Monday, July 14, 2014

Markets rise on earnings optimism

Dow jumped 111 (off the highs & short of a new record), advancers ahead of decliners almost 2-1 & NAZ climbed 24.  The MLP index slid a fraction to the 515s & the REIT index went up 1+ to the 306s (an almost 14 month high).  Junk bond funds edged higher & Treasuries pulled back following recent strength.  Oil treaded water & gold was hit with selling, although was able to hold above the important 1300 support level.

AMJ (Alerian MLP Index tracking fund)

CLQ14.NYM....Crude Oil Aug 14....100.73 Down ...0.10  (0.1%)

Live 24 hours gold chart [Kitco Inc.]

Regional govs in China are starting to pull out their own stimulus cards to shore up growth as central authorities limit aid for the economy.  Northern Hebei province, whose 4.2% Q1 expansion pace was less than half that of a year earlier, will invest 1.2T yuan ($193B) in areas including railways, energy & housing.  Heilongjiang province in the northeast, with 2.9% growth that was China’s lowest in Q1, will spend more than 300B yuan over 2 years in areas including infrastructure & mining.  Any borrowing to fund the investment risks exacerbating financial dangers from local-gov debt that swelled to about $3T as of Jun 2013.  While Premier Li Keqiang is trying to expedite spending from existing budgets & avoid broad stimulus, provinces such as Hebei are facing bigger shortfalls on their own growth goals than Li is with the nationwide target of about 7.5%.  China's economy is forecasted to expand 7.4% in Q2 from a year earlier, the same pace as the previous period, which was the weakest in 18 months.  Industrial production may have increased 9% in Jun from a year earlier, up from 8.8% in May, according to estimates.  H1 in fixed-asset investment, excluding rural households, probably maintained the same 17.2% pace as in Jan-May.  Li said yesterday that economic growth is in a reasonable range & he’s confident it can remain at a medium-to-high level.  Hebei’s plan is designed to curb an investment slowdown & aid the economy.  The amount would be equivalent to 42% of 2013 GDP in the region, where the gov is cutting steelmaking capacity.

China’s Local Governments Pile On Stimulus

Boeing, a Dow stock, expects to win orders from 2 jet-leasing companies for narrow & wide-body planes valued at as much as $9.2B.  The deals may be announced at the Farnborough Air Show tomorrow.  Air Lease (AL) may buy 20 of the 737 Max single-aisle jets & 6 of the 777 wide-bodies, while BOC Aviation is set to commit to at least 50 of the Max jets.  The transactions would help BA fight back after Airbus grabbed more business on the opening day of the Farnborough expo, the biggest aviation forum this year.  Airbus’s firm orders & sales accords today topped $21B, almost triple the tally for BA.  BA stock went up 1.43 in a rising market.  If you would like to learn more about BA, click on this link:

Boeing Said to Near $9.2 Billion of Jet-Lessor Orders

Boeing (BA)

Apple said location tracking functions of its software can’t be used to identify activity of individuals in China as it seeks to refute claims on state-owned media that its iPhones pose a security risk.  China Central Television reported on Fri that the software may result in a leak of state secrets.  The feature is designed to speed up applications with data stored on the phone & protected by a password.  US technology companies are attracting scrutiny in China amid escalating tensions over cyberspying after 5 Chinese military officers were indicted for allegedly hacking into American companies.  The location tracking function isn’t a default setting on AAPL devices, which means users have to choose to enable it & the feature can be turned off, AAPL said.  The company said it has never worked with any gov agency for access to its products.  “We want to make sure all of our customers in China are clear about what we do and we don’t do when it comes to privacy and your personal data,” AAPL said in the statement.  “We appreciate CCTV’s effort to help educate customers on a topic we think is very important.”  AAPL posted Mar qtr sales of $9.3B from the greater China area.  The report by CCTV on the iPhone came after China told its state-owned wireless carriers to cut marketing expenses because they overspent on subsidies & advertising for devices such as the AAPL.  The stock rose 1.23.  If you would like to learn more about AAPL click on this link:

Apple Rejects China State Media Claims of IPhone Security Risks 

Apple (AAPL)

While this was a good day for the stock market, it fell short of being rated as stellar.  Market breadth was unimpressive & what enthusiasm there was came from Citigroup (C) earnings which were not spectacular.  Citi finished with a gain of 1.47.  This may be another case of buy on the rumor & sell on the news (when fresh reports come in).  China growth remains sluggish (by its standards) & fighting in Ukraine, Israel, Iraq & Syria are adding risk to the optimistic scenario rising markets suggest.

Dow Jones Industrials

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