Tuesday, July 8, 2014

Markets tumble led by biotechs and internet stocks

Dow dropped 95, decliners ahead of advancers almost 2-1 & NAZ tumbled 59.  The MLP index lost another 1+ to the 511s after setting a new peak last week & the REIT index went up 1+ to the 303s.  Junk bond funds were mixed & Treasuries rose as stocks declined.  Oil & gold had modest rebounds today.

AMJ (Alerian MLP Index tracking fund)

CLQ14.NYM...Crude Oil Aug 14...103.79 Up ....0.26 (0.3%)

GCN14.CMX...Gold Jul 14.........1,318.40 Up ...1.90 (0.1%)

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A surge in part-time employment that was behind last month’s drop in the US jobless rate takes little away from the overall picture of steady progress in the labor markets according to some economists.  The Bureau of Labor Statistics’ survey of households showed the number of people working part time for economic reasons rose in Jun by the most in a year.  275K more Americans worked less than 35 hours a week because they were unable to find full-time jobs or their hours were cut back.  Swings in the data aren’t unusual.  Last month’s increase in part-timers followed a 196K slump in May.  There are also about ¼M fewer Americans working part time for economic reasons than at the end of 2013 & 1M more with ful-time jobs.  Changes in part-time employment go into assessing underemployment, one of the measures of labor-market progress being watched by the Federal Reserve (FED).  The broadest measure of joblessness, which also takes into account those too discouraged to look for work & those wanting full-time jobs, was 12.1% in Jun, about double the main unemployment rate, which fell to 6.1%, the lowest in almost 6 years.  Progress toward more full-time employment is still slow.  The number of Americans putting in 35 hours or more as a share of the total number of employed was 80.8%, up from a low of 79.9% in Feb 2010.  But the share is still well below the 83.1% in Dec 2007 when the recession began.  That helps explain why hours worked & wage gains remain limited.  The average workweek in Jun was 34.5 hours for a 4th straight month, while the year-over-year increase in average hourly earnings was 2%, matching the average since 2009.  That suggests the FED can stick to its strategy of gradually reducing monthly bond purchases while keeping borrowing costs low.

Part-Time Jobs Surge Takes Little Away From U.S. Labor Recovery

Foreigners purchased $92.2B of US homes in the 12 months thru Mar, led by buyers from China, according to the National Association of Realtors.  Spending by Chinese buyers soared 72% from a year earlier to $22B, with their purchases accounting for 24% of spending by intl buyers.  Total investments by foreigners jumped 35%.  Chinese buyers acquired 16% of houses sold to foreigners, up 4 percentage points, spurred by currency appreciation, rising affluence & concerns about an economic slowdown in China.  “It’s just the beginning of a tidal wave,” Lawrence Yun, the association’s chief economist, said.  “Large numbers of wealthy Chinese want to have property in the U.S. because they want to visit the U.S. and they want to diversify the wealth they accumulated in China to outside countries where they feel secure in their property rights.”  Canadians bought the highest number of homes, accounting for 19% of residences sold to foreigners, down from 23% a year earlier as US home prices rose from a 2012 post-housing-bubble low & the Canadian dollar weakened.  Chinese purchases were concentrated in higher-priced markets such as California, Washington & NY, while Canadians bought in lower-priced Florida & Arizona, popular getaways from northern winter weather.  Chinese buyers paid a median of $523K per home, compared with $212K for Canadians.  Sales to long-term foreign residents & non-resident buyers accounted for about 7% of the $1.2T of existing-home transactions.

Chinese Lead $92 Billion of U.S. Home Sales to Foreigners

Samsung forecast a recovery in sales after the world’s biggest smartphone maker posted Q2 profit that missed estimates on competition from Chinese makers & gains in the Korean won.  New products & demand for displays will boost results in Q3, the company said.  Operating income fell 24% to 7.2T won ($7.1B), the 3rd straight quarterly drop.  Samsung is counting on demand for 4th-generation devices to revive growth as the competition packs features into cheap phones to lure budget buyers.  Currency moves cut the value of overseas earnings as its grip on the market for screens larger than 5" faces new competition.  Operating profit of 7.2T won compares with the 8.1T won estimate.  “The second quarter is a seasonally weak period for smartphone demand in China,” Samsung said.  “The company cautiously expects a more positive outlook in the third quarter with the coming release of its new smartphone lineup. Samsung does not expect any major marketing expenditure to occur in the upcoming quarter.” 

Samsung Forecasts Mobile Phone Sales Rebound After Earnings Miss Estimates

There is selling in the market this week because traders are nervous about earnings.  Tonight Alcoa (AA) is the first major company to report.  The estimate for EPS ia a jump from 33¢ to 49¢ & the stock is little changed while it's waiting for the news.  Earnings reports from the big banks will follow.  Meanwhile multiple messes, starting with illegals flooding over the southern border, death threats to the US from the new forces in Iraqi & the Veterans Administration are going nowhere fast.  In addition, the markets were reminded of the slooooow economic recovery following the worst recession in decades. 

Dow Jones Industrials


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