Friday, October 24, 2014

Markets attempt to edge higher on favorable earnings

Dow rose 39, advancers & decliners were equal, & NAZ gained 12.  The MLP index dropped 1 to 510 & the REIT index fell a fraction in the 311s.  Junk bond funds were mixed to higher & Treasuries advanced.  Oil fell back towards 80 while gold inched higher.

AMJ (Alerian MLP Index tracking fund)

CLZ14.NYM....Crude Oil Dec 14...81.11 Down ....0.98  (1.2%)

GCV14.CMX...Gold Oct 14......1,232.40 Up ...3.90 (0.3%)

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Purchases of new homes in the US were little changed in Sep after the prior month was revised down, showing an uneven recovery that will limit how much residential real estate contributes to growth.  Sales rose 0.2% to a 467K annualized pace from a 466K rate in Aug that was 7.5% weaker than previously estimated, according to the Commerce Dept.  The forecast called for the pace to decelerate to 470K.  Home sales are struggling to accelerate further as restrictive lending rules & wage gains that barely keep pace with inflation prevent lower-income buyers from stepping into the market.  The recent drop in mortgage rates will probably help prop up residential real estate heading into 2015.  Last month’s sales rate was still the strongest since Jul 2008.  As the Aug markdown attests, the preliminary figures can be subject to large revisions.   The Commerce Dept report said the Sep reading will show between 15.5% drop to a 15.9%.  Declining borrowing costs will help make big-ticket purchases such as homes more affordable.  The average rate on a 30-year, fixed mortgage fell to 3.92% last week, the lowest since Jun 2013, according to Freddie Mac data.  The rate has dropped by 0.27 percentage point over the past 3 weeks as concern over slowing global growth pushed investors into the safety of Treasury securities, causing yields to drop on the benchmarks used to calculate home-lending costs.  New-home sales, which account for about 7% of the residential market, are tabulated when contracts are signed, making them a timelier barometer than existing homes.  At the same time, the existing-home sales figures showed that participation among first-time buyers is still languishing.  Those consumers made up 29% of the market for a 3rd month in Sep, below the historical average around 40%.

Sales of New U.S. Homes Little Changed After August Revised Down

Microsoft, a Dow stock, quarterly sales topped estimates on cloud-computing growth & recovering PC sales, as CEO Satya Nadella shows progress in his effort to revive the company.  Revenue at the ailing Nokia handset business, which it acquired earlier this year, also topped projections, while sales of Azure cloud software & Web-based versions of Office programs more than doubled.  Total revenue in fiscal Q1 rose 25% to $23.2B, compared with the estimate for $22B.  The results bolster Nadella’s view that the software maker needs to focus on Web-based services & mobile devices.  Another bright spot was Surface, the tablet computer that was introduced 2 years ago, only to struggle to gain market share.  Revenue from the devices rose to $908M as the Surface Pro 3 outsells the previous version by a 2-to-1 margin.  Including charges related to the job cuts, the company reported Q1 EPS of 54¢.  Excluding restructuring charges, EPS was 65¢, topping the projection for 55¢.  The unit that includes the Nokia business posted sales of $2.61B, beating the $2.1B estimate.  The number was also ahead of the MSFT internal forecast, according to CFO Amy Hood.  “We have work to do on phones but we are seeing Lumia share growth in key markets,” Hood said.  “That being said, we know this is a long road.”  For the current qtr, Hood forecast phone hardware revenue of as much as $2.2B.  MSFT is benefiting from an upgrade cycle in the PC market, as companies replace aging machines.  The stock rose 71¢.  If you would like to learn more about MSFT, click on this link:

Microsoft Rises After Profit, Revenue Top Estimates on PC Market Recovery

Microsoft (MSFT)

UPS reported Q3 earnings that beat estimates, buoyed by intl exports, & said it expects shipments during Dec to climb 11%.  EPS rose to $1.32 a diluted share from $1.16 a year earlier.  Analysts predicted $1.28.  It’s the first time UPS surpassed analysts’ projections this year.  UPS is working to avoid the peak season problems it faced last year, when unseasonably cold and snowy weather combined with a surge in late, online orders & led to missed deliveries on Christmas.  This year it is bracing for even more orders.  “We expect another robust peak season and are confident our network is prepared to operate at the highest level,” Kurt Kuehn, CFO, said.  UPS said it plans to spend $175M on improving its operations during the holiday rush.  It’s opening 14 temporary shipping facilities to help expedite deliveries, upgrading its Orion software to help plot the best route for drivers, & is hiring as many as 95K seasonal workers to help field packages.  The world’s largest package delivery company also confirmed its full-year 2014 EPS estimate of $4.90-$5.00.  Results in Q3 were boosted by a 9.4% gain in intl exports, with strong growth in Asia & Europe, & a 6.9% increase in US daily packages.  Total revenue rose 5.7% to $14.3B, as UPS shipped 1.1B packages around the world, a record for a non-peak qtr.  The stock rose 93¢.  If you would like to learn more about UPS, click on this link:

UPS Profit Tops Estimates, Sees December Shipments Rising 11%

United Parcel Service (UPS)

After a good week, stocks are attempting to extend their gains.  Earnings have been fairly good with decent guidance going forward.  Dow is up 380 this week but remains down more than 300 in Oct.  In addition, triple digit daily swings have become common.

Dow Jones Industrials

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