Wednesday, October 22, 2014

Markets crawl higher after 4 days of gains

Dow added 5, advancers over decliners 3-2 & NAZ went up 6.  The MLP index rose 2 to the 212s & the REIT index was up fractionally to near 311.  Junk  bond funds went up & Treasuries pulled back again.  Oil edged higher & gold retreated.

AMJ (Alerian MLP Index tracking fund)

CLZ14.NYM....Crude Oil Dec 14...82.97 Up ...0.48 (0.6%)

GCV14.CMX...Gold Oct 14......1,243.90 Down ...7.10  (0.6%)

The cost of living in the US barely rose in Sep, leaving inflation below the Federal Reserve goal as fuel prices plunge this month.  The consumer-price index climbed 0.1% after decreasing 0.2%, according to the Labor Dept.  The forecast called for no change.  Excluding volatile food & fuel, the core measure also advanced 0.1% after being little-changed in Aug.  A slowdown in global economic growth & declining energy & commodity costs will restrain overall price pressures this month, indicating contained inflation will give the FOMC room to keep interest rates low well into 2015.  Lower fuel bills are also helping boost consumer confidence & purchasing power, which will underpin the US expansion.  Overall consumer prices increased 1.7% in the 12 months ended in Sep, the same as in the year ended Aug.  Core CPI climbed 1.7% from Sep 2013, also matching the prior month’s increase.  Energy costs decreased 0.7% from a month earlier, & will probably drop even more this month.  Households are getting relief as their fuel bills plunge.  The drop in fuel costs will free up billions over the next year that the consumers can spend on other purchases.  But even the muted increase in the cost of living is enough to depress paychecks.

Consumer Prices in U.S. Rise 0.1% as Inflation Remains Muted

US Bancorp Q3 profit that matched estimates as the company made more loans to businesses.  EPS was 78¢, up from 76¢ a year earlier.  The estimate was 78¢.  CEO Richard Davis is benefiting from improved commercial lending amid signs the US economy is strengthening.  The bank has countered an industrywide slump in mortgages by relying on fees from businesses including credit cards & auto financing.  “Our disciplined approach returned positive operating leverage and the diversification of our business profile allowed us to maintain our momentum as the economy slowly rebounds,” Davis said.  Total loans increased 6.3% to $243B as commercial lending climbed 13.6%.  Net revenue rose 2% to $4.99B, trailing estimates of $5.01B.  Mortgage banking revenue fell 21% from a year earlier.  Noninterest expense rose 1.9% to $2.6B from a year earlier as the bank spent more on professional services & technology, while provision for credit losses increased 4.4% to $311M.  Net interest margin, a measure of profitability, fell to 3.16% from 3.27% in Q2.  Return on equity, a measure of how well a company reinvested profit to generate additional earnings, fell to 14.5% from 15.8% a year earlier, the lowest since Q2-2011.  The stock was off pennies.  If you would like to learn more about USB, click on this link:

U.S. Bancorp Profit Matches Analyst Estimates as Commercial Loans Increase

U.S. Bancorp (USB)

Target Eyes Holiday Turnaround
Photo:   Bloomberg

Target, a Dividend Aristocrat, is betting that free shipping, more advertising & 35K new items will fuel a much-needed turnaround for its holiday fortunes.  These changes are all part of a refocus on consumer service & offering shoppers better value since CEO Brian Cornell took over in Aug.  TGT, which now offers free shipping for customers who use its branded payment cards, is extending that to all purchases thru Dec 20.  “It’s a company that has really returned to what has made it great,” Cornell said.  “We want to bring ease and convenience to our guests.”  Cornell took the reins of the 2nd-largest US discount chain at a critical moment.  The data breach last year compromised 40M credit-card accounts at a time when the retailer already faced slowing US sales & a botched expansion into Canada.  Sales fell 5.3% in last year’s Q4.  There are increasing signs that this will be another lackluster Christmas for US retailers.  Early results from back-to-school shopping, which is considered an indicator of how holiday sales will go, mostly disappointed as chains trimmed revenue forecasts.  While Cornell says customers have moved on from the breach, the chain has yet to win over investors.  Cornell is getting the company to concentrate on its best categories, including apparel, home goods & toys.  Noticeably absent from this list was food that was given more floor space previously.  “We have lots of different categories, but not all those categories can be critically important,” Cornell added.  “We’ve made it really clear that there’s certain categories we want to be known for.”  The company also is spending more on advertising for the holidays, said Jeff Jones, the chain’s chief marketing officer.  A major reason for that bump is a 50% increase in digital advertising, including paid search & online video, he said.  The stock rose 19¢.  If you would like to learn more about TGT, click on this link:

Target Eyes Holiday Turnaround on Free Shipping, Faux Fur

Target (TGT)

There is not a lot going on in the markets with no significant news drivers.  Dow is up more than 500 in 4 days after massive selling.  Time for a breather.  The FOMC meeting next week is expected to announce an end to the Q3 bond buying program.  Dow remains up a smidgen YTD.   

Dow Jones Industrials

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