Monday, October 27, 2014

Lower markets on weak home sales data

Dow dropped 32, decliners over advancers 5-2 & NAZ fell 15.  The MLP index plunged 6+ to 507 on lower oil prices & the REIT index was fractionally higher to 313.  Junk bond funds slid lower & Treasuries gained.  Oil fell to a 28 month low as an analyst forecast was cut & gold was about even.

AMJ (Alerian MLP Index tracking fund)

CLK15.NYM...Crude Oil May 15...79.57 Down ....0.87  (1.1%)

GCV14.CMX...Gold Oct 14.......1,228.60 Down ...2.60  (0.2%)

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Contracts to purchase previously owned homes rose less than forecast in Sep, showing housing will take time to gain momentum.  The pending home sales index increased 0.3% after dropping 1% in Aug, the National Association of Realtors said.  The projection called for a 1% gain.  Still-tight credit & low inventories remain hurdles for a sluggish housing recovery that’s still healing more than 5 years after the downturn.  More Americans are being helped by faster progress in the employment picture, allowing those who are able to get a mortgage the opportunity to take advantage of historically low rates.  Purchase contracts climbed 1% in the 12 months ending in Sep after a 4.1% annual decline in Aug, the NAR report showed.  Last month marked the first year-over-year increase since Sep 2013.  The pending sales index was 105 on a seasonally adjusted basis.  A reading of 100 corresponds to the average level of contract activity in 2001, or “historically healthy” home-buying traffic, according to the NAR.  Pending sales rose in 2 of 4 regions from the prior month, with the South up 1.4% & the Northeast advancing 1.2%.  Pending sales are considered a leading indicator because they track new purchase contracts.

Pending Sales of U.S. Existing Homes Rise Less Than Projected

German business confidence dropped for a 6th month as the specter of a recession haunts Europe's  largest economy.  The Ifo institute’s business climax index, based on a survey of 7K executives, dropped to 103.2 in Oct from 104.7 in Sep, the lowest since Dec 2012.  The forecast predicted a decline to 104.5.  The German economy, which helped the euro area emerge from its longest-ever slump last year, contracted in Q2, & the Bundesbank predicts little, if any, growth in H2.  Factory orders in Aug, industrial production & exports all plunged the most since 2009, & investor confidence slid for a 10th month in Oct.  Economists are predicting GDP growth of 0.3% in Q3.  Ifo’s measure for current conditions dropped to 108.4 from 110.5 in Sep, & a gauge for expectations fell to 98.3 from 99.2.  Germany’s export-oriented economy is suffering from sanctions by the EU & the US against Russia & instability in the MidEast.  A slowing economy in China, the country’s 3rd-largest trading partner & weaker demand from its euro-region peers are adding to risks.

German Ifo Business Confidence Drops for Sixth Month

Merck, a Dow stock, beat earnings estimates & said it won a “breakthrough” designation from regulators that would bring its most promising oncology drug to lung cancer patients faster.  Profit excluding one-time items of 90¢, beating by 2¢ the estimate.  Q3 EPS fell to 31¢ from 38¢ a year earlier.  Keytruda, the drugmaker’s new cancer medicine, was approved for use in melanoma in Sep & MRK said 900 patients were treated with it last month.  The FDA today awarded the therapy a “breakthrough” designation for a form of lung cancer, which could speed approval for use in those patients.  MRK has cut jobs & overhauled its research operations to focus on its cancer pipeline.  Keytruda, its flagship new medicine, is part of a new generation of oncology treatments that use the body’s own immune system to attack & destroy tumors.  By 2017, analysts project the drug’s sales to be $1.8B.  MRK narrowed its adjusted adjusted EPS for the year to $3.46-$3.50, from a prior forecast of $3.43-$3.53.  It also cut the top end of its sales forecast by $400M to $42.8B.   Drug sales fell 4% to $9.13B.  Gardasil, a vaccine for human papillomavirus, declined 11% on lower use in the US.  Cholesterol drugs Zetia & Vytorin fell 3% on weaker US sales.  The animal health business’ sales rose 11% to $885M, which the company attributed to growth across all species.  The stock lost 56¢.  If you would like to learn more about MRK, click on this link:

Merck Beats Earnings Estimates as FDA Boosts Cancer Drug

Merck (MRK)

The is shaping up as another dreary day for the stock market with oil well below the important 80 support level.  Dow is still up 200 YTD, but may not be able to hold that advance with more selling this week.  This month Dow is down 250.  The FOMC is expected to announce to announce the end of QE3 bond buying after the meeting on Wed & may give clues about raising interest rates next year.

Dow Jones Industrials

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