Thursday, October 30, 2014

Markets rise after better than expected GDP data

Dow climbed 221 closing near the highs, advancers over decliners 3-2 but NAZ went only 16.  The MLP  index sank 8+ to the 501s & the REIT index bounced back 1+ to the 515s (a new yearly high).  Junk bond funds were mixed & Treasuries rose.  Oil dropped & gold slipped to just under the important 1200 resistance level.

AMJ (Alerian MLP Index tracking fund)

CLZ14.NYM....Crude Oil Dec 14....81.24 Down ...0.96  (1.2%)

Live 24 hours gold chart [Kitco Inc.]

With China headed for its slowest full-year expansion in a generation, the gov has listed housing as one of the 6 consumption areas to be encouraged after years of trying to cool the property industry.  China will “stabilize” property-related consumption & make it easier for people to access mandatory housing savings, the State Council said.  The last time China’s State Council documents mentioned “stabilizing” housing consumption was in Apr 2009, when the gov was rolling out a massive stimulus plan to shield the economy from a global slowdown.  GDP expanded 7.3% in Q3 from a year earlier, the weakest pace in more than 5 years.  New-home prices fell in 69 out of 70 cities last month from Aug.  Property prices may decline as much as 10% this year & the slump may extend into 2015, according to SouFun Holdings.  The Chinese gov, which started tightening lending to property developers & buyers in Apr 2010 to prevent asset bubbles from expanding, has also signaled plans to reverse course on home financing, with the central bank on Sep relaxing mortgage rules for homebuyers who have paid off existing loans.  Consumption is an “important engine of economic growth,” the Cabinet said, adding that the gov will also support e-commerce, environment-friendly products & tourism (without providing detail)s.

China Backs Growth in Housing Again as Slowdown Prompts U-Turn

The push to end a 4-decade limit on exporting US oil may get a boost from a gov study set for release shortly that will explain the relationship between crude oil & domestic gasoline prices.  Supporters of lifting the ban anticipate the Energy Information Administration (EIA) analysis will affirm what they suspect: that overseas sales won’t raise the price Americans pay at the pump because the price of gasoline is tied to the global oil supply.  While some recent studies have reached a similar conclusion, the analysis from the non-partisan EIA could make a stronger impression with lawmakers.  Lifting the restrictions faces steep political challenges, lobbyists & energy analysts said.  It isn’t clear how many Reps want to end or ease the restrictions.  With US production on the rise, EIA says it may reach its highest point in 4 decades next year, critics of the ban say it does more harm than good.  A glut of domestic oil could push prices lower & discourage companies from investing in new wells.  The debate focuses on whether higher US oil costs lead to higher gasoline prices.  A Government Accountability Office report last week showed lifting the oil-export limits may cut the per-gallon retail gasoline prices by 1½ - 13¢ even as the West Texas Intermediate, the US oil benchmark, rises.

U.S. Oil Exports Seen Gaining as EIA Readies Study on Pump Price

Time Warner Cable reported profit that trailed estimates & cut its sales forecast as it continues to lose video subscribers.  Q3 EPS, excluding some items, fell to $1.86, compared with an estimate of $1.90.  TWC lost 184K video customers, & rising costs for sports programming cut into profit.  The company lowered its revenue forecast for the year to $22.8B, below every estimate.  The company is relying more on broadband users for revenue growth as new TV subscribers prove harder to come by.  The falling number of Americans paying for TV is part of the driving force behind Comcast’s (CMCSA) proposed $45B takeover of TWC.  A year ago, TWC reported losses of 306K customers for video & 24K for broadband.  In the most recent qtr, the company added 92K high-speed Internet subscribers.  The deal with CMCSA is at risk of taking longer to complete as regulators resolve disputes over programming contracts.  While the Federal Communications Commission last week stopped the clock in its review, CMCSA said it still expects the deal to be completed in early 2015.  EPS was $1.76, down from $1.84 a year earlier.  Sales rose 3.6% to $5.71B, shy of the $5.75B projection.  Programming & content expenses climbed 9.6% to $1.3B because of costs for the SportsNet LA channel that carries Los Angeles Dodgers baseball games.  In Jul, the company had to reduce its full-year profit forecast because it was unable to get rival TV distributors to pay the fees it was asking for the sport network.  Today, the company forecast 2014 revenue of about $22.8B for 3.1% growth.  That’s lower than the guidance it gave in Jul for revenue growth of 3.5 - 4.5% this year.  Analysts had been expecting 2014 sales of $22.9B.  The stock lost 87¢.  If you would like to learn more about TWC, clik on this link:
Time Warner Cable Misses Estimates, Cuts Sales Forecast as TV Users Fall

Time Warner Cable (TWC)

Stocks liked the GDP growth & that brought out buyers.  But favorable growth figures can give the Federal Reserve courage to raise interest rates soon, something the bulls are praying will never happen.  After all is said & done, Dow is up almost 1%, & so close to its record high, in an unusually wild month for stock prices.  Tomorrow money managers will close out positions to make their monthly statements look better & that can bring for another volatile day.

Dow Jones Industrials

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