Wednesday, October 8, 2014

Markets surge after dovish Fed minutes

Dow soared 274 (closing near the highs), advancers over decliners better than 3-1 & NAZ rose 83.  The MLP index dropped 3+ to the 511s & the REIT index rose 6+ to the 498s.  Junk bond funds were mixed & demand for Treasuries was strong again.  Oil continued selling off to new lows & gold crawled a little higher.

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CLX14.NYM....Crude Oil Nov 14....87.31 Down ...1.54  (1.7%)

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Federal Reserve (FED) policy makers at their last meeting said a global slowdown & a stronger dollar posed potential risks to the outlook for the US economy.  Some said growth “might be slower than they expected if foreign economic growth came in weaker than anticipated,” according to minutes of the Sep 16-17 FOMC meeting.  Officials cautioned that spillover from Europe’s cooling economy & low inflation could boost the dollar further, curbing US exports, & restrain price gains that have lagged behind the 2% goal.  “Some participants expressed concern that the persistent shortfall of economic growth and inflation in the euro area could lead to a further appreciation of the dollar and have adverse effects on the U.S. external sector,” the minutes said.  The IMF yesterday cut its outlook for global growth in 2015 to 3.8% from a Jul forecast of 4% & saw US growth of 3.1% next year.  Regional FED presidents have said in the past month they are watching the dollar as officials debate the timing of the first interest-rate increase since 2006.  The FOMC last month retained a pledge to keep interest rates near zero for a “considerable time” after it concludes an asset purchase program that’s due to end after its Oct meeting.  “Some participants saw the current forward guidance as appropriate in light of risk-management considerations, which suggested that it would be prudent to err on the side of patience while awaiting further evidence of sustained progress toward the committee’s goals,” minutes of the gathering show.  At the same time, “the concern was raised that the reference to ‘considerable time’ in the current forward guidance could be misunderstood as a commitment rather than as data dependent,” the minutes said. 

Fed Officials Saw Global Slowdown Among Risks to Outlook

Russia's Central Bank Chairman Elvira Nabiullina
Phoro:   Bloomberg

Russian pres Putin’s policy makers are in damage-control mode to confront mounting economic pain from US & European sanctions over Ukraine.  The central bank said today it sold $420M of foreign currency on Oct 6 in its 3rd day of interventions this month to slow a decline in the ruble that’s made it the world’s worst performer since Jun.  The gov raised less than half the amount offered in a bond sale.  All this while oil, the source of half of Russia’s revenue with natural gas, dropped to a 27-month low.  Currency sales, set to top $2B once interventions in the past 2 days are factored in, underscore the price Putin is paying for his country’s annexation of Crimea & alleged support for rebels in eastern Ukraine.  The US & EU have imposed penalties that curbed access of Russian companies to overseas financing & fueled an exodus of foreign capital just as a drop in the price of crude saps export revenue.  The Bank of Russia is dipping into $457B of reserves to prop up the ruble, which slid past 40 per dollar today.  The monetary authority has spent more than $1.4B defending the currency this month, according to central bank data that exclude figures for yesterday & today.  The interventions come as shelling killed 6 & wounded more in Ukraine’s eastern regions, marring the gov's attempt to halt firing & open the way for a buffer zone agreed in a truce deal with rebels last month.

Pain From Putin Sanctions Deepens as Ruble to Auction Suffer

Apple sent out invitations to an event on Oct 16, when the company is said to be planning to reveal its latest iPad tablets ahead of the holiday shopping season.  The event will be held at AAPL headquarters.  “It’s been way too long,” the invitation said.  The company is set to introduce a new version of its 9.7" iPad & the smaller iPad mini, according to a leaker.  CEO Tim Cook is working to shake up the iPad line as sales of the tablets, AAPL's 2nd-biggest product by revenue, have declined for 2 straight qtrs.  The company hasn’t introduced a new iPad since last Oct, & consumers have instead been shifting to smartphones with bigger screens.  The new iPads follow the release of the latest iPhones, the 6 & 6 Plus, which have larger screens than the company’s older devices.  The phones were unveiled in Sep, along with a smartwatch & new mobile-payment system, as Cook seeks to build out the company’s key products & move into new categories.  AAPL is expected to add a gold color option for its full-size iPads.  The company also is developing a bigger iPad, with a 12.9" screen to be introduced next year, according to leakers.  The company sold a record of more than 10M iPhones during the debut weekend of the new models.  The stock went up 2.05.  If you would like to learn more about AAPL, click on this link:

Apple to Hold Oct. 16 Event for New IPad Ahead of Holiday Season

Apple (AAPL)

All the talk at the FED about slow growth sent a message to the market that interest rates, before being increased, will last forever (i.e. at least another 6 months, probably longer).  Stocks soared.  The yield on the 10 year Treasury has fallen about 30 basis points to a little over 2.3% in the last 3 weeks, negative bets on the economy.  This is not a healthy market when those negative bets bring out stock buyers.  Even after this gain, Dow continues below 17K, where is has been lingering for 4 months.  This month Dow is down 48.   

Dow Jones Industrials

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