Thursday, October 16, 2014

Markets erase losses on hopes of extending QE

Dow fell 24, advancers ahead of decliners almost 3-1 & NAZ went up 2.  The MLP index jumped 21 to 497 & the REIT index was up fractionally in the 301s.  Junk bond funds inched higher after recent selling & Treasuries pulled back with the yield on the 10 year Treasury now at 2.15%.  Oil rebounded after falling below $80 for the first time since Jun 2012 on speculation prices decreased more than justified & gold slid lower.

AMJ (Alerian MLP Index tracking fund)

CLX14.NYM....Crude Oil Nov 14....82.75Up ...0.97 (1.2%)

Live 24 hours gold chart [Kitco Inc.]

Wal-Mart, a Dow stock & Dividend Aristocrat, cut its sales forecast & acknowledged the need to do a better job stocking shelves & staffing stores to win back customers in a tough economy.  The company is predicting sales growth of 2-3% this year, down from a previous forecast of as much as 5%.  WMT also expects slower profit increases over the next 3 years as the company revamps its business & invests in e-commerce.  CEO Doug McMillon is coping with a broad-based slump in retail spending & a slowdown in foot traffic at supercenters.  Same-store sales haven’t risen in 6 qtrs.  To cope, the company is adding less square footage than originally planned next year, focusing instead on smaller neighborhood stores & its internet site.  “If you study retail history, you know that retailers come and go,” McMillon said.  Even if smaller stores eat into sales of supercenters, WMT has to “embrace change and be willing to cannibalize ourself if we need to be, so that we can set the stage for the future.”  McMillon said that he sees plenty of room for improvement when touring stores on surprise visits.  He said stores need to boost in-stock levels -- a measure of the merchandise available on shelves for customers to buy.  They also should address long checkout lines & improve staffing by increasing the number of worker hours.  The company also pledged to enhance its fresh produce department & the way it prices products.  The upgrades may include a boost in pay.  Currently there are fewer than 6K workers in the U.S who make minimum wage, he said, & “it’s our intention to be in a situation where we don’t pay minimum wage at all.”  There’s “no excuse” for the company not to be doing better in the US, McMillon added.  Opening new Neighborhood Market stores is part of its plan to win back customers.  The company will open as many as 200 of the outlets next year, compared with 60-70 supercenters & it will add 26-30M retail square feet worldwide this year, less than the 32-34M it had originally projected.  That reflects the declining importance of big-box stores in Wal-Mart’s fleet.  The stock fell 1.38.  If you would like to learn  more about WMT, click on this link:

Wal-Mart Cuts Annual Sales Forecast as Supercenters Struggle

Wal-Mart Stores (WMT)

Greece's Prime Minister Antonis Samaras
Photo:   Bloomberg

Greece’s plan to escape the biggest bailout in history is at risk of falling apart.  A month of declines in stocks & bonds has pushed yields to a level that investors say threatens once again to cut Greece off from financial markets.  A rally in Greek gov bonds earlier this year emboldened Prime Minister Samaras, who announced plans to sever the €240B ($307B) lifeline that has kept the country afloat since 2010.  The bailout loans came with strict conditions on belt-tightening that exacerbated Greece’s worst recession on record & triggered a political backlash.  Samaras’s plans may yet be derailed by the selloff.  Greek bonds have lost about 17% in the past month thru yesterday, making them the worst-performing gov security.  As during the debt crisis, the turmoil rippled out to other euro-area nations, with Spanish securities tumbling for a 2nd day after Spain missed its maximum target in an auction of 10-15-year debt.  Greek 10-year yields were up 72 basis points to 8.5% today, the biggest increase since Jul 2012 when the country was on the brink of exiting the euro area.  In a speech before a confidence vote in parliament last week, Samaras said his gov is negotiating a precautionary program that would see Greece seeking emergency loans from its euro-area partners or the IMF only as a last resort.

Greek Bailout Exit Plan at Risk Amid Bond, Stock Selloff

EBay, which will split into 2 companies next year, gave a sales forecast for Q4 that missed estimates as the company recovers from the impact of a security breach that curbed customer growth.  Revenue for the current period will be $4.85-$4.95B & EPS will be 88-91¢.  Analysts projected sales of $5.16B & EPS of 91¢.  CEO John Donahoe is stepping up spending on marketing to lure customers back to the website ahead of the holiday shopping season.  EBAY has struggled to restore web traffic after asking users in May to change passwords after hackers gained access to login information, & Google (GOOG) changed its search results, curbing visits to EBay’s website from potential shoppers.  Donahoe said 100 of the 152M users have changed their passwords, & the company increased its advertising budget.  The company also continues to invest in improving traffic from searches, but the recovery will be slow & span several qtrs, he said.  “Anytime you put friction in an experience, there’s some fallout,” Donahoe said in a telephone interview yesterday.  Q3 sales rose 12% to $4.35B, falling short of the $4.36B estimate.  Excluding certain costs, EPS was 68¢, compared with the prediction for 67¢.  EBAY didn’t give any further guidance on its plans for cash held overseas, after taking a $3B tax charge in Q1 to let it potentially repatriate foreign earnings, which boosted available US cash by $6B.  PayPal payments volume expanded by 29% in Q3, compared with the prediction for 27% growth, underscoring how PayPal is expanding faster than the marketplaces business.  PayPal has 157M accounts, up 14%, & is on track to process 1B mobile transactions this year.  Revenue in the marketplaces unit, the main auction & retail business, rose 6.4% to $2.16B & the volume of merchandise sold rose 9%.  The stock fell 2.36.  If you would like to learn  more about EBAY, click on this link:
EBay Holiday Sales Forecast Misses Analysts’ Estimates After Data Breach

eBay (EBAY)

This was another one of those wild days which has become routine in Oct.  For the moment the bleeding has stopped, giving some relief to investors.  But nothing has been resolved.  Earnings are coming in so-so at best & there are continual signs that the US economy is not expanding as fast as it should which would bring significantly higher wages to households.  Overseas economies are not doing well.  Then there is fighting in Ukraine & MidEast & that shows no sign of ending.  The MLPs, not associated with wild moves, is up a good 40 in a couple of days.  The VIX, volatility index slipped fractionally, but is still in the 25s, more than double where it has been for months.  Today's rally, based entirely on a QE rumor, was not impressive.

Dow Jones Industrials

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