Monday, August 4, 2014

Lower markets after one tough week

Dow slid 7, decliners over advancers almost 3-2 & NAZ went up 5.  The MLP index recovered 2+ to 499 & the REIT index lost a fraction in the 301s.  Junk bond funds fluctuated after an unusually difficult week & Treasuries were flat.  Oil traded at its lowest in almost 6 months before economic data from the Us, the world’s biggest oil consumer.  Gold pulled back slightly.

AMJ (Alerian MLP Index tracking fund)

CLU14.NYM...Crude Oil Sep 14...97.59 Down ...0.29  (0.3%)

GCQ14.CMX...Gold Aug 14....1,290.20 Down ....3.40  (0.3%)

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Investors may be underestimating the pace at which the Federal Reserve (FED) will raise interest rates over the next 2 years, said Jeffrey Lacker, president of the Federal Reserve Bank of Richmond.  Short-term interest-rate markets have for months priced in a slower tempo of increases than policy makers themselves forecast.  That’s risky because the misalignment, a bet against a rate path that the central bank alone controls, could lead to volatility if traders have to adjust rapidly, Lacker said.  “When there is that kind of gap, it gets your attention,” Lacker, a consistent critic of the FED’s record easing who votes on policy next year, said Fri.  “It wouldn’t be good for it to be closed with great rapidity.”  Lacker said the discrepancy may arise from skepticism about FED forecasts, which call for for unemployment to fall to 5.4-5.7% at the end of next year, close to their estimated range for full employment.  Investors may also be giving too much credence to a phrase in the FED statement that even after employment & inflation are close to its goals, “economic conditions may, for some time, warrant keeping the target federal funds rate below levels the committee views as normal in the longer run.”  “They may be placing more weight on that than I think it deserves,” said Lacker, who dissented against his colleagues at every meeting of the FOMC in 2012.  “They may think we have more conviction about that than we do.”

Lacker Fed May Raise Rates Faster Than Investors Expect

McDonald's, a Dow stock & Dividend Aristocrat, will start selling beef & chicken burgers in some Chinese cities again, resuming its full menu almost 2 weeks after a supplier came under investigation for using expired meat.  Customers in Chinese cities will be able to buy all the items on the menu later this week, MCD said without specifying the date or number of cities.  It’s also increasing orders from other existing suppliers in China while exploring new ones.  MCD withdrew beef, pork & chicken items from its restaurants in China after a Shanghai TV station reported on 2 weeks ago how Shanghai Husi Food, a unit of its long-term supplier OSI Group, took expired meat & added sell-by dates of another year, renewing concerns of food safety in the country.  In Hong Kong, MCD restaurants are serving burgers such as the Big Mac & McChicken burgers “back to their original build,” after lettuce & onion were imported from the US & Taiwan.  Hong Kong sales were halted of products supplied by Shanghai Husi late last month.  MCD is increasing orders from existing suppliers to handle the shortage of ingredients.  It’s also exploring new Chinese suppliers for items such as fresh produce, & is in the process of evaluating these companies.  MCD has 2.6% of China’s fast food market with 2K outlets, the 2nd-largest restaurant chain in the country by market share.  MCD, which doesn’t break out China sales publicly, received 23% of its revenue from the Asia Pacific, Middle East & Africa region.  The stock fell 53¢.  If you would like to learn more about MCD, click on this link:

McDonald’s to Resume Full Menu in Chinese Cities This Week

McDonald's (MCD)

The markets have a lot to digest after last week's plunge.  Earnings season is largely over & results were varied, not what is expected in a bull market.  But intl fighting is getting more attention than in the past & these conflicts show no sign of ending soon.  Dow is down 650 YTD as the bulls have lost control of the stock market.

Dow Jones Industrials

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