Thursday, October 9, 2014

Markets tumble on economic growth concerns

Dow sank 334 (closing at the lows), decliners over advancers 7-1 & NAZ dropped 90.  The MLP index plunged 16+ to 495 (a record drop in its 20 year history) & the REIT index was off pocket change in the 298s.  Junk bond funds drifted lower & Treasuries crawled higher.  Oil tumbled into a bear market on concern rising global supplies will be more than enough to meet slowing demand.  That money went into gold.

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CLX14.NYM....Crude Oil Nov 14....85.77 Down ...1.54  (1.8%)

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Federal Reserve (FED) Vice Chairman Stanley Fisher said that to him, the central bank’s “considerable time” language for keeping interest rates low refers to between 2 months & one year.  He also said that so-called liftoff of interest rates will take place “relatively slowly.”  The FOMC last month maintained its pledge to keep the benchmark interest rate low for a “considerable time” after completing its bond-purchase program, which is slated to end after this month’s meeting.  The rate has been held near zero since Dec 2008.  Most officials expect the rate to rise some time next year, according to projections released at the Sep meeting.  Traders see a 56% chance the FED will raise the rate by Sep 2015.  “It looks like the markets have it right, somewhere in the middle of the year,” Fischer said.  Still, he stressed the FED's message that the outlook for policy will change in reaction to the latest economic data.  “People who are in the market should be thinking about what the Fed will be doing as the data come in but we will describe what we will do to the best of our knowledge as the data come in,” he added.  “If the data come in differently, we will say different things. It’s not complicated.”  Policy makers last month worried that slowing global growth & a stronger dollar posed risks to the US economy as they decided to maintained their “considerable time” pledge.  A number of officials said the US expansion “might be slower than they expected if foreign economic growth came in weaker than anticipated,” according to the minutes.

General Electric, a Dow  stock, CEO Jeff Immelt said he expects sales of as much as $5B by 2017 from its business of helping customers use data collected from industrial equipment.  Revenue is headed to about $1.1B this year from the analytics operations as the backlog has swelled to $1.3B.  Since pledging in 2011 to expand the business, GE has introduced about 40 products designed to boost efficiency & productivity, & reduce costs.  “This is going to be one of the underpinnings to improve the growth rate of the overall service business,” Immelt said.  Sales from the big-data business may reach “$4 billion or $5 billion in the next few years,” he added.  GE is seeing the fruits of a $1B investment in the industrial internet, including opening a global research facility in Silicon Valley.  He has laid out a vision of a world of smart machines that can diagnose their own problems & find solutions.  As companies have embraced big data to improve operations, GE has put resources behind the industrial internet & now has 10M sensors analyzing data from the wind turbines, medical-imaging devices & other equipment it has sold.  The company offers hardware & software to help customers track and utilize information.  GE said it is working to enhance cybersecurity following its acquisition of Wurldtech this year.  The stock lost 47¢.  If you would like to learn more about GE, click on this link:

GE Sees Fourfold Rise in Sales From Industrial Internet

General Electric (GE)

Ukraine reported intensified shelling in its war-ravaged east as German Chancellor Merkel said the terms of a month-old truce aren’t being met.  The gov reported one death among its forces the past day, saying pro-Russian insurgents fired artillery rounds at the military on 33 occasions.  While the cease-fire “isn’t flawless,” the tendency in Ukraine is “unambiguously positive,” Russian Foreign Minister Lavrov said.  The rebels yesterday described the truce as all but dead.  “It’s obvious that the Minsk agreement isn’t implemented yet,” Merkel said today.  Drones could be used to monitor the truce, “but the condition for everything is that the cease-fire really holds. You can see how fragile the situation is right now.”  While the truce, sealed Sep 5, has reduced the bloodshed in Ukraine’s easternmost regions, it’s been marred by daily violence.  There have been at least 331 deaths since the deal was agreed, the UN estimates.  The rebels say they’re ready to resume peace talks once Russia & the Organization for Security & Cooperation in Europe agree on the terms.  Christine Lagarde, managing director of the IMF, said today that more intl financing will be needed to prop up Ukraine’s war-battered economy, but that not all of the funding should come from the IMF.  Lagarde said other lenders will need to participate, without providing details.  The IMF has already approved a $17B bailout loan to help Ukraine stay afloat.  Ukrainian central bank chief Valeriya Gontareva said last month the official support program from the IMF envisages a 6.5% shrinkage in the country’s GDP this year.  She said the “really drastic deterioration of economic conditions” will cause a revision showing an even larger economic contraction.  “I suppose that it will be minus 9 percent, or even 10 percent,” she said in Kiev last month.  The Ukrainian ambassador to the US said that 3K Russian troops remain on the Ukrainian side of the border between the 2 countries.  He said the cease-fire has been violated more than 1K times though “it’s difficult to say” if the violations have been committed by Russian forces or pro-Russian separatists.

Ukraine Sees Shelling Worsen as Merkel Says Truce Not Met

Macro economics which have been largely ignored for months (maybe years) were center stage today.  And the markets did like what they saw.  The intl political scene is a disaster.  America is no longer a leader, merely just another follower.  The bad guys do what they want without any checks on their behavior.  Just look at Ukraine & ISIL.  The political turmoil bleeds over the economic scene which was not petty to begin with.  Then there's oil which is in a bear market.  A few months ago, WTI (US oil) was over 105.  Today it's down $20.  Brent oil (which much of the world uses) has fallen more.  The major oils are down & the MLPs are being punished badly.  Much of that involves fracking which is expensive.  High priced oil justifies added expenses.  Now that's less obvious, the business is not so rosy.  Dow is down almost 400 in Nov & 620 from its peak last month.  Nov is shaping up as one ugly month.    

Dow Jones Industrials

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