Wednesday, September 17, 2014

Markets gain ahead of FOMC decision

Dow rose 16, advancers over decliners 3-2 & NAZ climbed 2.  The MLP index was up a fraction in the 529s & the REIT index rose a fraction above 300.  Junk bond funds fluctuated & Treasuries advanced.  Oil & gold prices changed little.

AMJ (Alerrian MLP Index tracking fund)

CLV14.NYM....Crude Oil Oct 14...94.70 Down ...0.18  .(0.2%)

GCQ15.CMX...Gold Aug 15.....1,240.70 Up ....0.60 (0.1%)

The cost of living in the US unexpectedly dropped in Aug for the first time in more than a year, showing inflation still is falling short of the Federal Reserve (FED) goal as policy makers meet.  The CPI declined 0.2%, the first decrease since Apr 2013, according to the Labor Dept.  The forecast called for unchanged.  Excluding volatile food & fuel, the core measure was unchanged, the first time it failed to increase in almost 4 years.  A drop in energy costs & muted global growth are helping contain inflation.  Subdued price increases have allowed FED officials to keep interest rates at record lows even as they plan to end their monthly asset purchase program in Oct.  Overall consumer prices climbed 1.7% in the 12 months ended in Aug, following a 2% year-over-year gain the prior month.  The core measure also rose 1.7% from Aug 2013 after 1.9% in the prior 12-month period.  Energy costs declined 2.6% in Aug from a month earlier, the most since Mar 2013 on  falling gas prices, helping cushion household budgets.   Food costs increased 0.2% after a 0.4% gain the prior month.  The core rate was held back by broad-based declines in prices, including airline fares, recreation, household furnishings, clothing & used cars and trucks.

U.S. Consumer Prices Drop for First Time in a Year

FedEx rallied after fiscal Q1 earnings beat estimates as the company carried more packages, cut pension expense & benefited from completion of a record stock buyback.  It also reaffirmed its fiscal 2015 EPS forecast of $8.50-$9, citing increases in US industrial production this year & global economic growth in 2015 matching its previous expectation.  Holiday-season hiring will be 50K jobs, compared with 40K in 2013.  Results showed improvement in the overnight-delivery business along with the Ground & Freight divisions as FDX continued benefiting from a $1.7 B cost-cutting program begun in 2012.  EPS rose to 2.10 (including a 15¢ gain attributable to the stock buyback), beating the 1.96 estimate.  Revenue rose 6% to almost $11.7B, also topping estimates.  “All three of our transportation segments drove higher revenues and improved profitability year over year,” CFO Alan Graf said.  “Our profit improvement programs are progressing as planned and we continue to expect strong earnings growth this year.”  The full benefit of the expense-reduction plan will be felt in 2015.  The company repurchased 5.3M shares, capping a 32M-share plan announced in Oct.  FDX increased its forecast for 2014 US industrial production rising 4.1%, up from 3.6% & global GDP will expand by 3.1% in 2015.  The stock rose 6.30 (4%).  If you would like to learn more about FDX, click on this link:

FedEx Risses as Buyback-Aided Profit Tops Estimates

FedEx (FDX)

Confidence among US homebuilders rose in Sep to a 9-year high, showing the industry is gaining ground & will be a source of momentum for the economy.  The National Association of Home Builders/Wells Fargo sentiment measure climbed to 59, exceeding the highest estimate, from 55 in Aug.  Readings above 50 mean more respondents said conditions were good.  Improvement in the job market & low interest rates spurred buying interest this month, as the group’s index of foot traffic thru model homes jumped to the highest level since Oct 2005.  Faster wage gains would provide extra momentum for residential real estate, which has seen lackluster demand from first-time buyers.  Today’s report also showed purchases & sales expectations increased this month.  The measure of the 6-month sales outlook climbed to 67, the highest since Aug 2013, from 65 in Aug.  An index of current single-family home sales rose to 63, the highest this year, from 58, while the gauge of prospective buyer traffic advanced to 47 from 42.  Builder confidence increased in 3 of 4 regions, led by a 12-point jump in the South to 63, the highest since Jan 2006.  Sentiment also advanced in the West & Northeast.

Homebuilder Confidence in U.S. Increases to a Nine-Year High

There is little going on in the markets as traders are waiting for Janet to speak.  The bond buying program will continue to be reduced, but the major uncertainty is about what is said on the future of interest rates.  I am a big believer that caution will be the biggest factor in the thinking by the FOMC.

Dow Jones Industrials

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