal

Dow dropped 70 (but off the lows), decliners over advancers 2-1 & NAZ lost 22.  The MLP index fell 2+ to the 514s & the REIT index was up 1+ to the 305s.  Junk bond funds were mixed & Treasuries rose, seen as a safe haven investment in a troubled world.  Oil saw buying after 2 weeks of selling & gold climbed to a 16-week high as banking concerns in Portugal & a slump in equities boosted demand for the precious metal as a haven.

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The IMF said the Spanish Prime Minister Rajoy will have to take action to increase gov revenue to compensate for the cost of tax cuts announced last month.  “What we’ve seen so far is revenue losing,” James Daniel, head of the IMF’s Spain mission, said today. “That will need to be compensated by further measures in the future.”  Rajoy is ignoring calls from the IMF & the European Commission to increase indirect taxes & close fiscal loopholes as he looks toward an election due next year after escaping the heightened scrutiny that came with the 2012 bank rescue program.  His plan to cut income & corp taxes aims to boost growth after unemployment surged to 25% amid the deepest budget cuts in Spain's democratic history.  Spain needs continued policy action “to ensure a sustainable, strong, and job-rich growth,” the IMF said.  “The legacy of the crisis persists, as unemployment remains high and public and private debt levels are elevated.”  In an initial statement on May 27, the IMF said that the expected overhaul of Spain’s taxation system, announced on Jun 20, will be critical to achieve a lasting recovery after the economy turned the corner.  “The overall growth impact will depend on how the loss of revenue is compensated,” today’s supplementary report added.  While the IMF recommends raising excise duties & environmental levies, & gradually reducing discounted rates of sales tax on some goods, Budget Minister Cristobal Montoro has said that the gov’s plans are in line with Spain’s commitment to tackle the EU’s 4th-largest budget deficit.

IMF Says Spain Needs to Raise Taxes After Election-Year Cuts

Verizon, a Dow stock, added 1.4M contract subscribers in Q2, CEO McAdam said.  “We think this is going to be a great quarter for us,” McAdam said from the Allen & Co. conference in Sun Valley, Idaho.  He was referring to the period that ended in Jun.  “We had record tablet growth, we had very good churn and we delivered margins that were consistent with the last several quarters.”  The subscriber gain exceeds a 900K analyst estimate.  VZ, the largest US mobile-phone company, is working to keep customers from defecting to competitors, which are dangling offers such as free music streaming.  VZ had a net loss of phone customers for the first time in Q1, though tablet sales helped boost overall wireless subscriptions by 539K in Q1.  The stock was up 74¢.  If you would like to learn more more about VZ,
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Verizon Added 1.4 Million Subscribers Last Quarter, CEO Says

Verizon (VZ)

Microsoft's, a Dow Stock, Satya Nadella unveiled his first vision statement as CEO, saying that more engineering & organizational changes are needed as he attempts to turn around the software maker.  “We’ve got to back it up with products people love and that’s what we’re galvanizing to do,” Nadella said.  He didn’t address the prospect of job cuts, but they will probably happen.  MSFT is shifting its focus from the devices & services strategy to homing in more on productivity, mobile & cloud, Nadella wrote in a memo to employees.  “Over the course of July, the senior leadership team and I will share more on the engineering and organization changes we believe are needed,” Nadella wrote.  “Nothing is off the table in how we think about shifting our culture.”  The memo is Nadella’s most comprehensive statement about MSFT direction since he was appointed CEO in Feb.  Previously, Nadella has signaled a desire to produce software for rival operating systems like iOS & Android, & has shuffled management in areas like marketing, business development & the Xbox game console.  When the company agreed to acquire Nokia’s handset business in Sep, it pledged $600M in annual cost savings for 18 months after the deal closes.  Meeting that commitment will probably involve job cuts in areas where the 2 companies overlap.  Nadella did not say whether the changes will result in job cuts & said he would provide more details on the implications of his memo when MSFT reports fiscal Q4 earnings on Jul 22.  The CEO said he sees the company’s operating systems as a cloud OS comprised of Azure, its software for hosting & running apps in the cloud; its Windows software for PCs; as well as Windows for devices & its own hardware.  He pledged to modernize the company’s engineering processes to be faster & rely more on data, as well as better at predicting what customers want.  Nadella also stated his commitment to Xbox, even as he listed it as something outside the company’s core.  The stock went up pennies.  If you would like to learn more more about MSFT,
Click here for a FREE analysis of MSFT and be sure to notice the intermediate time frame

Microsoft CEO Nadella Outlines Vision With More Overhauls

Microsoft (MSFT)

Home Depot (HD), a Dow stock, & Lowe’s (LOW) fell after an analyst lowered estimates for their profits based on weak results at rivals.  We have what could be soggy retail numbers in the US & there are an abundance of conflicts overseas, starting with Israel mobilizing troops for a possible invasion into Gaza.  This is a major disconnect with the Dow just below its record high set last Fri.  The VIX, volatility index, has shot up 2 to 12½ in the last week on increased nervousness in the stock market.  Dark clouds overhead should not be ignored.

Dow Jones Industrials

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