Monday, October 6, 2014

Mixed markets on worries about rate hikes coming sooner

Dow lost 17, advancers just ahead of decliners & NAZ dropped 20.  The MLP index fell 3+ to below 521 & the REIT index was up 1 to the 295s.  Junk bond funds climbed higher & Treasuries rallied.  There was a little bit of buying in the PM for oversold oil & gold.

AMJ (Alerian MLP Index tracking fund)

CLX14.NYMCrude Oil Nov 1490.27 Up 0.53 (0.6%)

Live 24 hours gold chart [Kitco Inc.]

China's Growth
Photo:   Bloomberg

The World Bank lowered its forecasts for growth in developing East Asia this year & next as China’s expansion moderates & policy makers brace for tighter global monetary conditions.  The region is forecast to grow 6.9% in 2014 & 2015, down from 7.1% projected in Apr.  China will expand 7.4% this year & 7.2% next year, compared with 7.6% & 7.5% previously forecast.  Data released last month showed China’s industrial-output expansion at its weakest since the global financial crisis, while moderating investment & retail sales growth underscore the risks of a deepening economic slowdown led by a slumping property market.  Significant uncertainties remain that could affect the region’s growth including downside risks in the euro area & Japan, a sharp tightening in global financial conditions & intl & regional geopolitical tensions, the World Bank said.  “The best way for countries in the region to deal with these risks is to address vulnerabilities caused by past financial and fiscal policies, and complement these measures with structural reforms to enhance export competitiveness,” the World Bank’s East Asia & Pacific chief economist said.  Growth in the region excluding China is expected to accelerate to 5.3% in 2015 from 4.8% this year as a gradual recovery in high-income economies boosts demand for its exports, & domestic economic reforms advance in the large Southeast Asian economies, the World Bank added.  China’s growth is expected to slow as the gov implements policies to address financial vulnerabilities & structural constraints.  As it seeks to strike a balance between containing risks & meeting growth targets, structural reforms in sectors previously reserved for state enterprises & services could help offset the impact of measures to contain local gov debt & curb shadow banking.  Protests in Hong Kong will probably slow growth there this year but haven’t so far had a significant impact on China’s economy.

World Bank Cuts Developing East Asia 2015 GDP Forecast

Becton, Dickinson agreed to buy CareFusion (CFN) for $12.2B in a cash & stock deal that will enhance the company’s role in providing drug management &d patient safety services to hospitals.  CFN stockholders will get $49 in cash & 0.0777 of a BDX share for each share they own, implying a value of $58 (26% premium).  The transaction is expected to close in H1-2015.  Pricing pressures on hospitals have led them to crack down on outside purchases, with many turning to bulk orders to cut costs & increase volume.  The deal will let BDX offer a range of medication services, from drug preparation & delivery to patients on the hospital floor, to monitoring how they subsequently fare.  The global medication management market is worth $20B, BDX CEO Vincent Forlenza said.  BDX has already identified $250M in cost cuts that will come from reducing overhead expenses, combining operations & trimming manufacturing operations.  The savings will be fully realized by 2018.  The company will suspend its $400M in annual share repurchases until its debt level is reduced, Forlenza said.  CFN is a top provider of infusion pumps & drug dispensing systems, while BDX sells laboratory equipment, diagnostic tests & a range of drug delivery systems, including hypodermic needles, syringes & self-injection systems.  BDX stock jumped 9.14 & CFN soared 10.58 (23%) to 56.75.  If you would like to learn more about BDX, click on this link:

Becton, Dickinson to Buy CareFusion for $12.2 Billion in Cash-Stock Deal

Becton, Dickinson and Company (BDX)

Disney, a Dow Jones stock, is injecting money into Disneyland Paris in a bid to revive the 22 year old theme park that’s struggling with waning attendance & mounting losses.  Euro Disney (EDL), the operator, plans a €1B ($1.25B) refinancing backed by the US parent.  DIS, which owns about 40% of the French company, is required to make an offer for all EDL shares as a result of the recapitalization.  DIS continues to support Disneyland Paris after years of losses at the theme park, hurt as Europe’s faltering economy weighs on consumer spending.  The resort, created in 1992, is forecasting attendance to drop by as many as 800K visitors this year.  “This recapitalization plan would improve Euro Disney Group’s financial position and enable it to continue investing in the guest experience,” DIS said.  “We are demonstrating The Walt Disney Company’s continued confidence in Disneyland Paris.”  The refinancing includes a capital increase of about €420M made or backed by DIS & the conversion of €600M of debt owed to its US parent into EDL shares.  The offer for all EDL shares by DIS isn’t voluntary & is part of the plan only because it would be required as a result of its increasing stake, EDL said.  EDL said its net loss will probably widen to as much as €120M this year from €78M the previous period, while sales will decline as much as 3%.  “This recapitalization is essential to reinforce the financial solidity of Euro Disney and allow the group to continue investing in its park,” Tom Wolber, a Euro Disney exec, said.  “A bad economic environment and heavy debt have impacted revenue and cash.”   DIS shares went up pennies.  If you would like to learn more about DIS, click on this link:

Walt Disney to Back $1.25 Billion Refinancing Plan of Theme Park in Paris

Walt Disney (DIS)

Thoughts were spread that a rate increase from the Federal Reserve could happen sooner than expected.  This is a sad state of affairs when every breath suggesting when rate hikes will come dominates investment thinking.  The stock market is overbought after Dow has been treading water for 4 months.  Overseas economies keep stumbling, with a bias on the negative side.  The US economy is growing, but in fits & starts.  Next year is near.  If the Federal Reserve is right that the key benchmark rate will be 1.625% by Dec 2015, rate hikes, in small steps, may begin in just a few months.  Next year could get ugly for stocks.

Dow Jones Industrials

This Undervalued Energy Stock is Set to Soar! Special Report

3 Stocks You Should Own Right Now - Click Here!

I’m a huge fan of INO & from what I have seen so far, their service Marketclub!  This isn’t a stripped down version, everything in MarketClub is available to you.  I don’t want to give everything away, but you’ll have unlimited access to my favorite 3 tools: Trade Triangles, Smart Scan & Alerts!  The best part is that the MarketClub customer support team will be providing UNLIMITED support!  You can call or email for an instant response to any question, comment or concern.

Here’s that link:

I’d recommend you jump on this now.

No comments: