Tuesday, July 22, 2014

Markets rise on earnings reports

Dow climbed 61 (just below the record high), advancers over decliners 2-1 & NAZ shot up 31.  The MLP index jumped 3+ to the 525s (inches from the record made on Jul 1) & the REIT index rose 1+ to the 308s.  Junk bond funds advanced & Treasuries went up, taking the yield on the 10 year Treasury to 2.47% (near a yearly low).  Oil & gold slid back.

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The cost of living in the US rose at a slower pace in Jun as the economy generated little price pressure when growth accelerated.  The CPI increased 0.3% after a 0.4% gain the prior month, according to the Labor Dept.  The data bolster Federal Reserve’s view that a recent pickup in inflation was temporary & that the economy would rebound from a Q1 slump so that the central bank can keep interest rates low well into 2015.  The increase in consumer prices last month matched the forecast.  Consumer prices rose 2.1% in the 12 months ended Jun, the same as in May.  Excluding food & fuel costs, the core measure increased 0.1% after rising 0.3% in May.  It was the smallest gain since Feb & fell short of the 0.2% forecast.  Core prices rose 1.9% from Jun 2013, after advancing 2% in the prior 12 months.  The rise in consumer prices was driven by a jump in gasoline that is now reversing.  Gasoline costs climbed 3.3%, the biggest gain since Jun 2013, accounting for 2/3 of the increase in total prices.  Falling fuel prices are now giving households some relief.  Food costs also showed signs of stabilizing after surging in prior months as a drought in the West & a hog virus pushed up prices for beef, pork & some vegetables & fruits.  Food prices increased 0.1% in Jun after surging a combined 1.7% in Feb-May, the biggest 4-month jump in 3 years.  The core rate was held back by declines in the cost of new cars & hotel rates, which both dropped by the most since Oct 2013.

Consumer Prices in U.S. Climb on Jump in Gasoline Costs

Mcdonald's, a Dow stock & Dividend Aristocrat, Q2 profit trailed estimates after a US sales slump lingered.  EPS was $1.40 versus $1.38 a year earlier.  The projection was for $1.44.  Revenue rose 1.4% to $7.18B, trailing the $7.29B estimate.  The US business faces a crowded field & last year it added many new items, slowing down its kitchens. Competitors are selling more new fare that’s attracting customers.  Same-store sales fell 1.5%, compared with a 1.7% decline in the previous Q2.  Analysts had estimated that the sales would be little changed.  While MCD has tried advertising free coffee, new bacon Clubhouse sandwiches & Happy Meals, the promotions have failed to boost same-store sales.  Jun comparable-store sales fell 3.5% in the US.  Same-store sales in the Asia-Pacific, Middle East & Africa region rose 1.1% in Q2, below the 1.5% projection.  They fell 1% in Europe, where MCD gets about 40% of revenue.  Analysts projected a 0.7% gain.  The chain has been selling value meals in Germany as well as family packs of McNuggets & onion rings in France to attract budget-conscious European diners.  Jul global same-store sales are expected to be negative, MCD said.  The stock lost 1.28, taking close to its lowest level in almost 5 months.  If you would like to learn more about MCD,

McDonald’s Profit Trails Estimates as Sales Slump Persists

McDonald's (MCD)

Harley-Davidson sold off after saying it expects to ship about 9K fewer bikes this year.  Harley now forecasts shipments of 270-275K this year, compared with an earlier outlook of as many as 284K.  US dealers sold 16 fewer motorcycles (58,225) in Q2 compared with a year earlier, hurt by bad weather & low demand for the Sportster as buyers await the arrival of the sporty & lightweight new Street 500 & Street 750, which began to arrive at dealers late last month.  The company, which has sought to introduce lighter-weight Street bikes & win riders overseas, said worldwide sales of bikes rose by 25 to 90,218.  EPS rose to $1.62, compared with $1.21 a year earlier.  The estimate was for $1.47.  Revenue excluding financial services rose 12% to $1.83B from a year earlier & total sales climbed 12% to $2B.  Q2 gross margin widened to 39.5% of sales from 36.9%.  Operating margin from motorcycles & related products grew to 25.8% from 21.9%.  Harley reaffirmed its forecast for annual operating margin in the motorcycles segment of 17.5-18.5%.  The stock fell 3.62.  If you would like to learn more about HOG,

Harley Sinks as Annual Shipment Outlook Cut on Slower U.S. Sales

Harley-Davidson (HOG)

Earnings were generally favorable today, notwithstanding KO, MCD, HOG & United Tech (UTX), another Dow stock, reporting disappointing earnings.  Verizon (VZ), a Dow stock, & Comcast (CMCSA) rose on favorable reports.  The flight disaster in Ukraine is haunting the markets even though it has not brought on selling.  Israel's push into Gaza shows no sign of ending soon.  Then there is the Iraq mess, which affects surrounding countries at a minimum, that is dragging on with the bad guys setting up a new country to sponsor terrorism.  But so-so earnings are carrying the day, at least today.
Dow Jones Industrials

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